The failure of India’s EOUs

Author: Pravakar Sahoo, IEG and Bruegel

The export-oriented unit (EOU) scheme was launched in India in 1980 to boost exports and increase production. Under the scheme, Indian companies that produce goods solely for export can register as ‘export-oriented units’. Read more…

Can Indian financial reform build better banks?

The Reserve Bank of India (RBI) building in Mumbai, India. (Photo: AAP)

Author: Pravakar Sahoo, Institute of Economic Growth

In India’s most recent budget Finance Minister Arun Jaitley formally announced that it would slash the number of Indian public sector banks from the current 27 to just 10. Consolidating India’s public sector banks will result in improved efficiency, greater economies of scale and large-scale financial institutions that can cater to the needs of a growing economy.

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India’s rate cut is both warranted and timely

Raghuram Rajan, Governor of the Reserve Bank of India (RBI), speaks during a press conference in Mumbai, India, 29 September 2015. The Reserve Bank of India on 29 September cut its short-term lending rate by 50 basis points to 6.75 per cent. (Photo: AAP).

Author: Pravakar Sahoo, IEG

The decision of the Reserve Bank of India (RBI) to slash the repo rate (the rate at which the RBI lends to commercial banks) by 50 basis points (bps) has surprised many. The RBI governor, Raghuram Rajan, had previously taken baby steps to reduce interest rates, focusing strictly on inflation. Now the repo is at 6.75 per cent, the level of 2011, down from 8 per cent at the start of 2015. But both the domestic and external economic environment warranted big steps by the RBI to induce economic growth. Read more…

Modi changes the state of play for Indian federalism

Indian Bharatiya Janata Party (BJP) national president Amit Shah (L), Prime Minister Narendra Modi (C) and Finance Minister Arun Jaitely look on during a BJP office bearers' meeting held on the eve of the party's National Executive committee meeting in Bangalore on April 2, 2015. (Photo: AAP).

Author: Pravakar Sahoo, IEG

India’s 14th Finance Commission has made some fairly revolutionary statutory recommendations.

The commission proposed increasing the share of the ‘divisible pool’ — the pot of tax revenue that is allocated between the federal and state governments — that goes to states without any strings attached from the 32 per cent recommended by the last commission to 42 per cent. This would represent a historic increase. Read more…

No easy task for India’s labour reforms


Author: Pravakar Sahoo, IEG

Investors find labour laws in India restrictive. Although progress has been made since reforms began in 1991, the labour market is still subjected to around 250 labour rules at the central and state level. India, a democracy, has found it harder than China — where labour laws are more flexible and business friendly — to undertake important reforms. Read more…

India and Japan boost cooperation, but no nuclear power deal

Indian Prime Minister Narendra Modi is welcomed by his Japanese counterpart Shinzo Abe upon his arrival at the State Guest House in Kyoto, on 30 August 2014. Modi flew into Japan for a five-day official visit as their governments seek to boost security ties and counter a increasingly assertive China. (Photo: AAP).

Authors: Pravakar Sahoo and Abhirup Bhunia, IEG

Modi’s visit to Japan from 31 August to 3 September was dubbed a success. But what has been achieved? And what do these achievements mean for both countries?

Modi’s visit assumed far greater significance than any previous visits by Indian prime ministers. This is because Modi has a powerful mandate and, of course, because of the reported bonhomie between Modi and Abe. When Modi was Gujarat’s chief minister, Japanese firms participating in the Vibrant Gujarat Summit invested between US$2–3 billion in various manufacturing and infrastructure projects in that state, in response to its investor friendly environment. Modi shares this business friendly attitude with Abe. Read more…

BCIM Corridor a game changer for South Asian trade

A vender weights corn for a customer at a market in Yingjiang, near the Myanmar border, Yunnan Province, China, 26 May 2012. (Photo: AAP).

Authors: Pravakar Sahoo and Abhirup Bhunia, Institute of Economic Growth

The Bangladesh–China–India–Myanmar (BCIM) Economic Corridor will increase socioeconomic development and trade in South Asia. The initiative seeks to improve connectivity and infrastructure, energy resources, agriculture, and trade and investment. It will connect India’s Northeast, Bangladesh, Myanmar, and the Chinese province of Yunnan through a network of roads, railways, waterways, and airways under a proper regulatory framework. The current focus of BCIM talks is on an inter-regional road network. This makes sense, as roads are the cheapest route of trade. Read more…