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- Indian Institute of Management, Ahmedabad, Economics, Faculty Memberadd
- Presently employed as Senior Professor, Goa Institute of Management, Earlier was Professor (from 2000) at the Indian ... morePresently employed as Senior Professor, Goa Institute of Management, Earlier was Professor (from 2000) at the Indian Institute of Management, Ahmedabad. Work involves teaching, research and consultancy. (Also as the Chairperson of the Doctoral (Fellow) programme for over three years, and currently as the first Chairperson of the Post Graduate Programme in Public Management and Policy, and also first Chairperson of the Centre for Infrastructure Policy and Regulation. These chair positions also involve administrative responsibilities). Was Co-Chair of the Harvard Kennedy School, Phase V IAS Training Programme for Senior Civil Servants (2006-2010), and Chair of the Phase V Programme for IAS Programme (2010-) and Chair of the Phase IV IAS Programme (2010-)
Visiting ICCR Chair Professor at the Copenhagen Business School (Asia Research Centre, School of International Economics and Management) Feb 1 to June 15 2013.
Was Visiting Fellow at the University of Pennsylvania, Philadelphia, USA from August 25, 1993 to August 31, 1994, and has been visiting faculty at ESSEC, Paris.
Employed as Assistant Professor at the Indian Institute of Management, Ahmedabad. Work involved teaching, research and consultancy. (June 92 to July 96) and then as Associate Professor (1996-2000).
Employed at the Institute of Public Enterprise, Hyderabad, in the Economics Group, from June to August 31, 1994 as Associate Professor, and earlier as Assistant Professor from April 1986. Work involved research, teaching, training, and consultancy.
Was senior staff writer and correspondent for Business India (magazine) from September 1982 to November 1983. Work involved editing, reporting, as well as writing feature articles.edit
Foreign direct investments from India, although not exactly a recent phenomenon, has attracted the attention of scholars only in the recent past. Nevertheless a fairly substantial literature has emerged on the phenomenon of foreign direct... more
Foreign direct investments from India, although not exactly a recent phenomenon, has attracted the attention of scholars only in the recent past. Nevertheless a fairly substantial literature has emerged on the phenomenon of foreign direct investments (FDI) from the LDCs. The published literature on FDI from India has generally lacked systematic empirical basis, mainly due the inadequacy of available information.<br><br>This study is a departure from previous studies in that it has a fairly rich empirical basis. The author had access to information from the Government not generally available to scholars. It is also the first comprehensive study of the phenomenon. FDI (rather the bulk of the FDI in the form of the so called "joint ventures" abroad) from India, since 1964, is analyzed in many of its important aspects: trends and patterns, the nature of financing, control and ownership of the resulting firms abroad, and their sources of technology. The motivations underlying FDI and the competitiveness of the firms abroad are also analyzed and related to the specific nature of development in the post independence period in India. <br><br>Much of the evidence presented in support of the hypotheses and conclusions is built up from information pertaining to individual firms abroad. While most questions do start with an examination of the aggregate picture, the attempt is always to take advantage of the detailed firm level information when these were available. Fourteen case studies covering some of the most important Indian firms abroad, both large and small, bring out certain finer points and interrelationships not easily brought out in an analysis based on aggregate information alone.<br><br>In Chapter I, in a brief survey of the literature, it is argued that popular conceptualizations like the product cycle hypothesis, or the advantage concept of Kindleberger, can only inadequately or only partly, explain FDI in general, not to speak of FDI from the Less Developed Countries (LDCs). Instead, an alternative framework that recognizes the search for markets and resources as the only truly general causal factor in FDI is adopted.<br><br>In Chapter II, the trends in FDI, their geographical and industrial patterns since 1964, and the dimensions of the phenomenon in relation to other relevant phenomenon inward FDI, FDI from other LDCs and small advanced capitalist countries, and domestic investments is brought out. It is shown that FDI (despite the small size when compared to that from the advanced capitalist countries) has emerged as a significant option for the private corporate sector in India. <br><br>In Chapter III, the patterns of ownership and control of the firms abroad is established. Some of the firms in India are highly transnationalised, and houses such as the Birlas, Thapar and Jhawar are transnationalised to a level that exceeds 30%, whatever measures one adopts. Although the large business houses dominate the phenomenon, there are very many other firms which have invested abroad. Through a detailed examination of the share holding patterns, directorships, contractual arrangements and other relevant information pertaining to firms abroad, the true degree of control by Indian parents is estimated. Despite the fact that on the average Indian parents directly hold only about 30% of the equity share capital of the firm abroad, through many ways dominant share holding, dispersal of part of the stock through a stock exchange, indirect share holding, collaborations with persons and firms of Indian origin, collaborations with host country governments Indian parents, in over two thirds of the investments abroad, have ensured control. Through other measures such as long term management contracts, the hold of the Indian parent is deepened and formalised. Yet in a number of large firms abroad Indian parents have collaborated with transnational (originating in the advanced capitalist countries) capital in the equity of the firms abroad. Although transnational capital has shared control with the Indian parents in a significant way, there are hardly any cases where the Indian parent plays only the role of a junior partner. In nearly all the cases of collaboration with transnational capital, the Indian party had taken the initiative to set up the firm abroad. FDI is largely a phenomenon of indigenous Indian capital. Firms in India which are joint ventures with foreign capital have also shown the same propensity to go abroad. But foreign controlled companies be they subsidiaries or the so called foreign controlled rupee companies have shown little propensity to invest abroad.