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

Ravindra H DholakiaSubscribe to Ravindra H Dholakia

Manufacturing Output in New GDP Series

The new gross domestic product series, with base year 2011–12, has mostly replaced the Annual Survey of Industries with corporate financial data for estimating manufacturing value added. This has resulted in its higher share in GDP and a faster growth rate (compared to the older series). The Central Statistics Office claims that the new series better captures value addition, as ASI reportedly left out activities outside the factory of an enterprise. This claim is probably not true, as is evident from closer examination of a sample of ASI primary schedules.

Changing Dynamics of Inflation in India

Using the latest consumer price index (combined) series, it is found that the dynamics underlying India’s inflationary process have changed substantially. Significant reduction found in the inflation persistence reflects anchoring of inflationary expectations. Moreover, it is the headline inflation that reverts to the core and not vice versa, as was assumed so far. It implies the absence of any significant second-round effects. These features need to be taken into account for any policy analysis. Attempting to forecast inflation using various econometric techniques, it is found that a combination of alternative models based on mean square errors improves forecast accuracy as compared to any individual model.

Measurement Issues in Comparing Fiscal Performance of States

Interstate comparison of fiscal performance requires the use of appropriate concepts and proper measurement of state income, fiscal deficit and debt. GSDP at market prices and a comprehensive concept of debt consistent with the fiscal deficit of a state government are the right concepts to use for the purpose. Neither the rating agencies nor the finance commissions have used the right concepts so far. Illustrative estimates for Gujarat show that this can lead to misleading target setting and wrong perceptions about the fiscal performance of the states.

Double Deflation Method and Growth of Manufacturing

This comment points out an erroneous assumption in the calculations and central argument of Rajakumar and Shetty ("Gross Value Added: Why Not the Double Deflation Method for Estimation?," EPW, 15 August 2015) that reverses almost all their inferences and conclusions. If construction and service input prices are also considered in the construction of the input price deflators, the double deflation method may further raise the manufacturing real income rather than depressing it. Conditions under which single or double deflation can better approximate the Index of Industrial Production growth rate are also discussed.

Measurement Issues in State-Level Income from Registered Manufacturing: Case of Gujarat

This article discusses some important issues involved in the estimation of state income originating in the registered manufacturing sector with illustrations drawn from Gujarat. It critically discusses the present practices in preparing quick estimates when results from the regular data source of the Annual Survey of Industries have not as yet been fi nalised. The article points to the serious fl aw of gathering information in ASI without updating regularly the census sector frame at the state level, which results in ignoring new large and medium manufacturing units.

Cost and Benefit of Disinflation Policy in India

The Reserve Bank of India’s monetary policy stance is based on assertions that there is no trade-off between inflation and growth and that disinflation will result in more growth. This note examines recent empirical evidence on the direction of causality for growth and infl ation, and the short-run costs and long-run benefits of a deliberate policy of disinflation. There is no support for the first assertion because a regular trade-off does exist in India, imposing substantial short-run costs for deliberate disinflation. There is strong evidence for causality from growth to inflation, but the reverse cannot be ruled out. Under such conditions, the RBI should hold nominal growth of money supply and allow supply-side policies by the government to bring down inflation.

Relative Growth Performance of Gujarat

EPW has been publishing a number of articles on the relative economic performance of Gujarat, and on growth and human development in India under the United Progressive Alliance vs the National Democratic Alliance (28 September 2013, 12 April and 19 April 2014). These articles attract critical comment here from Ravindra H Dholakia and Sugata Marjit. Continuing the debate, R Nagaraj, and Maitreesh Ghatak and Sanchari Roy respond to Dholakia, while Ghatak et al respond to Marjit.

Gujarat's Growth Story

If one were to use correct concepts and measurements, it will be seen that labour in Gujarat has actually significantly benefited from high economic growth and productivity gains. Annual Survey of Industries data show that the state has outperformed many others in the level of employment and wage compensation. A critical comment on "Labour and Employment under Globalisation: The Case of Gujarat" (EPW, 28 May 2011).

Right to Education Act and Public-Private Partnership

The authors of "Feasibility of Implementation of Right to Education Act" (EPW, 20 June 2009) respond to the critique of their argument by Padma M Sarangapani (EPW, 24 October 2009) and Vimala Ramachandran (EPW, 11 July 2009).

Regional Sources of Growth Acceleration in India

Gujarat, West Bengal, Karnataka, Maharashtra, Kerala and Tamil Nadu were the major contributors to the growth acceleration in India after 1991-92. Although regional disparity may increase temporarily, the causality test provides support to the hypothesis about spread effects. The regional growth targets assigned by the Eleventh Plan in India seem to rely on the spread effects of economic growth acceleration in the better-off states to achieve its 9% growth target and reduce regional disparity in the long run. To strengthen the spread effects, the domestic economy should be further integrated and interlinked with free flow of goods, services and factors of production.

Feasibility of Implementation of Right to Education Act

This article argues that even an allocation of 6% of the gross domestic product to the education budget would not be sufficient to fund universal school education until the very distant future if the government school system is used as the only instrument. The only way to meet the Right to Education obligation is to rely on low cost private schools as a significant instrument of the government education policy. On the contrary, the proposed rte bill introduces provisions that would oppose low cost private schools. Therefore, the legislation for rte needs to be modified and framed with specific provisions for private-public partnerships.

Fiscal Space with States and the Sixth Pay Commission

This article estimates the fiscal space available with the state governments, in case they implement the Sixth Central Pay Commission recommendations. It prepares base case estimates for the fiscal space based on liberal and plausible assumptions and shows that most of the states have the space to incur the estimated additional expenditure. Some states are likely to face difficulties in the initial one or two years. However, they can consider several options to overcome the problem.

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