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Gurbachan Singh
Gurbachan Singh is an independent economist. He was visiting professor at Ashoka University. For many years, he taught at Indian Statistical Institute (ISI), Delhi Centre, and Jawaharlal Nehru University (JNU). His research is at the interface between finance and macroeconomics. His work is on theory to explain the real world and on policy. He is a keen teacher; his main teaching is on ‘Finance and Volatility’. He is a guest faculty at Management Development Institute (MDI), Gurugram. He received his Ph.D. from ISI Delhi Centre, M.A. from Delhi School of Economics (DSE), and B.A.(Hons.) from Hindu College, University of Delhi. He writes a regular ‘column’ for Business Standard. His other interests include good cinema.
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Budget 2021-22: Missed opportunity for increasing tax collection
Examining income tax announcements of Budget 2021-22 with a broader perspective, Gurbachan Singh highlights the need to increase tax collection in India in a gradual and careful but sustained manner. In his view, while checking tax evasion is important in this context, it is also important to ensure that the law requires people to pay taxes in the first place.
Inflation targeting and capital flows
Current law in India mandates a review of the target inflation rate by 31 March 2021 for a five-year period. Several critics have called for abandoning the flexible inflation targeting regime altogether. In this post, Gurbachan Singh shows that flexible inflation targeting can accentuate the problem of sudden capital flows, and that the current monetary policy framework can be substantially improved by including two ‘new’ policy instruments that can be used by the Ministry of Finance rather than the RBI,
A ten-point programme for economic recovery
The Indian economy has been experiencing a slowdown in growth of GDP in general and investment in particular, with the Covid-19 crisis being the last (big) straw. In this post, Gurbachan Singh presents an internally consistent 10-point programme for economic recovery, which includes a novel package of well-targeted policies for macroeconomic and financial stability, and self-sustaining growth.
Covid-19: Recession in India, and policy lessons from other countries
Given the prevailing economic situation in India and following the past experience of several developed countries, there is a clamour for accepting much larger fiscal deficits, and adopting unconventional monetary policy. In this post, Gurbachan Singh contends that these are relatively soft and not very effective policy options for sustainable recovery and growth. He presents a different diagnosis, and accordingly, an alternative policy prescription.
Covid-19, and the way to avoid a blunt interest rate policy
Given the looming recession due to Covid-19, the Reserve Bank of India has reduced interest rates to encourage economic activity in the country. In this post, Gurbachan Singh contends that the prevailing interest rate policy is non-transparent and complex, in addition to being blunt. He proposes an alternative policy that is transparent, simple, and well-targeted.
Covid-19: Does the Government of India really have little fiscal space?
Several commentators have argued that the Government of India has very limited fiscal space to provide fiscal stimulus to jumpstart the economy, and spend on the poor and on medical care post Covid-19 lockdown. In this post, Gurbachan Singh contends that there is significant, if not ample, fiscal space, if we use the term more broadly. He shows how fiscal space in terms of government's existing assets can be an alternative way of maintaining aggregate demand in the economy
Covid-19: Getting fiscal policy right
The textbook answer to financing of additional government expenditure in a recession is that the government should borrow the funds rather than impose a tax. Gurbachan Singh argues that the conventional wisdom applies to a normal economy in recession, but not to an economy that is in recession due to lockdown. He explains that the Government of India need not incur additional fiscal deficit to provide an additional relief package; it can instead impose direct taxes without making a significant dent into the aggregate demand.
Does the current economic slowdown warrant a fiscal boost?
The Indian economy is going through an economic slowdown. Several economists have made a case for an expansionary fiscal policy to deal with the slowdown. In this post, Gurbachan Singh argues that it is not advisable to use fiscal policy now. He further contends that part of the fall in demand is rooted in the long-term supply-side reforms that the government and Reserve Bank of India have been undertaking.
