ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Capital Scrapping and Exports

With the machine tool industry as the reference point, this paper builds a vintage model to demonstrate that the economic lifespan of machines is inversely related to the rate of technological progress. Further, the rate of technical progress in an underdeveloped economy is not exogenous but varies directly with the share of domestic production geared towards exports (or the rate of growth of exports). Exports, through the demand generated by more discerning users/consumers in high-income economies, induce domestic producers into embodying new technologies in machines of a later vintage.

The Analytics of the Agriculture-Industry Relationship in a Closed Economy: A Case Study of India

The barriers created by stunted agricultural growth for industrial development have constituted a recurrent theme in debates on Indian economic policy. This essay brings out these debates in terms of the disproportionality caused by the disparate rates of industrial and agricultural growth. It examines the continued relevance of the agriculture-industry linkage to understand the stagnation in the farm sector since the early 1990s. Instead of focusing on agriculture per se, the discussion attempts therefore to unravel the links that bind agriculture and industry, both analytically and empirically for India.

Development in the Time of Finance

Capture and Exclude: Developing Economies and the Poor in Global Finance edited by Amiya K Bagchi and Gary A Dymski

The economy: Changing Tracks

Even as the Indian economy is likely to register an unprecedented annual growth of over 8 per cent between 2003-04 and 2006-07, the appalling state of infrastructure, the deep divide separating industry and agriculture, and the uneven spread of the fruits of growth cloud the picture.

A Model of Exports and Investment in an Open Developing Economy

The paper develops a model that privileges exports as the key element of demand; not only do exports permit the exploitation of scale economies by enlarging the size of the market served by domestic producers but also lead to the effective use of the relatively abundant factor, i e, labour. The development literature has further emphasised the fact that exports are instrumental in inducing investment because of the incentive they provide to introduce new techniques through additions to the capital stock. The model introduces somewhat different export and investment equations in an otherwise traditional Keynesian model. Exports lead to investment and investment, in turn, leads to higher capacity utilisation and further investment, which stimulates growth. However, the commodity composition of a developing economy's exports implies that exports are a function of the real exchange rate. An increase in the real exchange rate (depreciation), while stimulating exports and thus growth, however, leads to an erosion of the real wage share because of a price rise through imports. The steady state can be interpreted as a balance of these two forces - an exchange rate depreciation leads to growth through an increase in exports but simultaneously causes a cutback in government expenditure to maintain a floor wage share, impeding the growth process.

Machine Tool Absorption and Capital Formation in India

This paper attempts to trace the evolution of the machine tool industry in India. It tests whether the relationship between gross fixed capital formation and machine tool supply has remained the same before and after 1991. It also seeks to demonstrate that any short-run deviations of machine tool supply from the demand warranted by GFCF are self correcting. Yet another objective of the exercise is to test and quantify an error correction model between machine tool supply and gross fixed capital formation.
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