In the Independence Day special issue of Forbes magazine, I have an article titled Rightsizing the State. At a recent show organised by Dun & Bradstreet, I joked that the puzzle in India is that of finding the middle road, between Gotham City on one hand (a murky world of corruption and criminality) and Jurassic Park on the other (with socialist dinosaurs destroying the economy). Pessimists about India might say that if the goons won't get you, the dinosaurs wi...
Tuesday, 27 August 2013
Sunday, 25 August 2013
Every now and then, some people get enamoured about capital controls as a tool for macroeconomic policy. The actual operation of capital controls on the ground is a mess.As an example, consider the recent decision to hinder outbound capital flows by individuals and firms. At first it sounds fair and plausible. We are hindering outbound capital flows by households by interfering with their purchase of gold, and in similar fashion we should intefere with their outbound capital flows through other routes.Vatsal Gaur and Sidharrth Shankar review this...
Saturday, 24 August 2013
by Percy Mistry.Dhiraj Nayyar, Director of the Think India Foundation, has just written an excellent, sympathetic piece about Dr. Subbarao's tenure as Governor of RBI.It is full of pathos because Dr. Subbarao is a decent, dignified and extraordinarily intelligent, capable man with a powerful sense of politeness and decorum. These days: decency, decorum, dignity and politeness are virtues that, in modern political, bureaucratic and corporate India, seem conspicuous by their absence. So anyone who exhibits them, should score highly in anyone's book.Dr....
Friday, 23 August 2013
The problemShekhar Gupta and Swaminathan S. A. Aiyar have pointed out that our domestic policy logjam is leading to the import of natural resources which are amply present in mines in India. This is giving a bigger current account deficit and a weak rupee.I feel this is not such a bad thing. Many countries have been afflicted by the resource curse and many countries have been afflicted by Dutch disease. We are blessed with reverse resource curse and reverse Dutch disease. Here's the argument.Reverse resource curseThe idea of the resource curse...
Thursday, 22 August 2013
Miss Prism: Cecily, you willread your Political Economyin my absence. Thechapter on theFall of the Rupeeyou may omit.It is somewhat too sensational.-- Oscar Wilde,The Importance of Being Earnest,1895.The graph above superposes the INR/USD exchange rate and Nifty, both reindexed to start at 100 on 15 May 2013....
Wednesday, 14 August 2013
by Harsh Vardhan.The much hyped applications for new bank licenses are in – all 26 of them. Now, RBI will evaluate these applications which will require scrutinising mountains of documents that have been presented.A casual look at the applicants reveals remarkable diversity in their character. The applications include non-banking finance companies, micro-finance companies and brokerage firms. There are established and new firms. There are focused (i.e. single business oriented) and diversified firms. There are public and private firms. A number...
Tuesday, 13 August 2013
Road safety is a problem in India. The authorities are getting push back from the citizenry about the carnage on the roads. What is convenient for them is: to shut down roads.Finding terrorists is difficult. Terrorists can use open wifi networks or trains. What is convenient for the authorities is to shut down open wifi networks or trains.Achieving safety in public spaces late in the night is difficult. What is convenient for the authorities is to force all establishments to close down at 10 PM.In similar fashion, I was disappointed to read Chanpreet...
Monday, 12 August 2013
Many people are confidently saying that the market's price of the rupee-dollar exchange rate is wrong. They think they know what the exchange rate should be. There are many pitfalls along this path.The simplest international trade perspectiveTo fix intuition, let's think there are only two countries: India and the US. Suppose there was no capital account. Suppose there was only import and export of goods and services on the current account. In the absence of a capital account, in every time period, the current account would have to work out to...
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