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

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Industry, Finance and Employment-A Discordant Trinity

Industry, Finance and Employment A Discordant Trinity Ranjit Sau The rich industrial countries of the OECD are having a profound technological revolution spearheaded by computer and a host of other marvels of science. Stock markets are booming; corporate profits are at an all-time high. But wages are falling; job insecurity is pervasive; and social tensions are mounting.

On the Making of the Next Century

On the Making of the Next Century THE 20th century arrived a little late, in 1905, when the Russian army was defeated by Japanese troops in the battlefield of Crimea. As if in apology, the 21st century had come a little earlyi in December 1994, when the Mexican peso had a melt-down. That Currency episode shows the day. A new class has entered the arena a class of rentiers; with a worldwide sweep. It had a dress rehearsal with the pound sterling and lira two years earlier; The signs and footsteps of this unfolding class are unmistakable. The foreign exchange market was the first to globalise in the mid- 1970s as controls were lifted after the Smithsonian Agreement. Advanced telecommunications immensely facilitated arbitrage. The market is awesome in site. The ratio of foreign-exchange transactions to the volume of world trade has jumped turnover is rising fasti at 1.3 trillion dollars

Some Notes on International Monetary Reform

Some Notes on International Monetary Reform Ranjit Sau This paper reviews and reconciles three models of international monetary reform: structuralist, monetarist, and volatilist. They are shown to he underdeterminate. In a three-market economy they each equilibrate only one market.

Liberalisation, Unemployment and Capital Reform

Liberalisation, Unemployment and Capital Reform Ranjit Sau The finance minister has outlined a model of economic development that envisages liberalisation and globalisation of the economy. Asset distribution in India is very skewed. Using the efficiency wage theory this paper proves with simple geometry that a competitive equilibrium in an economy with highly unequal asset holding will entail involuntary unemployment of the assetless poor. Although both are competitive, the equilibrium here sharply differs from that of an Arrow-Debreu economy which presumes sufficient assets for all agents.

World Capitalism and Globalisation

India is being inexorably drawn towards globalisation by a part of its own capital, and an offshoot of its own society. The world economy is driven by saving/investment, trade, and innovation. India has chosen a wrong route to globalisation: its rate of saving is relatively low and falling, unemployment is high and rising, and its R and D effort is minuscule. An alternative path is suggested here, should India decide to go global under compulsion or otherwise.

Political Economics of World Capitalism

Ranjit Sau Two recent events have caused a paradigm shift in political economics: (a) the unprecedented achievements of fast Asia, and (b) the fall of the Soviet Union, the contemporary world displays two contradictory signs in three spheres

On Inflation and Subsidy

Contrary to the finance minister's claim, stabilisation of the Indian economy was not completed last year by his own criterion and data, nor will it be in this year. Should structural reforms be pursued without first stabilising the economy?

Foreign Direct Investment, Portfolio Investment and Macro-Economic Stability

and Macro-Economic Stability Ranjit Sau Foreign capital comes in two forms: direct foreign investment (DFl) and foreign portfolio investment (FPI). This paper presents a simple model to examine the conditions of stability with the inflow of foreign capital We find that the equilibrium is most likely to be stable if the interest-elasticity of DFl is high andthqt of FPI is low. The experience of India, however, indicates that the situation here is just the reverse that implies the possibility of instability.

Purchasing Power Parity, Unequal Exchange and Foreign Direct Investment

Purchasing Power Parity, Unequal Exchange and Foreign Direct Investment Ranjit Sau The IMF, the UN and the World Bank are using the PPP doctrine. This paper shows that by the PPP criterion, the currencies of developing countries are undervalued, not overvalued as the conventional wisdom maintains. It proves that trade with such undervalued currency implies an adverse unequal exchange. For foreign capital now there are two channels of profit: production, and trade. Gains from unequal exchange deters foreign direct investment.

Exchange Rate Dynamics

Case of Dollar Ranjit Sau We have derived a first-order nonlinear difference equation for exchange rate. In theory it generates a very complex dynamics. The equation is estimated with quarterly data of US dollar relative to the SDR, 1974-1991. It is utilised to forecast the value of dollar up to the first quarter of 1995. The dollar, it appears, will be in the upswing in the near future. It will remain all through at a higher level than presently. Hence, the Indian rupee, \f made fully convertible, would depreciate relative to dollar THE Indian economy is being opened up for greater integration with the outside world. The finance minister has announced India's intention to make the rupee fully convertible as soon as the conditions permit. Exchange rate is a link that binds different parts of the world economy. The currency crisis that had gripped Europe on the eve of the French referendum on the Maastricht treaty has raised many a question once again. Is the exchange market stable? Does it ensure efficiency in some sense? What are the laws that govern the course of a currency? Is the post-1973 experience of floating exchange rates disappointing? Answer to these questions is very relevant for us today as India awaits full convertibility of rupee.

Costs of Stabilising the Economy

India is following a three-year, two-step strategy: slash aggregate demand in the first half, and then address the supply side through structural reform. As part of the former, investment from the central government budgetary resources has been relatively reduced. We estimate that had the investment been maintained at the historical average rate relative to gross domestic product, and one-third of the additional output were collected as tax, the entire budget deficit of 1993-94 could be covered.

A Landmark in Policy Analysis

Agriculture, Growth and Redistribution of Income: Policy Analysis with a General Equilibrium Model of India by N S S Narayana, Kirit S Parikh and T N Srinivasan; North-Holland, Amsterdam in association with Allied Publishers, New Delhi, 1991; pp 301+xvi.

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