<br><br>In Chapter IV, the sources of technology of the firms abroad is uncovered. A conceptual framework suited to the task on hand and keeping in view the limitations of the source materials is arrived at. The focus is to delineate the role of transnationals from Indian parents and firms as suppliers of technology. Technology is seen as being…
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During the eighties there have been stop-start attempts at liberalization and at policy change to give new direction to the economy which had been drifting ever since serious planning had been given up in the mid-sixties with the onset of... more
During the eighties there have been stop-start attempts at liberalization and at policy change to give new direction to the economy which had been drifting ever since serious planning had been given up in the mid-sixties with the onset of the recession then. The period since then right up to 1979 was one of slow growth. The eighties with some what better growth provided the confidence for change. In 1991 and 1992 the attempt by the Government to make a radical shift from the past in the direction of liberalization has no doubt been informed by the experience of the fast growing NICs of east and south-east Asia. The debate, that has followed the policy pronouncements, has been at cross purposes, and the ideological predilections of both parties, but particularly of the left has not helped the conduct of the debate. In this paper we examine some of the issues that have thus far been raised- possibility of India going the Latin American way, export pessimism, employment implications of...
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Reviews the working of the Rural Infrastructure Development Fund of the Government of India.
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these groups of firms in terms of technol- Outlook for Small Firms The Growth and Transformation of Small Firms in India by Sebastian Morris, Rakesh Basant, Keshab Das, K Ramachandran and Abraham Koshy; Oxford University Press, New... more
these groups of firms in terms of technol- Outlook for Small Firms The Growth and Transformation of Small Firms in India by Sebastian Morris, Rakesh Basant, Keshab Das, K Ramachandran and Abraham Koshy; Oxford University Press, New Delhi, pp xxii + 353, Rs 595 (hard bound).
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Brings out various features of infrastructural development in Gujarat, and provides an explanation in terms of endowments and political economy for the enhanced performance of Gujarat in some of the physical infrastructure segments like... more
Brings out various features of infrastructural development in Gujarat, and provides an explanation in terms of endowments and political economy for the enhanced performance of Gujarat in some of the physical infrastructure segments like electricity, roads, ports. Suggest suitable policy and actions to take infrastructure forward particularly in the weaker areas like tourism, water and municipal services..
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Brings out the nature of public expenditure accountability in India especially at the federal level. The perversities - large role for off budget items, the process that leads to expanding expenditures with little functional but much... more
Brings out the nature of public expenditure accountability in India especially at the federal level. The perversities - large role for off budget items, the process that leads to expanding expenditures with little functional but much procedural control, are brought out. The division of expenditure into Plan and Non-Plan is one the perversities since it leads to gaming by state governments to get central funds. Despite many cumbersome reporting requirements, there is little functional oversight or even corrective measures possible in the current system. General public concern for the fiscal deficit alone may not be the right approach, and attempts to reduce the same by cutting out expenditures may not be right especially when the elasiticity of tax revenures with respect to investment expenditures in a recessionary situation is high. Argues for a structural approach to the fiscal deficit and shows the limitations of the sustainability approach. Suggests that major changes are required in the process of budgeting, in the vast array of centrally sponsored schemes and in the mode of subsidisation.
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The paper reviews the situation with regard to the electricity sector and the failure of policy and regulation. It argues for direct subsidy and a market oriented unbundling of the sector to take the sector forward. It also brings out the... more
The paper reviews the situation with regard to the electricity sector and the failure of policy and regulation. It argues for direct subsidy and a market oriented unbundling of the sector to take the sector forward. It also brings out the failure of the IPP policy and the costs that it has imposed on the sector and the economy.
