Many elements of infrastructure have natural monopoly characteristics. Under these conditions, if the owner of the infrastructure is profit-maximising, he is likely to impose high user charges and extract a monopoly rent. As a consequence, in many infrastructure services in most countries, independent regulators are established which control the user charge.The critical building block that goes into this is assessing the `fair' rate of return on equity capital. By and large, infrastructure projects have low betas; whether business cycle conditions...
Tuesday, 24 April 2012
Monday, 23 April 2012
by a href="http://ajayshahblog.blogspot.com/2011/05/author-pratik-datta.html">PratikDatta./aIndia and Pakistan are slowly reintegrating their economies,through a href="http://ajayshahblog.blogspot.com/2011/11/pakistan-india-mfn-what-are.html">tradeand investment. Will we stop at sterile commercial transactions, orcan there be more to the engagement of the two countries? Most of usin India think of Pakistan as a country with serious governanceproblems; we think that India has little to learn from Pakistan. Acareful reading of history will...
by ViralShah and Ajay Shah.As with many other problems in Indian economic reform, getting tothe right destination on the GST requires winning on policy, politicsand administration. On the policy side, the basic design of the GSTneeds to be done right. Pulling this off will require great politicalskill - a coalition of beneficiaries from the GST will need tochampion it in the Indian federal setting. Finally, assuming that thepolicy and the politics has been done well, it will require the rightplumbing. In this blog post, we review progress on this...
Saturday, 21 April 2012
Many people like to envision worlds where the State will tax the rich and help "the needy" - this ranges from free health care to unemployment insurance to disability insurance, etc.There are many problems with these schemes. One of them is the fact that people respond to incentives. We are not bricks, we are not stones, but men, and being men, we will optimise. When unemployment insurance is offered, people will try less hard to find a job, to acquire skills that will get them a job, to migrate to a place where jobs are more easily found, etc....
Wednesday, 18 April 2012
Thursday, 12 April 2012
The most important measure of inflation in India is the year-on-year change of the CPI-IW index. This time series, for 120 months, is shown above. From 2006 onwards, India slipped into a new phase of macroeconomic instability, where inflation has strayed far outside the informal target zone of inflation at four-to-five per cent.Has inflation subsided?In recent months, there has been a surge of optimism that the inflation crisis is coming to an end....
Wednesday, 11 April 2012
Liquidity mattersOne of the most important features of a financial market isliquidity. In a well functioning market, a trader faces low costs oftransacting and can confidently expect that at future dates, acrossmany states of nature, the cost of transacting will prove to below.The immediate impact of a low cost of transacting is that itimposes a lower `tax' upon the speculator, who brings new informationinto prices, and the arbitrageur, who removes...
Tuesday, 10 April 2012
by Parth Shah.One major initiative of the Indian government, in a href="http://ajayshahblog.blogspot.in/2012/01/education-in-india-compact-reading-kit.html">the field of education, was the Right to Education Act of 2009. This act has major problems, as has been argued by numerous observers and experts in the field. This Act focuses on the interests of incumbent public sector education providers, instead of focusing on the interests of children and parents. It is focused on inputs into the educational process, regardless of the outcomes which...
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