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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 >

Strange rise of Eastern neo-colonialism

For 60 years, the International Monetary Fund has bailed out distressed economies, imposing onerous conditions aimed at ensuring that the loans are repaid. The borrowers have often complained that loan conditions violate their sovereignty. The IMF is dominated by rich countries, and always has a European chief. So, leftists have long accused the IMF of More >

Attack polluting policies, not the Nano

RK Pachauri, head of the Inter-governmental Panel on Climate Change, is getting nightmares because of the Nano, Tata’s Rs 1 lakh car. Sunita Narain of the Centre for Science and Environment (CSE) says that it isn’t the Nano by itself but cars overall that give her nightmares. The villains in my nightmares are neither the More >

End of the 9% Growth Dream

After four years of boasting of 9% GDP growth, and talking of overtaking China, Indians are reluctant to believe that the economy is headed for a serious fall. But the stock market has crashed, an indication of the pain ahead. Western observers have been lavishing praise on India as a coming economic superpower. So, many More >

Budget Stimulus is not Enough

This year’s budget is not simply an election budget. It is also an anti-recession budget. It seeks explicitly to stimulate the domestic economy in the face of the coming global slowdown. Yet the exercise will have at best very partial success, for two reasons. First, the finance minister is bound to sacrifice growth for inflation More >

Loan waiver: Not an election winner

Political ploys initially hailed as master-strokes often end up as flops. I suspect this will happen to the Rs 60,000 crore farm loan waiver announced in the budget. It writes off 100% of overdues of small and marginal farmers holding up to two hectares, and 25% of overdues of larger farmers. Finance minister P Chidambaram More >

The high cost of delayed reform

For a short but incisive economic history of India since Independence, you should read the first hundred pages of Arvind Panagariya’s new book (India: The Emerging Giant, OUP). He follows this up with an excellent discussion of key contemporary problems, including poverty and equality, deficits and debt, trade and industry, and ways to improve the More >

Election budgets don’t win votes

Dear finance minister, You are about to present your fifth and last full budget in your current term. Next year, you can present only a vote on account because a general election is due in May 2009. So, you will undoubtedly be under great pressure from friends and colleagues in the Congress party to make More >

Is IMF austerity only for the poor?

The IMF prescribed severe austerity and economic shrinkage. You chaps have been living beyond your means for years, it said, and have severe structural problems that cannot be reflated away. So, you need bitter monetary medicine (sky-high interest rates) and fiscal medicine (slashing government spending and fiscal deficits). Yes, the shrinkage of GDP will be More >