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Bharat Heavy Electricals Limited, a large Indian public enterprise in the power sector, has been successful in judiciously blending technology imports and indigenisation. Through the mid-1970s and 1980s, it has progressively increased its... more
Bharat Heavy Electricals Limited, a large Indian public enterprise in the power sector, has been successful in judiciously blending technology imports and indigenisation. Through the mid-1970s and 1980s, it has progressively increased its ability not only to search for, bargain and purchase advanced technologies, but also to achieve design and engineer ing within its main business lines. However, it could not emerge as a major technology exporter despite some initial advantages. This case study probes deeper into the apparent failure of BHEL in the international market.
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Optimal approaches that recognize the specific kind of market failure/s, in the policy and design of infrastructure, greatly reduce the financing costs and improves the ability of to attract finance in the private provisioning of... more
Optimal approaches that recognize the specific kind of market failure/s, in the policy and design of infrastructure, greatly reduce the financing costs and improves the ability of to attract finance in the private provisioning of infrastructure. When state systems are weak organizationally it is first best to strengthen the state capacity so that it can minimally perform the roles of design, regulation, development of frameworks, and of monitoring, for the private provisioning of infrastructure. This is particularly so in the case where there are dual market failures arising out of both the natural monopoly and the appropriability failure aspect. The challenges in design and policy are large and with many false starts it is only now barely beginning to be considered in India. Thus infrastructure design rather than debilities in financial markets remain the key problem. The potential to use of foreign capital to finance infrastructure is often overstated. The forces leading to the current mess-up of the Indian banks and FIs in lending to infrastructure are brought in perspective. The key issues in developing state capacity, and the changes required for getting the design of infrastructure right, as also to bring functionality to the role of financial institutions in the private development of infrastructure are highlighted. Governance reforms that make for better development of infrastructure are highlighted.
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Brings out the context for (economic) governnance reform in India and develops the theme of the report on better governance for commercialisation of infrastructure. Argues that most situations of governnace inadeuacy or failure can be... more
Brings out the context for (economic) governnance reform in India and develops the theme of the report on better governance for commercialisation of infrastructure. Argues that most situations of governnace inadeuacy or failure can be traced to utlimate causes in bad policy, rules, law and poor design of institutions; through examples and by uncovering the relationships. Argues against the thesis that the causation runs only one way from governance to economic performanc failures. Critiques the standard position of multilateral agencies. Brings out the roots of governnace failure in excessive discretion with government, the price based subsidisation, policy enduced shortages, poor regulatory structures, use of cost plus approaches, and laws that are unfair or contradictory. Categorises corruption and casts the same in a historical framwork. Corruption therefore is a result of economic policy, law and institutional failure rather than the other way around. Overcoming corruption is possible by bringing about change at the roots of the phenomenon. Lays out a perpective for governance reform for further commercialisation and for enhanced infrastructural development in India
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There are certain inherent problems with land because of its peculiar characteristics, which impede the natural emergence of a well-functioning market. The legal and regulatory framework can potentially overcome these problems. In India,... more
There are certain inherent problems with land because of its peculiar characteristics, which impede the natural emergence of a well-functioning market. The legal and regulatory framework can potentially overcome these problems. In India, despite some reform efforts, the land market continues to be highly distorted and inefficient. Land records are inaccurate, outdated, and incomprehensive. There are widespread uncertainties relating to land titles, which have hurt the market. Transaction costs are significantly high by international standards, which have discouraged formal land transactions. Initiatives which could have made the market function better have not been taken; while some regulations have been introduced which have introduced or magnified the distortions in the market. A major negative consequence of this underdeveloped and distorted market is that promoters of industrial and infrastructure projects have eschewed market negotiations for land acquisition and have favored the use of eminent domain powers. While reforms have begun in many areas, an area that has been left untouched relates to regulatory restraints on land use. The most notable has been the requirement of NAC. Because the clearance is typically given after land is transferred from one party to another, there is a significant transfer of wealth from farmers to project proponents, which has been the source of a great deal of social discontent. The elimination of this restriction on land use would go a long way towards making the land market a great deal more efficient than it is now.
