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

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The Fallacy of Trickle-down Economics: Whom Does ‘Wealth Creation’ Benefit?

While the theory of “trickle down” of wealth to the poor is often invoked to support the government’s neo-liberal policies, such as tax cuts and other financial incentives for the private sector that benefit the rich, in reality, such policies have not been successful in bridging economic inequalities.

Electricity (Amendment) Bill, 2020

The proposed Electricity (Amendment) Bill, 2020 aims to reduce subsidies and push for privatisation, especially in the distribution segment of the power sector. Undertaking structural changes in a core sector at a time of crisis from the COVID-19 pandemic and its economic effects defies logic. The proposed amendments are not only anti-people, but they also fail to address the long-term crises in the sector and will only accelerate its deterioration. The central government must hold off on passing any hasty legislation on the subject and adopt a more scientific and less ideological approach to deal with the travails of the power sector.

Goal Setting for Indian Agriculture

Though the 16-point action plan for agriculture laid down in the 2020 Union Budget continues prioritising subsidies and safety nets over agricultural investments, it does not make any fundamental improvements in the allocations towards these heads.

Inflation with Disinflation?

Price inflation in India as measured by the Wholesale Price Index and the Consumer Price Index has shown diverging trends. While WPI indicates a disinfl ationary situation for 16 months, CPI indicates inflation. Explaining the construction of the two indices, the trends of subgroups of both indices are presented. It is found that the different sample sizes and weightages of commodity groups of both indices and price interventions in the market explains, at least in part, this odd situation of infl ation along with disinfl ation.

Budget without Heft

Budget 2016-17 correctly recognises that the economy is facing a demand slowdown but fails to back this up with necessary expenditure to boost aggregate demand. Guided by its programme of fiscal consolidation, the government has almost frozen public investment in order to achieve the targeted deficit for 2016-17. While its proclamation to improve ordinary lives is welcome, a rearrangement of deep-rooted structures of public expenditure in India is required to achieve this.

General Agreement on Trade in Services

Concerns have been voiced about the WTO's encroachment into social service sectors such as health, education, and environment under the General Agreement on Trade in Services (GATS) and how this may undermine national sovereignty and autonomy in social policy-making. However, most of these concerns stem from misunderstandings and lack of information about the liberalisation process under the GATS. This paper tries to dispel such unwarranted fears by highlighting the GATS' commitment structure and framework and explaining how countries can retain their autonomy in social policy-making under the GATS. However, it also points out some problem areas in this regard, tracing their source to various ambiguities and weaknesses in the GATS framework. The paper highlights the need to use the ongoing GATS 2000 negotiations effectively so as to strengthen the GATS framework and address these problematic issues.

Fertilisers : Policy Muddle

It is time once again for fresh policy convulsions in the fertiliser sector and for claims and counter-claims by the government and industry. After a break in 2000-01, the government has once again imported 2.2 lakh tonnes of urea in order, it says, to prevent a shortage in the current rabi season. Considering that the total installed capacity of urea in the country is 20.9 mn tonnes, the import of such a small quantity is probably a symbolic gesture to drive home the government’s determination to press ahead with ‘rationalisation’ of prices. In November, the government, in an ‘interim’ decision, notified lower retention prices of urea for 13 manufacturers with retrospective effect from April 2000. This is expected to result in savings of Rs 800 crore in subsidies given to fertiliser units. The government has also drawn up stiff new norms of capacity utilisation and feedstock consumption by fertiliser units based on which retention price will be determined. But a comprehensive long-term policy for the Rs 35,000 crore industry – a key element in the agriculture sector – has yet to materialise.

Targeting and Efficiency in the Public Distribution System

This paper compares the public distribution of food in Andhra Pradesh and Maharashtra. Based on the 50th round of National Sample Survey (NSS) household consumption survey data, the authors examine differences in utilisation, extent of targeting, magnitude of income transfers and the cost-effectiveness of food subsidies. The findings suggest policy reforms in favour of self-targeting and greater operational efficiency.

Railways : Twisted Tracks

When the arithmetic is all done and the rhetoric has worn out, what emerges is an annual plan for the railways, not directed at growth but increasing distress. All the current signals are that railway minister Mamata Banerjee’s attempts to garner popular support through gimmickry is likely to boomerang. She has over the last two years constructed tracks, which will lead the railways to increasing disarray and oblivion. Even the moderately budget-literate members of her constituencies – the ordinary Indian who is being provided with “travel opportunity” at “affordable rates” and the housewives whose budget has been spared any increase due to hike in freight charges on salt, grains and pulses, sugar, fruits and vegetables, urea, edible oil, kerosene and LPG – will realise that running an enterprise like the railways requires an adequate income for overall, long-term development. Banerjee’s ‘housewife’ will know that if one is not to become dependent on the local moneylender, resources have to be generated in-house no matter how difficult that may sound. Such wisdom has not come the way of the railway minister.
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