Self-employment: Elephant in the room
While nearly half of the labour force in India is self-employed, persistent low standards of living on a large scale imply that not many of these are ‘entrepreneurs’. Much of the self-employment is in low-productivity occupations or businesses. In this article, Gurbachan Singh contends that if financial institutions, labour laws, redistributive policy, and educational certification worked well, low productivity self-employment would give way to more efficient and productive businesses.
Purchasing power parity: Some concerns
In this article, Dr Gurbachan Singh discusses how it may be problematic to make international comparisons using PPP that is based on observed prices, and why effective prices should be used instead.
Reconsidering the 4% inflation target
The RBI targets an inflation rate of 4%. In this article, Gurbachan Singh takes an in-depth look at the prevailing macroeconomic policy regime. This exercise provides an insight, which forms the basis for an alternative policy regime under which it is makes sense to target a lower inflation rate.
A closer look at demonetisation
In this article, Gurbachan Singh contends that black money and white money are simplistic concepts; there is a grey area as well. In his view, the economic effects of demonetisation in terms of real estate, seigniorage, and political funding are complex. The measure can be useful in curbing black money only if supplemented by other policies on a sustained basis.
Land in India: Market price vs. fundamental value
The Real Estate (Regulation and Development) Bill, 2015, is focused on protecting the few home buyers who can afford to buy homes but does not address the issue of high land prices, which is a very serious problem. This column demonstrates that the market prices of land in India are very high compared to fundamental values, and to market prices in developed countries.
Fiscal deficit and growth slowdown
Ahead of the Union Budget, several policymakers and economists in India have advocated increasing public spending to spur economic growth. In this article, Gurbachan Singh argues that even if India is facing a slowdown, a larger fiscal deficit is not the solution – more so now that RBI and the government have adopted inflation targeting. The prospect of a fiscal crisis may be farfetched but India may be incurring costs differently.
Inflation targeting in India: Right and wrong
An RBI-appointed Expert Committee has recommended targeting a 4% inflation rate, but allowing it to vary between 2% and 6%. This column takes a different position on the target and leeway. It argues that achieving truly low and stable inflation alongside macroeconomic stability is not as difficult as is usually made out to be, if the right policies are in place.
Why India should not further delay a credit line from the IMF
India is expected to run a current account deficit of more than 4% of its GDP this year. At the moment this can be paid for with money coming in from abroad – but what if the flow of money were to suddenly stop? This column argues that India should not further delay a credit line from the IMF.
The tussle between RBI and Ministry of Finance: A different dimension
The popular belief about the tussle between RBI and the Ministry of Finance is that it is an issue of the trade-off between inflation and economic growth, with the former more focussed on controlling high inflation and the latter emphasising high growth. However, according to Gurbachan Singh, there is a different dimension to the story; the Ministry doesn’t fully appreciate that RBI cannot ignore market forces while making announcements about interest rates.
भारत में ज़मीन की महँगाई और इसके उपाय
भारत में ज़मीन की कीमत उसके मौलिक मूल्य की तुलना में अधिक है, जिसके चलते देश में आर्थिक विकास प्रभावित हो रहा है। इस लेख में, गुरबचन सिंह दो व्यापक कारकों- शहरी भारत में लाइसेंस-परमिट-कोटा राज और ग्रामीण भारत में भूमि अधिग्रहण अधिनियम 2013 के सन्दर्भ में यह स्पष्ट करते हैं कि ऐसा क्यों है। वे इस व्यवस्था को चरणबद्ध तरीके से समाप्त करने और अंततः अधिनियम के मूल्य-निर्धारण प्रावधानों को समाप्त करने की सिफारिश करते हैं।
Why is land expensive in India, and what can be done about it?
The price of land in India is high relative to its fundamental value, impacting economic development in the country. In this post, Gurbachan Singh explains why this is so, in terms of two broad factors – the license-permit-quota Raj in urban India, and the Land Acquisition Act, 2013 in rural India. He recommends phasing out the Raj, and eventually abolishing the pricing provisions of the Act.
