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

Articles by Sugata MarjitSubscribe to Sugata Marjit

A Contemporary Perspective on the Informal Labour Market: Theory, Policy and the Indian Experience

This article looks at the substantial literature that has emerged in recent times on the impact of globalisation, reform and deregulation on the informal labour market, in terms of theory and accompanying empirical evidence. Growth of real informal wage and productivity across all states in India since the early 1990s is an interesting starting point. While it is not a foregone conclusion that a liberal economic environment necessarily benefits such sectors, marketfriendly policies can improve the real income of informal workers and thus can have a substantial effect on urban poverty. Some supportive evidence to this effect has led to analytical models that investigate these issues closely. The analysis here shows that deregulated economies may benefit the informal workers, by raising both wages and employment under certain conditions that depend on inter-sectoral capital mobility. In the process, agriculture and formal manufacturing may suffer. Labour and commodity market reform may have different and contradictory impact on informal labour. Organisational changes in production in a more open economy increase the degree of specialisation, help informal entrepreneurs, and promote exports. Lower tariffs and lower interest rates have opposite impacts on the informal segment of import competitive industries.

Global Recession and the Indian Economy - Myth and Reality

There has been a clamour for action by the government to prop up certain sectors which are experiencing a slowdown. What should be the real priorities of the government and central bank?

Inflation and Public Policy: Contemporary Dilemmas

There has been much comment by the media and criticism by business that the policy of hiking interest rates to combat inflation will hurt investment and growth. But what has India's experience been on the relationship between the real interest rate and the inflation rate?

Denying the Devil Its Due

Sugata Marjit Reading Globalisation and Development edited by Ashwini Deshpande has been a refreshing experience. The volume is a collection of articles presented in a conference in 2005 on a theme, which is of critical significance for policymaking all around the globe. The orthodox approach of trade and investment liberalisation as a necessary and sufficient means for prosperity of the developing world is put under the scanner by a set of skilfully done analytical papers. Researchers included in the volume have gathered from various corners of the world and done a fairly commendable job. By now it is well recognised that several critiques on either side of the fence often tend to engage in rhetoric while discussing the pros and cons of globalisation. The so-called

Regional Trade Openness Index and Income Disparity

This study tries to look at how "open" Indian states are with respect to international trade and then tries to characterise the relationship between regional disparity and openness. The major objective is to develop an openness index at the regional/state level. The methodology developed here is not only applicable to the Indian case but also for many countries where state-level trade data are not available. The paper tries to devise a proxy which ranks states over time in terms of their exposure to trade. It is observed that the relative income of a region is closely related to the extent of openness and that such a relationship gets stronger over time. There is evidence that openness is strongly correlated with rising income disparity across regions.

Liberalising Capital Account

Chapter 2 deals with the operational aspects of capital account liberalisation in Liberalising Capital Account terms of a macroeconomic perspective. The conclusion that India

Collateral Monitoring and Banking Regulation

It is well recognised that in the event of massive defaults or significant accumulation of non-performing assets, the government or a super regulator such as the central bank bails out public sector banks. Banks usually ask for collateral to hedge against defaults. However, we argue that they might not be careful in monitoring the quality of collateral, particularly when they think that the success probability is reasonably high and they will be protected in case of defaults. Limited liability and the definite possibility of a bail out in case of a default can impose severe costs on the regulator who, due to political or social reasons, cannot shift the risk onto the depositors. This is very likely to happen in poor developing countries. We design an incentive mechanism for public sector banks that calls for auditing in the 'good states' of nature. The regulator does not need to regulate when the probability of success is very high or very low. But there is a range of probabilities for which private monitoring by banks falls short of optimal monitoring desired by the regulator. Our scheme helps to implement the desired outcome.

Accounting for Growth

Accounting for Growth The South Asian Experience with Growth edited by I J Ahluwalia and J Williamson; OUP, 2003; ppxiii+218, Rs 495. SUGATA MARJIT This is an interesting volume on a topic that would attract readers from various circles. It is well known that when a large part of Asia has been experiencing phenomenal rates of growth, south Asia

Monitoring Success

Financial disasters have become common round the world. Their nature has been complex and varied, but the strong common link is that they have all underscored the importance of regulatory supervision of financial deals. This essay traces an even more fundamental relationship among apparently dispersed and unrelated problems. This has to do with the lack of monitoring of any system which performs well.

Political Lobbying and Fiscal Federalism

In a quasi-federal democracy like India, political representatives often fight to attract central disbursements towards their own states. Among central disbursements, two most important ones are letters of intent and industrial licences. Much of the disparities in the economic growth of various states is attributable to variations in the development of industries and the latter, in turn, are largely contingent on the nature of the industrial policies that were followed. In this paper the authors argue that the industrial policies pursued in the post-independence era resulted in a distorted pattern of disbursement of letters of intent and industrial licences. This remains true even after account is taken of the 'demand'-generated aspect of the disbursements. It is also shown how the presence of the same distortion in the disbursements in the so-called backward regions vitiates the very objective of balanced regional development.

Globalisation and Inequality

With the possible exception of the east Asian countries, increased foreign trade and investment have increased wage inequality in almost all parts of the globe during the last two decades of the 20th century. Theoretically as well as empirically Heckscher-Ohlin-Samuelson model of trade, with the Stolper-Samuelson result at its core, fails to explain such widening of wage gap between skilled and unskilled labour particularly in the south. This paper discusses alternative variants of the specific factor model accounting for the diverse trade pattern, informal factor markets and existence of non-traded goods, that can help our understanding of the wage gap phenomenon.

Currency Devaluation and Exports

Devaluation-led export growth takes place by reducing black-market premium. The initial optimism regarding the growth in exports during the early years of liberalisation gradually waned after some period of devaluation. Export growth, reported in Indian official trade statistics, came down to actual export growth, reflected in partner country's trade statistics. An explanation like this is derived for India's recent nose-diving export growth. The study is undertaken for the period 1951-94, using US imports statistics. It has been shown that the impact of devaluation in 1966 and 1991 was actually felt on officially reported exports to US and not much on US imports from India.

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