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In this paper, we examine the trends in the CPI and the core part of the CPI to bring out a grievous error in the core CPI. The core in certain years shows a jump of as much as 7% in certain quarters due to the error in the way the rent... more
In this paper, we examine the trends in the CPI and the core part of the CPI to bring out a grievous error in the core CPI. The core in certain years shows a jump of as much as 7% in certain quarters due to the error in the way the rent prices are computed. During the periods following the Pay Commission implementation, the “ rent” prices rise in the CPI, because the rents for the entire population are imputed from the “House Rent Allowance” accorded to government employees. “Rents” in the CPI have jumped up by as much as 35% in certain quarters, hugely overestimating the true inflation. This vitiates any use of the core CPI for monetary policy including inflation targeting. This will-o’-wisp that the RBI chased, had no doubt constrained growth in India.
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Abstract Approaches that recognize the specific kind of market failure/sMarket failure, in the policyPolicy and design of infrastructureInfrastructure, greatly reduce the financing costs and improve the ability of to attract finance in... more
Abstract Approaches that recognize the specific kind of market failure/sMarket failure, in the policyPolicy and design of infrastructureInfrastructure, greatly reduce the financing costs and improve the ability of to attract finance in the private provisioning of infrastructureInfrastructure. This is particularly so in the case where there are dual market failuresMarket failure arising out of both the natural monopolyNatural monopoly and the appropriability failure aspect. Thus, sewerage and water, city roads, multimodal facilities, solid waste, public health care and the challenges have proven beyond the current ability of the state. Debilities in the financial marketsMarket stem from the weaknesses of the public sector banksPublic sector banks. RiskRisk shifting on to them by private players have been common. PolicyPolicy must move to internalizing interest rateInterest rate change risk in all PPPsPublic private partnership. It must also tighten the conditions under which renegotiation is possible so that the state is not pushed to bearing the downsides of privately provided infrastructureInfrastructure. The heightened private brownfield investmentsInvestment (when greenfield decline rapidly), today, are more a reflection of the government’sGovernment inability to come out with solutions while monetizing its creative effort-especially the NHDPNational Highway Development Programme—in the past.
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In this paper the core issues that need resolution before water development especially by the private sector, and efficient usage can happen are very briefly outlined. These are Water rights have to be defined more functionally to include... more
In this paper the core issues that need resolution before water development especially by the private sector, and efficient usage can happen are very briefly outlined. These are Water rights have to be defined more functionally to include tradability. There is a need to move away from price based subsidies in electricity for irrigation and in irrigation water, to endowment based subsidies where these endowments can be traded. Administrative and organizational reform of parastatals in water, is most vital. The starting point of the same would be to grant operational autonomy and empower the leadership of water development departments. Creating institutionalized rules to overlay endowments and rights in cooperative water systems that can put free these organisations from the free-rider problem to lead to efficient management of water and to the enhancement of its generation. A strategic shift to more storage especially in the Deccan and its extensions, and to counter opposition from the post-modernist NGOs both within and outside the country by having excellent policies and actions to manage displacement and rehabilitation would also be necessary. River training for storage, canals, and recreation and navigation along with urban renewal can be an important way to finance vast infrastructure to develop cities and add to water resources as well.
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<jats:p>The Indian electricity sector was opened to the private sector under the IPP policy. The NTPC, India's largest and perhaps most efficient generator had to respond to the changing scenario. It set out to set up the... more
<jats:p>The Indian electricity sector was opened to the private sector under the IPP policy. The NTPC, India's largest and perhaps most efficient generator had to respond to the changing scenario. It set out to set up the Simhadri project in Andhra Pradesh, going beyond to original mandate. The IPP policy, its perversities, the background of the power sector, the problems there in and the response of NTPC are discussed. Case (B) discusses the issues related to Project Planning and Implementation.</jats:p>
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Using a logistic model of cumulative cases and deaths it would soon become possible to give estimates to the final numbers of cases and deaths that are likely on account of COID19, for countries which have gone through about 60+ days... more
Using a logistic model of cumulative cases and deaths it would soon become possible to give estimates to the final numbers of cases and deaths that are likely on account of COID19, for countries which have gone through about 60+ days since the first cases were recorded. Such estimates assume that the containment and preventive actions continue unabated. We also provide an upper bound to the final cases and deaths that are likely. Right now (with data up to April 1) the projections for Korea, China, Germany, Italy, Spain, Iran, UK have been made. We hope to update the same in due course as the disease progresses. In the UK the deaths are bound to increase, and in Italy the cases could rise further.
