Economics, Politics and Public Policy in East Asia and the Pacific
Author: Raghbendra Jha, ANU
In 2010, India’s GDP in PPP terms was $3.92 trillion. By this reckoning, India was the fourth-largest economy in the world after the US, China and Japan.
Citi Investment Research and Analysis estimates that in a decade India will be the third-largest economy. Between 2000–01 and 2007–08, India’s real GDP growth averaged 7.3 per cent per annum. Read more…
Authors: Raghbendra Jha and Raghav Gaiha, ANU
Inflation has been in the news for some time. Recent media reports have stated that the Reserve Bank of India (RBI) deems current inflation to be a scourge. This inflation has also been relentless.
There seems to be broad consensus among analysts that the current spate of inflation had its roots in food price inflation. Last year’s drought led to steep rises in retail food prices followed by hikes in procurement prices for farmers. Read more…
Authors: Raghav Gaiha, MIT/University of Delhi; Raghbendra Jha, Australian National University and Vani S Kulkarni, Yale University
Recent studies on food intake and incomes in India are puzzling. Despite rising incomes, there has been a sustained decline in the per capita calorie intake. In an important contribution, A Deaton and J Dreze offer a detailed analysis of the decline in calorie intake in 1983-2004.
Average calorie consumption was about 10 per cent lower in rural areas in 2004-05 than it was in 1983. The proportionate decline was larger among the more affluent sections of the population. In urban areas, there was a slight change in average calorie intake over this period. Read more…
Authors: Raghbendra Jha, ANU; Raghav Gaiha, Delhi; and Manoj Pandey, ANU
One of the paradoxes of modern India is the coexistence of high rates of economic growth and widespread malnutrition. Thus, between 2000 and 2005, real GDP per head and real per capita consumption grew at impressive rates of 5.4 per cent and 3.9 per cent per annum respectively. Yet more than 75 per cent of the population has a daily per capita calorie consumption below the minimum requirements for Indians. Concurrently, the food subsidy bill has been rising rapidly and was a staggering Rs 370 billion for households beneath the poverty line (BPL) in 2009-10.
Now, the government is seeking to enact a National Food Security bill (NFSB) which purports to provide 25 kilograms of rice or wheat per month to each BPL family at Rs 3 per kilogram, failing which, a poor person can seek redress. Read more…
Raghbendra Jha, ANU
Indian policymakers pride themselves on the fact that the Indian economy was able to pull out of the Global Financial Crisis (GFC) relatively unscathed, with real GDP growth rate falling to 6.7 per cent in 2008-09 as compared to the 9 per cent in 2007-08 and expected to rise above 7 per cent in 2009-10. At the onset of the GFC, many commentators had expected a collapse of growth, with some even predicting a return to the sluggish growth of the mid to late 1990s.
Thankfully, the Indian economy proved the predictors of doom wrong. Read more…
Author: Raghbendra Jha, ANU
Many agencies including national governments and the World Bank have cited public works programs as a crucial tool for poverty alleviation, particularly in the rural sector. When properly designed and implemented, rural public works (RPW) have the dual advantage of providing employment to the unemployed (hence reducing poverty) and building much needed rural infrastructure.
Besides, as RPW are designed to peak in seasonally slack periods, they help stabilise incomes. By stabilising and stimulating rural incomes and, therefore demand, RPW have the potential of stimulating the rural economy and, therefore, act as a counterfoil to contracting demand during recessions. RPW have been used in many countries, including India.
Author: Raghbendra Jha
As the world moves inexorably towards the Climate Summit in Copenhagen at the end of 2009, immense pressure has been brought to bear on India to accept legally binding carbon emissions targets. The latest attempt to pressure India came from US Secretary of State Hillary Clinton during her recent visit to India.
