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Oil subsidies are bogus socialism

Oil hit a record $135/barrel last week, up from $51/barrel in January 2007. Taking a longer four-year perspective, the price of the crude is up 230%, but Indian petrol is up only 35%, diesel 46%, and kerosene not at all! Why not? Because government diktat obliges oil marketing companies to provide massive implicit subsidies to More >

Roti, kapda, makaan and TVs

Surging food prices and the Karnataka election once again raise the question, how needy and distressed are Indians? Karnataka has been at the very forefront of India’s record GDP growth of almost 9% per year. But critics claim that rapid growth has bypassed the wretched poor. Karnataka can be cited as a case in point More >

Ban on food exports from India fueled world prices

Indians are outraged by President Bush’s claim that rising food consumption in India and China have sent world food prices skyrocketing. When incomes rise, people eat more meat, so more grain is fed to animals. Seven tonnes of grain produce only one tonne of beef. The conversion ratio is 4 to 1 for pork, 2 More >

Let others starve, self-righteously

Indians are outraged by President Bush’s claim that rising food consumption in India and China have sent world food prices skyrocketing. When incomes rise, people eat more meat, so more grain is fed to animals. Seven tonnes of grain produce only one tonne of beef. The conversion ratio is 4 to 1 for pork, 2 More >

How to reform power & irrigation

Last week, I showed that spending $50 billion on dams and canals in the 11th Plan would be a waste. Surface irrigation provides water in quantities and at times fixed by the irrigation authorities. This is useless for farmers growing different crops needing different amounts of water at different times. Farmers need just-in-time water on More >

RBI cannot focus on inflation alone

I greatly respect Raghuram Rajan. He warned in writings and speeches of rising risks in the US financial sector in 2005-07, when all others were singing hosannas to financial innovation. The subsequent financial crisis proved him prescient. Yet I disagree with his key recommendation as head of the Committee on Financial Sector Reform. He says More >

Wasting $50 bn on major irrigation

Ostensibly to help farmers, the 11th five-year Plan allocates nearly $50 billion to surface irrigation (dam reservoirs, tanks and canals). This will be a huge waste of money on obsolete, ineffective irrigation concepts dating from the 19th century, says irrigation expert Tushaar Shah in a forthcoming book. Farmers themselves have moved massively away from surface More >

India needs McCain as US President

Which of the three candidates for the US Presidency — Hilary Clinton, Barak Obama, and John McCain — will be best for India? Most Indians would opt for Obama or Clinton. But from a policy viewpoint, McCain would be best for India. Indians have followed with fascination the Democratic struggle in primaries between Clinton and More >

How BRICs have changed the world

In 2001, Goldman Sachs came out with the concept of the BRICs – Brazil, Russia, India China – as high-population countries that would dominate the world economy by 2050. At the time, global financiers sneered that this was a facile formulation to get business from the gullible. Very little global finance trickled into the stock More >

Fiscal deficit back to record level?

Terrified that surging food prices will cause it to lose the coming state elections, the government has come out with an anti-inflation package banning most agricultural exports and slashing import duties on edible oil. Yet the biggest anti-inflation measure is hardly known or debated, although it will have serious consequences. Domestic prices of fertilizers, petroleum More >

Why does corrupt India grow fast?

How serious is corruption in India, and how great an obstacle to fast growth? Most people would say corruption is very high and a serious obstacle to the 10% growth now sought by politicians. A joint study by CMS and Transparency International in 2005 asked people of their experiences in dealing with 11 government departments. More >

Government panic stokes inflation

When inflation accelerates, as is the case today, governments across the globe tend to panic and rush out with anti-inflationary packages. The trouble is that governmental panic itself has become a new cause of further inflation. That is why inflation in India-and in other developing countries — is not going to fall anytime soon. Inflation More >

Black money saves financial sector

A housing boom-and-bust has engulfed the US financial sector in crisis. India, too, has experienced a runaway real estate boom, which in a few areas is going bust. The share prices of real estate companies have crashed. Yet, India has no mortgage crisis or financial sector crisis. Why not? Mainly because of the huge amount More >

US recession a solution, not a problem

How long and hard will the US recession be, and how badly will it affect India? Analysis of that issue has currently been hijacked by the sensational events in the US stock market, mirrored by gyrations in Indian markets. The markets surged upward in a burst of optimism at the beginning of this week. Yet More >

Why Sonia should thank Chidambaram

Sonia Gandhi should thank Finance Minister Chidambaram for resisting proposals to put part of India’s foreign exchange reserves into a Sovereign Wealth Fund, which would buy equity shares in top global companies. Such a Sovereign Wealth Fund (SWF)—an idea backed by eminent economists, the Prime Minister and the Planning Commission—would have suffered huge losses because More >