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

Articles By Ranajoy Bhattacharyya

The Role of Informality in Moderating the Impact of Adverse Macroeconomic Shocks

In the presence of informality, adverse demand shocks have a lower impact on aggregate output and adverse supply shocks have a lower impact on prices as well as output. Both would imply that countries without a substantial informal sector, largely more affluent nations, would be more exposed to higher prices following such shocks. This is consistent with contemporary evidence of stagflation in developed countries. Being the residual sector, the informal sector inevitably moves in the opposite direction to the formal sector during a bad shock episode, cushioning its aggregate effect. We then show that the argument goes through if the firms have to finance their working capital requirements by borrowing
from the market.

‘Atmanirbhar Bharat Abhiyan’

Over the last two decades, India’s participation in global value chains and international production networks have improved, but the domestic value added embodied in gross exports has exhibited a fluctuating trend. In 2020, India launched the “Atmanirbhar Bharat Abhiyan,” where enhancement of the DVA content of exports can be considered as an underlying objective. The impact of various factors of production and other drivers on India’s DVA content in select manufacturing exports have been identified in this paper with help of trade in value added data for 2000–18. The empirical results indicate that the focus on export and FDI promotion policies by itself will not lead to either self-reliance or address employment worries in India. A coordinated effort towards labour skill augmentation along with technology transfer will be instrumental in this regard.