Economics

This paper examines the paradox of the diminishing institutional role of large central public sector enterprises despite rising profitability and investment as a result of their being efficient competitors in the new market environment. Under the neo-liberal regime of the last two decades, these CPSES, with large cash balances and improved profitability, have emerged as the main drivers of public savings and investment. But instead of enhancing their strategic role, the union government has been treating them as cash cows. A comparison of the performance of large private and public sector firms in the manufacturing sector shows that the CPSES have provided higher returns on capital employed. And, performance in terms of technical parameters is in no way inferior to that of their private counterparts. Yet the Modi government intends to either privatise these CPSES or sell a significant part of their equity shares, a decision that is devoid of both strategic and business sense.

The Indian economy has seen a radical change during the last decade. From a regime of fixed exchange and regulated interest rates, tight control on foreign direct investment (FDI) and a complete absence of foreign portfolio investment, it has transformed itself into a favoured destination for FDI and portfolio investment.

THE last a few years have witnessed an uneasiness with the industrialisation strategy hitherto followed amongst Indian planners and policy makers. It is argued that the old strategy has focused almost exclusively on the home market and has ignored techno-logical changes in the ...

1. CAPITAL ACCOUNT LIBERALISATION IN AN EMERGING ECONOMY: PRIVATE CAPITAL FLOWS, EXCHANGE RATES AND STOCK MARKETS IN INDIA Sushil Khanna, Indian Institute of Management Calcutta, India ABSTRACT The emerging economies of Asia have in 1990s, emerged as the epicentre of private capital flows in the global economy, attracting a significant proportion of FDI and portfolio flows. India too has attracted more than $40 billion, during the second half of 1990s. External capital inflows were expected to have a positive impact on the emerging market economies. At the macro level, capital account liberalisation is expected to lead to more efficient resource allocation at the global level. Flows into capital scarce emerging economies would lead to decrease in interest rates, accelerated investment and higher growth. At the micro-level, integration of the capital markets in such economies with global portfolio flows should lead to risk diversification and lower the cost of capital for individual ...

This paper examines the paradox of the diminishing institutional role of large central public sector enterprises despite rising profitability and investment as a result of their being efficient competitors in the new market environment. Under the neo-liberal regime of the last two decades, these CPSES, with large cash balances and improved profitability, have emerged as the main drivers of public savings and investment. But instead of enhancing their strategic role, the union government has been treating them as cash cows. A comparison of the performance of large private and public sector firms in the manufacturing sector shows that the CPSES have provided higher returns on capital employed. And, performance in terms of technical parameters is in no way inferior to that of their private counterparts. Yet the

The emerging economies of Asia have in 1990s, emerged as the epicentre of private capital flows in the global economy, attracting a significant proportion of FDI and portfolio flows. India too has attracted more than $40 billion, during the second half of 1990s. External capital inflows were expected to have a positive impact on the emerging market economies. At the macro level, capital account liberalisation is expected to lead to more efficient resource allocation at the global level. Flows into capital scarce emerging economies would lead to decrease in interest rates, accelerated investment and higher growth. At the micro-level, integration of the capital markets in such economies with global portfolio flows should lead to risk diversification and lower the cost of capital for individual firms by raising Tobin’s q. This paper examines the experience of India at the macro and micro level, which accompanied by large fluctuations in the quantum of lows. At the macro level, periods ...

Growing concerns about the sustainability of the fiscal policy in India have evoked serious concerns in the recent past. The present paper has assessed the Indian fiscal trends in terms of inter-temporal budget constraint (IBC) for the Central and State Governments separately and together by employing Gregory and Hansen [J. Econometrics 70 (1996) 99] tests of co-integration with structural breaks. By addressing the issue of regime shift, this paper finds that while the fiscal stance of the Central and the State Government at the individual level is unsustainable, it is weakly sustainable for the combined finances as it nets out inter-governmental financial flows. Thus, claims about sustainability of India’s public finance, made on the basis of the assessment of individual finances and neglecting inter-governmental flows and the possibility of regime shifts seems exaggerated.

Banks and financial institutions play a major role in governance of non-financial companies in India through the mechanism of nominee directors. This paper probes two allied issues: firstly, the isolation of the firm specific factors which determine the presence of bank ...