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Raising prices sensibly can reduce inflation

The Kelkar Committee report has painted a dire picture of government finances. It emphasizes the need to phase out unwarranted subsidies (such as those on diesel, cooking gas and urea) while maintaining warranted subsidies (on education, health, food) and targeting the poor. The committee has warned that India must curb its high fiscal deficit, which More >

Infrastructure crisis endangers future growth

Without infrastructure, an economy cannot grow. Industry and services cannot expand without highways, electricity, ports and airports, rail links and pipelines. The 12th Plan (2012-17) projects infrastructure investment of a trillion dollars. Alas, infrastructure has hit a wall, and been knocked semi-conscious. This has seriously undercut India’s future growth potential. No remedy is in sight. More >

Profit and loss can be manipulated, market price gives a better picture of cos’ financial position

The Comptroller and Auditor General’s ( CAG) estimates of government losses and corporate gains have stirred much controversy. Supreme Court Chief Justice S H Kapadia attempted to elucidate valuation principles in a recent speech. He reportedly said, “Today, a number of controversies on valuation are discussed but the basic principle of valuation is that loss More >

Cheap Chinese imports can be good for us

Across Asia, including China, foreign retailers have proved a blessing, providing consumers with cheaper wares, and upgrading the technology of local producers to make them globally competitive. Only in India do opposition parties want to protect the aam bania against the aam admi. The worst argument against foreign retailers is that they will flood India More >

US electoral college maths favours Obama

With less than two months to go for the US presidential election, most opinion polls suggest that Barack Obama is a clear favourite to beat Republican challenger Mitt Romney. A Gallup poll last Thursday gave Obama 50% of the popular vote against Romney’s 44%. However, a Rasmussen poll showed Romney nosing ahead by 47% to More >

Why we need better economics

In Washington DC, a fellow bus traveller asked about my job. I said I was an economist. “Oh” he said in disgust “you economists don’t know nothing.” This was a cruel, yet accurate comment. The world is staggering under multiple problems, but economists of all stripes have failed to come up with convincing remedies. Once, More >

The XI that won the Gujarat Test

There was much cheering last week when our cricket Test team demolished New Zealand . Yet the truly great Test and victory was in the Gujarat High Court, which imposed stiff sentences on perpetrators of the Naroda Patiya massacre of 2002. India’s institutions and civil society defeated a state bent on protecting the guilty. This More >

Don’t cancel coal blocks, levy high royalties

Opposition parties want Manmohan Singh’s head for supposed corruption in 57 coal blocks that were allocated, not auctioned. The government is under pressure to cancel the allocations. That would be politically, legally and economically wrong. Politically, it will look like a confession of crookedness. Neither the CAG nor anybody else has produced any evidence of More >

CAG, SC, EC: institutions up in arms

Indian politics today seems driven less by politicians and more by the Supreme Court and Comptroller and Auditor General (CAG). What does this imply for Indian democracy? The answer is that we are seeing a revolt by India’s institutions against a corrupt, callous state. An implicit political conspiracy ensures that all parties can, with impunity, More >

End discretionary allocations in coal and everything else

The report of the Comptroller and Auditor General on coal block allocations highlights the mess in the coal sector, but has led to very faulty interpretations of what exactly has gone wrong. The report exposes the pitfalls of ministerial discretion to allocate coal blocks. Market-based procedures like auctions, which would eliminate bribes and increase revenue, More >

Independence Day: Why Partition was a good thing for India

  Today we celebrate the 65th anniversary of India’s independence. Some mourn it as the 65th anniversary of India’s partition, which killed a million people and forced 10 million to flee across borders for safety. Utopians wish Partition had never happened. Supposed realists say Partition was inevitable. I would go a step further and say More >

Drought relief, poll freebies will widen fiscal deficit

When India’s GDP growth declined to 6.5% last year, some shrugged it off as an aberration. But drought and industrial stagnation have led financial analysts like CLSA to slash their growth estimate for 2012-13 to 5.5%. Citibank fears it could fall to 4.9%. Consumer inflation remains high. Don’t blame just the weather and global conditions, More >

Anna’s party would be a great blunder

Dear Anna Hazare, Frustrated by your failure to draw large crowds or sway Parliament, you have decided to convert your India Against Corruption movement into a political party. This is madness. Please abandon the idea. A mass movement can flourish on a single issue like fighting corruption. A single-issue movement can draw support from many More >

Why RBI’s fears about India’s growing current account deficit are misplaced

The Reserve Bank has expressed grave worries about the current account deficit (CAD). This hit a record 4.2% of GDP in 2011-12. In January-March 2012, it was even higher at 4.5% of GDP, in stark contrast to just 1.3% in the corresponding quarter of the previous year. Some analysts are calling for anti-crisis action. Their More >

Drought not a big calamity in India anymore

The monsoon has failed badly this year as it did in 1965. But it’s little more than an inconvenience this year, whereas in 1965 it was a monstrous calamity. The drought-proofing of India is a success story, but one widely misunderstood. India in the 1960s was pathetically dependent on US food aid. Even in the More >