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

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Strengthening Local Governments

This paper evaluates the fiscal success of recent efforts towards reforming and strengthening rural governments in India through the process of rural decentralisation initiated with the 73rd Constitutional Amendment Act in 1992. It measures the extent of fiscal decentralisation that has taken place in order to evaluate how far the rural governments have effective control over expenditure decision-making. The analysis is based on budget data of rural governments in seven Indian states for the decade of the 1990s and presents recommendations to make fiscal decentralisation more effective.

Food Security

Towards Hunger Free India: Agenda and Imperatives edited by M D Asthana and Pedro Madrano; Manohar Publishers, New Delhi, 2001; pp liii+592, Rs 895

Taking the PDS to the Poor: Directions for Further Reform

This paper examines the costs and benefits associated with the operation of the Public Distribution System (PDS) for foodgrains in India. It illustrates through counterfactual simulations how the benefit-cost ratio for the PDS increases when subsidies are targeted at the poor and indirect benefits are accounted for, even in a scenario where PDS grain is procured at market prices. However, administration of directly targeted PDS is difficult and can lead to the error of excluding the poor. The paper therefore examines the inefficiencies in the system, comparing costs of public storage and distribution operations with those of private agents and discusses how the rising government costs can be curtailed by making administration more efficient and relying on market forces for spatial distribution of grain. Finally, it discusses the issues involved in the targeting of PDS to the poor and examines the potential for geographic targeting.

Foreign Aid to India

This article shows that foreign aid to India merely substitutes for spending that the government would have undertaken anyway; the funds freed by earmarked aid are spent elsewhere. Moreover, in passing external assistance earmarked for the states, the central government makes a reduction in transfers it would have otherwise made to the states. From the country's perspective these fungibility results could be good; domestic spending priorities - inter-sectoral and inter-regional - are unaffected by foreign aid. For the donors, however, the results indicate that success of their projects, as measured by the conventional benefit-cost analysis, does not tell the whole story; the marginal use of their money and its overall development impact could be different from that intended.

Government Expenditure Hidden Agendas

Government Expenditure: Hidden Agendas Shikha jha Public Expenditure Decision Making: The Indian Experience by Anuradha Basu; Sage Publications, New Delhi, 1995.

Economic Reforms and Agricultural Policy

(5) The proposed TRIPS prevents the grant of compulsory licences in the public interest. (6) Under TRIPS no ceiling can be placed on royalty demanded on patents like in the Indian Patent Act.

Who Pays More-Case of Excise Duties in India

Who Pays More? Case of Excise Duties in India Shikha Jha P V Srinivasan How progressive is the revenue collected from different commodity taxes (excise duties) in India? This paper examines this issue based on the distribution of consumption expenditure. It also analyses how the incidence of tax on different expenditure groups is influenced by the commodity tax structure.

Indirect Taxes in India-An Incidence Analysis

An Incidence Analysis Shikha Jha P V Srinivasan This paper seeks to provide an evaluation of the indirect tax structure in terms of, inter alia, its redistributive effects or incidence. A knowledge of these effects is necessary to assess the implications of the indirect tax reform through the introduction of the modified value added tax or 'MODVAT'.

Price-Cost Relationship in Indian Industry

Indian Industry Shikha Jha The Behaviour of Industrial Prices in India by R Chatterji; Oxford University Press, Bombay, 1989; pp 224, Rs 150. WHAT are the mechanisms for clearing different markets? Are the prices flexible enough to equate supplies and demands? Or are excess demands met by quantity adjustments? These questions are partly answered by the fact that the assumption of fix-price markets (at least) for manufactured goods is now a standard feature of most post-Keynesian macro models and is supported by a long line of empirical research starting with the Oxford studies on the price mechanism (T Wilson and P W S Andrews (eds), Oxford Studies on the Price Mechanism, Oxford University Press 1951), Information on the behaviour of industrial prices is very important for any economy- wide policy analysis, e g, in exercises such as applied general equilibrium modelling. For instance, if an assumption is made that demands and supplies determine prices, while in fact they are cost determined, then we could be over/under-estimating the inflationary impact. When prices follow a cost-based rule for certain industries it becomes necessary to specify alternative market clearing mechanisms for these industries since prices do not perform this role. Therefore, an analysis of the price/cost/ activity relation is useful especially at a disaggregated level rather than for the aggregate industrial sector as a whole.

Inflationary Implications of Resource Mobilisation through Administered Price Increases

This paper discusses a crucial aspect of the strategy of mobilising resources for financing the Seventh Plan, namely, the inflationary implications of administered price increases. The authors' analysis shows that the contribution of administered price increases to past inflation has been considerably greater than what was suggested in the discussion paper on administered prices prepared by the Finance Ministry ft a high rate of inflation, then, a price which the government must pay for following the Seventh Plan's financing strategy? Not necessarily for there are, the authors find, a number of major administered prices which could be raised substantially without triggering much extra inflation. The prices of a range of public sector products, such as coal and lignite, fertilisers, non-ferrous metals and rail transport services, fall in this category A policy of judiciously selected administered price increases would, therefore, go a long way in closing the Seventh Plan resource gap without generating very high rates of inflation.
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