Such pressures on India and some other countries (particularly China) are occurring against the backdrop of a new wave of environmental activism among western commentators over the climate change debate. For example, Al Gore has called on all countries to place an immediate moratorium on coal-fired power plants. This would simply be a no go for India. More than half of the 800,000 megawatts of power India plans to produce by 2030 are to come from coal-fired plants because coal is abundant in India and other energy sources are relatively scarce.
Author: Raghbendra Jha
The on-going global financial crisis (GFC) has cast a shadow over the global economy with world output and trade forecasted (by the IMF) to shrink in 2009.
In the Australia South Asia Research Centre Working Paper, ‘The Global Financial Crisis and Short run Prospects for India’, [pdf] I outline the major contours of the GFC, its evolution since the subprime mortgage crisis in 2007, its implications for India and India’s response to the crisis.
Exhibiting a strong dynamism, economic growth in India in 2007–08 was a high 9 per cent despite the fact that the sub-prime crisis had already started to impact the US and other major economies. However, growth rates dropped steadily during the first three quarters of 2008–09. Government forecasts economic growth to be 7.1 per cent during 2008–09 but the fourth quarter growth figures may be overestimates so that growth in 2008–09 may be lower.
Author: Raghbendra Jha
Satyam Computer Services, India’s fourth largest IT firm and a leading outsourcing company that counts General Electric, General Motors, Nestle, the US Government, Qantas and National Australia Bank amongst its clients, suddenly collapsed on 7th January 2009. The script for this debacle appeared to come straight from Enron. Like Enron, Satyam cooked the books and showed highly inflated assets. In his letter to the Satyam Board, CEO Ramalinga Raju admitted that of the 53.6 billion rupees in cash and bank deposits which Satyam listed as assets at the end of the second quarter of 2008-09, 50.4 billion rupees or US1.03 billion did not exist.
However, the similarity with Enron ends there. Whereas Enron was a loss-making enterprise that kept hiding its losses until they could be hidden no longer, Satyam is still a profitable company. In the past year, Satyam’s profit was not Rs. 6.49 billion as it claimed but Rs. 0.61 billion. Once Satyam’s true balance sheet is taken into account its margin last year was only 3 %, much lower than that of other IT majors.
Author: Raghbendra Jha
Recent events in the global financial system have been nothing short of seismic. Hundreds of billions, if not trillions of dollars in capital value have been lost in stock markets. Inter-bank credit has almost frozen up.
Actual costs of borrowing have gone up (even with falling central bank interest rates), unemployment has been rising in the major world economies, and home foreclosures and bankruptcies are on the rise.
This crisis is sought to be addressed by a variety of policy initiatives, the most important aspects of which are the injection of vast amounts of public funds into financial institutions and the provision of sovereign guarantees on bank accounts.
But the ability to do so is limited. The budget deficit for 2008 in the US has trebled as compared to its forecasted value and the ratio of public plus private debt to GDP is well over 300 percent. The huge injection of funds to stabilise the financial system will need to be financed. But the US treasury is already stretched and, with a recession looming, prospects for enhanced tax revenue in 2009 do not appear bright. Similar comments apply to Europe.
Further, there is the relatively unspoken fear: if failing private institutions are bailed out now, could it lead to a problem of moral hazard with these players not becoming more careful in the future, in anticipation of being bailed out again?
How is the Indian economy is expected to fare in the short-term and how has it responded to the crisis?
Author: Raghbendra Jha, Professor of Economics, ANU
The global spike in food prices started late in 2007 and shows no signs of abating. The price of rice, the most important cereal crop consumed in the Asia-Pacific region, was rising steadily but incrementally until late 2007, by which time it was about double the levels of 2002.
But there was a huge spike in the price of rice in late 2007 to early 2008. The monthly average price for the benchmark white rice, Thai 100per cent B grade, went up from $US385 ($422) a tonne in January to a peak of $US962.60 in May before falling marginally to $836.50 in July.
In today’s Australian I argue that global trading activity in futures and options in agricultural derivatives markets has been experiencing very high rates of increase since February 2005. These have only accelerated since the sub-prime mortgage crisis.