Huge bank losses, frauds, and economic risks
Banks have incurred humongous losses in India. The public authorities have taken corrective measures primarily in the form of strengthening laws, audits, and the enforcement processes. In this article, Gurbachan Singh argues that while this is indeed required, at the margin there is a much greater and urgent need to improve assessment of the economic risks in a dynamic economy.
Bubble in bitcoin or elsewhere?
The price of Bitcoin has skyrocketed. Gurbachan Singh contends that there may or may not be a bubble in cryptocurrencies. If there is a bubble, then the prices will fall eventually, and the story will end there. If, however, there is no bubble in cryptocurrencies, then there can be interesting implications for other important assets.
Recapitalisation of public sector banks, and financial repression
Government of India recently announced its decision to infuse Rs. 2.11 trillion of fresh capital into public sector banks, financed partly through recapitalisation bonds. In this article, Dr Gurbachan Singh discusses how by opting for normal government bonds instead, issues of financial instability and financial repression could have been avoided. Government of India recently announced its decision to infuse Rs. 2.11 trillion of fresh capital into public sector banks, financed partly through recapitalisation bonds. In this article, Dr Gurbachan Singh discusses how by opting for normal government bonds instead, issues of financial instability and financial repression could have been avoided.
Should India hold US$400 billion of foreign exchange reserves?
RBI’s foreign exchange reserves have now crossed the US$400 billion mark. In this article, Dr Gurbachan Singh discusses why India’s Central Bank should not hold such large reserves.
Towards financial prescription
The Securities and Exchange Board of India has proposed that the distributors of mutual funds should only be allowed to sell financial products and not act as financial advisers for customers. Drawing analogies from the regulatory frameworks for driving on public roads and practising medicine, Gurbachan Singh contends that this is a step in the right direction but much more needs to be done to regulate financial advice.
Demonetisation: Some very counterintuitive effects in practice
Due to demonetisation, holders of black money lose if they cannot exchange their notes or sell these in the black market. It is widely reasoned that this implies an equal financial gain for the public authorities. In this article, Gurbachan Singh shows that this logic is flawed.
Public sector banks: The more things change, the more they stay the same
Banks Board Bureau has been set up to help the government appoint heads of public sector banks (PSBs) and to advise on important issues in banking. In this article, Gurbachan Singh asks basic questions – what is the rationale for PSBs? Was there a rationale for the nationalisation of banks even in 1969? In his view, privatisation is needed but as a second-best solution, meaningful autonomy can be useful.
Recapitalising public sector banks by disinvesting in RBI: Right and wrong
The Economic Survey 2015-16 put forth the argument that the Government of India could reduce its capital in the RBI from its current large level and use it to increase its capital in public sector banks, which face a capital shortage. RBI Governor Raghuram Rajan has stated that this argument is not valid. In this article, Prof. Gurbachan Singh contends that while the argument does not hold in general, it does so for all practical purposes under the present conditions.
Reining in gold imports
In an attempt to reduce gold imports, the Indian government has proposed three new schemes – gold monetisation, sovereign gold bonds, and domestic production of branded gold coins. In this article, Prof. Gurbachan Singh diagnoses the market failure and government failure involved in large gold imports, and provides a broad perspective on the issue. He examines the potential effectiveness of the schemes, and suggests policy alternatives.
What is mitigating a financial crisis in India?
The recent turmoil in the currency market and the general slowdown in growth in India are disturbing. However, India has by and large performed better in terms of macro-financial stability as compared to many parts of the world. This column discusses the problems confronting policymakers, and current policy responses and associated costs, and suggests alternative policies.
The market for inflation-indexed bonds
On 15 May 2013, the Reserve Bank of India announced that it would begin monthly issues of inflation-indexed bonds starting June 2013. These bonds, wherein in the principal amount adjusts according to changes in the price level, are already in use in the developed world and their introduction in India is a welcome development. However, they are likely to have different implications for India given the presence of the Statutory Liquidity Ratio regulation in the country.