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Why next-generation economic reforms are crucial for reviving investment
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Macroeconomics
Does easing controls on foreign borrowing boost firm performance?
The literature shows that rigid capital-control policies adversely influence international trade, but overlooks the relationships among access to external financing, firm-level productivity, and exporting performance. Using a dataset of 11,612 Indian firms over 1988-2014, this article finds a significant effect of capital-account liberalisation through an export-oriented policy initiative, on firms' productivity and exporting activity. The effect is stronger for financially vulnerable firms, as measured by high debt and low liquidity.
Unmaking ‘Make in India’
The current government has attempted to improve India’s ranking in the World Bank’s Doing Business Indicators, but with limited success. This article shows that ‘deals’ between the State and businesses, rather than the rules laid out by the State, characterise the State–business relationship. Indian states with weaker quality of governance provide higher proportions of ‘good deals’ in terms of the speed of obtaining licences, such that easing business regulations does not necessarily lead to higher productivity
Atmanirbhar Bharat Abhiyan: Putting the cart before the horse
In an attempt to tackle the economic crisis triggered by the Covid-19 pandemic, Government of India announced a Rs. 20 lakh crore Atmanirbhar Bharat Abhiyan financial package, equivalent to 10% of India’s GDP. In this post, Dey and Kundu present a detailed analysis of the package and contend that the actual stimulus component is only about 1.27% of GDP. They propose a modified package equivalent to 5% of GDP, with a focus on stimulating demand in the economy.
The supply-side effects of India’s demonetisation
What were the effects of the 2016 Indian demonetisation that removed 86% of currency in circulation overnight, on the production side of the economy? By combining data from financial statements and surveys of firms and workers, this article finds that firms that use cash more and obtain larger shares of labour or material inputs from the informal sector, experienced declines in these input shares after demonetisation. Further, casual labourers were more likely to report being unemployed post demonetisation.
Webinar video: The Covid-19 shock
The Covid-19 pandemic and the containment measures adopted to check the spread of the disease, have caused an unprecedented economic crisis in India as well as the rest of the world. Further, India is experiencing a massive humanitarian crisis, exemplified by the scale of reverse migration that is in progress. There is an urgent need for the government to implement policies designed to mitigate the economic damage, and alleviate the suffering of the most vulnerable. In this webinar (12 June 2020) – moderated by Prof. Parikshit Ghosh, Member of the I4I Editorial Board – Dr Pronab Sen reviews the current status, and deliberates on what needs to be done, and where we are likely to be in the future. The webinar is based on Dr Sen’s recent five-part series on I4I.
Protectionism and Statism, once again
In this post, Ajit Karnik argues that, at a broad strategic level, the Indian government has displayed a disconcerting shift towards protectionism and Statism over the last few months. While discussing India’s experience with an inward-looking policy in the past – the negative consequences of which had kept it shackled in a low rate of growth for decades – he presents a critique of the economic vision of the current government.
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