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The eighties have witnessed major changes in the phenomenon of foreign direct investments (FDI). There have been major shifts their sources and destinations. Japan became an important source, the US the largest host for inward FDI both of... more
The eighties have witnessed major changes in the phenomenon of foreign direct investments (FDI). There have been major shifts their sources and destinations. Japan became an important source, the US the largest host for inward FDI both of Japanese and Western European based FDI. The important underlying reason has been the declining competitive position of US firms in relation to German and Japanese firms, and the assemetry in growth between the three advanced regions – the USA, Japan and Western Europe. An important development has been the emergence, and now dominance, of services related FDI, although these flows have as yet to affect the LDCs significantly. The host countries within the LDCs too have changed as growth in Latin America has collapsed or declined in the eighties. The fast growing economies of East and South East Asia, have became important hosts, since non resource seeking FDI typically seeks to follow growth. There have been changes too within the Indian economy. The eighties witnessed good growth after a near recessionary period of nearly a decade and a half. It is argued that while the FDI inflow into India is likely to increase in the nineties, such increase is contingent on the maintenance of the industrial growth of the eighties in this decade too. Inflows anywhere near the Chinese level is quite out of question, except in the remote chance that India achieves the ‘high speed’ growth of China. FDI into India is more likely to take the form of joint-ventures and other so called ‘non-equity’ forms. As indigenous businesses have gathered strength over the period of sheltered growth in the eighties (and even earlier), FDI entry into India would rarely be without an active Indian collaborator. FDI has had little role to play in the manufactured exports growth from most of the NICs, and their role in India is likely to be even less significant. Yet other foreign firms (like retail chain stores in the West, the Shogo Shosho of Japan) and transnationals too, have, to the great benefit of LDC firms sourced manufactured items from them, the LDC firms having acted as subcontractors or as OEM suppliers. Given the wide diversification of the economy, the low cost of manpower, availability of a wide variety of skills, and large excess capacities, subcontracting and OEM relationship in manufacturing can provide the crucial economies of scale, and steady market to segments of Indian manufacturing which are most competitive, even if at low margins, so that a significant contribution to the extensification of growth can be made.
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In this chapter, we being out the estimates of growth from the period since the Global Financial Crisis (GFC) using a variety of data—GDP using both the series with 2004–05 as base year and the new series with 2011–12 as base year,... more
In this chapter, we being out the estimates of growth from the period since the Global Financial Crisis (GFC) using a variety of data—GDP using both the series with 2004–05 as base year and the new series with 2011–12 as base year, besides the Index of Industrial Production (IIP) as well again with both base year. What should have been a simple matter is made difficult by the divergence in the estimates of growth between the two national income series, by as much as 1.5% per annum over the years that they overlap. The problem of overestimation is recognized, the trends in growth are drawn by considering the physical IIP. Growth had been high at around 9% for the 2 years following the GFC when the fiscal stimulus was in place. Thereafter it fell and rose again briefly in 2016–17 to fall again. From late 2018 growth slowed down to reach a low level of just a wee bit above 4%. The manufacturing, and the trade, transport, storage, and communication sectors too show trends which are broadly similar, and the low growth from 2011 to 2012 onwards is supported by the lower rate of gross capital formation in India.
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In this book, we bring out the performance of the Indian economy, and review the approach of macroeconomic policy especially demand management in the Indian economy, since the Global Financial Crisis. We also consider the COVID crisis and... more
In this book, we bring out the performance of the Indian economy, and review the approach of macroeconomic policy especially demand management in the Indian economy, since the Global Financial Crisis. We also consider the COVID crisis and its impact, and the measures adopted to mitigate its effects by both the government and the central bank focusing on the macroeconomic dimensions of the various initiatives. We also cover the issues related to manufacturing performance in India. At end of November 2021, the economy showed a mixed response with the stock market rising sharply though the recovery was modest, and as on date is yet to go decisively over the levels reached in 2019 a year before the crisis.
There is much hope though that the capital investments cycle which had been depressed almost since 2012–13 would revive based on the government’s initiatives in manufacturing, and due to the positive effects (for India) from the vastly changed global economic environment, especially those related to China, and its relationship with Europe and US, especially the latter. The institution of GST has created disincentives against investment support on the part of regional governments, and the institutional mechanism also makes it difficult to quickly use tax cuts as countercyclical policy and puts an upward political bias to keep rates high.
