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

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Impact of Public Debt on the Economic Growth of Subnational Economies in India

This study examines both the short- and long-run impact of public debt on the economic growth of Uttar Pradesh during the post-reform period of 30 years by employing the vector error correction model. The empirical analysis revealed that the increase in public debt-to-gross state domestic product ratio and interest payments burden would have an adverse impact on the long-run economic growth of UP, while having no significant impact on the short-run growth. It is also notable that the effective interest rate has negatively correlated with the gross capital formation in UP, and the latter has shown significant positive long-run association with the economic growth. In order to attract investments and economic growth, the state Government of UP should continue a countercyclical fiscal stance that would help in adhering to fiscal sustainability rules by smoothing out the repercussions of the COVID-19 pandemic.

What Must be the Priority of the Budget?

Improving agriculture incomes and boosting consumer demand must be the top priorities.

Economic Growth in Uttar Pradesh in Recent Years

This article critically scrutinises the tall claims of the state government using the official figures of the gross state domestic product, and shows that over the four years of the present government, the per capita income in UP has increased merely by 0.43% as against the claim of 100% growth. The analysis of growth rates at the sectoral level shows that the rates of growth in most of the sectors during the present government are lower than the growth rates registered during the previous government.

Impact of Leverage on Firms’ Investment

It has been observed that the economic growth cycle coincides with the investment cycle in India. It is found that firm-level leverage could provide early signals about the movements in the investment cycle. Furthermore, a firm’s leverage adversely affects its investment activity after a threshold. Regression results, after controlling for firm’s price to book ratio and operational variables, indicate that the adverse impact of high leverage is predominant on low-growth firms. The initiatives to clean up the balance sheets of banks and deleveraging by non-financial corporates should help in the revival of the investment cycle. The results are consistent with the agency cost of debt and trade-off theory of capital structure, wherein firms set targets for leverage by balancing costs and benefits of debt.

The Role of Inequality and Growth in Determining Social Outcomes

The impact of inequality in hindering social outcomes is discussed. Although it may appear on the basis of limited data, in the Indian context, that growth alone is the main driver in improving social outcomes, including poverty reduction; and that increased inequality that is a by-product of the Indian non-inclusive growth process does not hinder social development, such a conclusion advanced recently in the Economic Survey 2020–21 is based on possibly insufficient analysis of the data. It is demonstrated that the apparent favourable association, which is counter-intuitive, between income inequality measures and social outcomes, is possibly due to both being associated with growth and could therefore be revealing a spurious relationship when considered in isolation.

Migrant Workers from West Bengal since 1991

The in and out balance of migration in West Bengal, for the first time, was recorded negative in the 2000s, and it is estimated to have gotten worse in the 2010s. Based on estimates, more people migrated out than entered the state in the 2010s compared to the 2000s. Though the crisis started towards the end of the left regime, it has worsened under the Trinamool Congress government. The article provides insights into labour migration, unemployment and economic growth during 1991–2018.

A Framework for the Analysis of State–Society Relations

Class and Conflict: Revisiting Pranab Bardhan’s Political Economy of India edited by Elizabeth Chatterjee and Matthew McCartney , New Delhi: Oxford University Press, 2020; pp x + 299, £47.99 (hb).

Inflation and Terms-of-trade

This paper argues that, over the longer run, the intertemporal path of inflation in an economy is affected by secular changes in the inter-sectoral terms-of-trade, which in turn, is closely linked to the stages of structural change. This linkage is investigated through simple devices of consumer choice and growth. Results imply that monetary authorities’ inflation targets should optimally account for such secular changes in the terms-of-trade, over and above the terms-of-trade shocks observed typically in developing economies.

Growth Transitions in India

Growth has consistently remained a central topic in economic policy considerations of the government in India. However, there has also been a more scholarly interest in it among social scientists. As a part of the latter tradition, this paper addresses the proper delineation of the phases of growth in India, a matter of some discussion in the literature. Using state-of-the-art statistical methodology, it first establishes the trajectory of growth and then provides a theoretical explanation for that history. With data spanning the period 1950–2020, the procedure adopted is also able to assess the impact on economic growth of the policies of the present government. The results are conclusive. First, it is established that growth in India has accelerated continuously since the 1950s, implying that dynamism in the economy did not have to wait for the liberalising reforms launched in 1991. Next, the performance of India’s economy is compared to growth that has taken place in the rest of the world. It is seen that while India’s economy has, in recent years, shown a dynamism relative to the rest of the world, it has consistently fallen behind its most dynamic regions, notably in East Asia.

Understanding India’s Gilded Age

The Billionaire Raj: A Journey through India’s New Gilded Age by James Crabtree, Noida: Harper Collins, 2018; pp 358 + xxv, ` 799.

Rural Economic Growth and Emerging Pattern of Rural Towns

The two features of structural transformation visible in India are an increase in the overall gross domestic product and per capita incomes, enabled by the shift away from agriculture to other sectors or occupations with higher productivity; and greater urbanisation. An attempt is made to examine the emergence of small towns or urbanised villages in Gujarat and Rajasthan. The states depict a disparate pattern of rural economic transformation and varying levels of urbanisation. The emerging urban hierarchy is contextualised within the process of economic growth and transition, and the composition of urban growth along with the locational features of the emerging towns are studied. The underlying causes responsible for the nature of urban growth in the two states highlight the need for a regional focus of policy.

From Developing to Developed Nations

The Art of Economic Catch-up: Barriers, Detours and Leapfrogging in Innovation Systems by Keun Lee, Cambridge, New York, Port Melbourne, New Delhi and Singapore: Cambridge University Press, 2019; pp xxiii + 279, price not indicated.


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