We also lay out an enhanced macroeconomic framework that recognizes shocks that heighten uncertainty increasing the portfolio demand for money, as the role of “structural” policies on the capacity (full employment) output in macroeconomic management. We bring out the limitations in the CPI that is used by policymakers including in the core CPI. We also take into account the correction required in the new GDP11-12 series which had in the early years overestimated the growth in the Indian economy.
This chapter covers the conceptual enhancements to the standard macroeconomic framework and also provides a synopsis of the coverage and results brought in other chapters of the book.
There is much hope though that the capital investments cycle which had been depressed almost since 2012–13 would revive based on the government’s initiatives in manufacturing, and due to the positive effects (for India) from the vastly changed global economic environment, especially those related to China, and its relationship with Europe and US, especially the latter. The institution of GST has created disincentives against investment support on the part of regional governments, and the institutional mechanism also makes it difficult to quickly use tax cuts as countercyclical policy and puts an upward political bias to keep rates high.
We also lay out an enhanced macroeconomic framework that recognizes shocks that heighten uncertainty increasing the portfolio demand for money, as the role of “structural” policies on the capacity (full employment) output in macroeconomic management. We bring out the limitations in the CPI that is used by policymakers including in the core CPI. We also take into account the correction required in the new GDP11-12 series which had in the early years overestimated the growth in the Indian economy.
This chapter covers the conceptual enhancements to the standard macroeconomic framework and also provides a synopsis of the coverage and results brought in other chapters of the book.
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Abstract In this book, we bring out the performance of the Indian economy, and review the approach of macroeconomic policy especially demand management in the Indian economy, since the Global Financial Crisis. We also consider the COVID... more
Abstract
In this book, we bring out the performance of the Indian economy, and review the approach of macroeconomic policy especially demand management in the Indian economy, since the Global Financial Crisis. We also consider the COVID crisis and its impact, and the measures adopted to mitigate its effects by both the government and the central bank focusing on the macroeconomic dimensions of the various initiatives. We also cover the issues related to manufacturing performance in India. At end of November 2021, the economy showed a mixed response with the stock market rising sharply though the recovery was modest, and as on date is yet to go decisively over the levels reached in 2019 a year before the crisis.
There is much hope though that the capital investments cycle which had been depressed almost since 2012–13 would revive based on the government’s initiatives in manufacturing, and due to the positive effects (for India) from the vastly changed global economic environment, especially those related to China, and its relationship with Europe and US, especially the latter. The institution of GST has created disincentives against investment support on the part of regional governments, and the institutional mechanism also makes it difficult to quickly use tax cuts as countercyclical policy and puts an upward political bias to keep rates high.
We also lay out an enhanced macroeconomic framework that recognizes shocks that heighten uncertainty increasing the portfolio demand for money, as the role of “structural” policies on the capacity (full employment) output in macroeconomic management. We bring out the limitations in the CPI that is used by policymakers including in the core CPI. We also take into account the correction required in the new GDP11-12 series which had in the early years overestimated the growth in the Indian economy.
This chapter covers the conceptual enhancements to the standard macroeconomic framework and also provides a synopsis of the coverage and results brought in other chapters of the book.
In this book, we bring out the performance of the Indian economy, and review the approach of macroeconomic policy especially demand management in the Indian economy, since the Global Financial Crisis. We also consider the COVID crisis and its impact, and the measures adopted to mitigate its effects by both the government and the central bank focusing on the macroeconomic dimensions of the various initiatives. We also cover the issues related to manufacturing performance in India. At end of November 2021, the economy showed a mixed response with the stock market rising sharply though the recovery was modest, and as on date is yet to go decisively over the levels reached in 2019 a year before the crisis.
There is much hope though that the capital investments cycle which had been depressed almost since 2012–13 would revive based on the government’s initiatives in manufacturing, and due to the positive effects (for India) from the vastly changed global economic environment, especially those related to China, and its relationship with Europe and US, especially the latter. The institution of GST has created disincentives against investment support on the part of regional governments, and the institutional mechanism also makes it difficult to quickly use tax cuts as countercyclical policy and puts an upward political bias to keep rates high.
We also lay out an enhanced macroeconomic framework that recognizes shocks that heighten uncertainty increasing the portfolio demand for money, as the role of “structural” policies on the capacity (full employment) output in macroeconomic management. We bring out the limitations in the CPI that is used by policymakers including in the core CPI. We also take into account the correction required in the new GDP11-12 series which had in the early years overestimated the growth in the Indian economy.
This chapter covers the conceptual enhancements to the standard macroeconomic framework and also provides a synopsis of the coverage and results brought in other chapters of the book.