Modi should use future budgets to build, build, build

An Indian labourer works at a construction site in Mumbai, India, 18 July 2014. Infrastructure was a key sector addressed in the first budget of Finance Minister Arun Jaitleythe and the Modi government. (Photo: AAP).

Author: Geethanjali Nataraj, Observer Research Foundation

Expectations of the Modi government’s first budget were high. But, in the face of difficult fiscal circumstances and volatility in oil and food prices, the new government and Finance Minister Arun Jaitley had limited options. Seen in this light, this year’s budget is balanced and gives a sense of direction to the economy. In fact, it has laid the base for a whole set of reform measures that will be put into the place around the next budget. Read more…

Cementing the BRICS together

The heads of BRICS member states pose for a picture during the 6th BRICS summit in the city of Fortaleza, Brazil, 15 July 2014. BRICS (Brazil, Russia, India, China and South Africa) member states discuss political coordination issues and global governance problems. (Photo: AAP).

Authors: Garima Sahdev and Geethanjali Nataraj, Observer Research Foundation

India’s Prime Minister Narendra Modi is in Brazil for his first major international summit, the sixth annual BRICS summit. Before his departure, the leader put forward his vision that the vitality of the BRICS group would cut across the geographical and ideological divides of not only the five countries of the group but also of the global economy. 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…

G20 must shape a new world trade regime

The G20 meeting at the IMF/World Bank Spring Meetings 11 April 2014 at the IMF Headquarters in Washington, DC. (Photo: AAP).

Authors: Mari Pangestu and David Nellor, Indonesia

Over the past decade global trade and investment discussions have moved far away from the formal global trade regime. The multilateral system has been mired in the Doha Development Round — defined by a single undertaking and a fixed agenda that is increasingly out-of-date. In the meantime, most countries have devoted their energies to regional trade and investment discussions. Read more…

Export-oriented FDI can jumpstart Indian manufacturing

Indian laborers nap during a lunch break at a workshop in Mumbai, India, 31 May 2010. (Photo: AAP).

Authors: Abhirup Bhunia, Institute of Economic Growth and Geethanjali Nataraj, Observer Research Foundation

Addressing a joint session of parliament, Indian president Pranab Mukherjee laid out the roadmap of the new Modi government by emphasising three distinct economic policy thrusts: FDI, jobs and manufacturing. Talk of encouraging investment — including by foreign investors — and boosting labour-intensive manufacturing is not new. Scholars such as Arvind Panagariya have long attributed India’s poor performance in manufacturing to the lack of suitable policy designed to utilise the country’s abundant unskilled labour force. Read more…

Chinese loans will counterbalance Russia’s influence in Kazakhstan

Russian President Vladimir Putin, Kazakhstani President Nursultan Nazarbayev and Belarussian President Alexander Lukashenko shake hands following the signing ceremony for the Eurasian Union in Astana, Kazakhstan, 29 May 2014. (Photo: AAP).

Author: Micha’el Tanchum, Shalem College

On 29 May 2014, the presidents of Kazakhstan, Russia, and Belarus signed a treaty establishing the Eurasian Economic Union (EaEU). One week prior, Kazakhstan’s President Nursultan Nazarbayev and Chinese President Xi Jinping announced investment agreements worth US$10 billion. The timing of the two events reflects Nazarbayev’s determination to use Kazakhstan’s burgeoning economic relations with China to counterbalance possible Russian domination. Read more…

Making monetary policy work in Sri Lanka

A Sri Lankan vendor pushs a handcart laden with bananas on a street in Colombo, 3 September 2013. After armed separatist conflict four years ago Sri Lanka expected to become the tiger economy of South Asia, but exuberance has given way to mediocre growth and fears of more trouble ahead. (Photo: AAP).

Author: Dushni Weerakoon, IPS

The Central Bank of Sri Lanka (CBSL) announced in February 2014 that the country maintained single-digit inflation for five consecutive years for the first time since independence. For a country that has historically suffered from both high and volatile rates of inflation, this achievement is no mean feat. The scale of this accomplishment becomes clear when comparing the country’s monetary environment to that of 2008, when annual inflation peaked at 22.6 per cent before settling to single-digit levels from February 2009. Read more…

China must accept slower growth to avoid no growth

Members of the Politburo Standing Committee, including President Xi Jinping, raise their hands to vote on reforms at the third plenary session of the 18th Central Committee of the Communist Party of China in Beijing, 12 November 2013. (Photo: AAP)

Author: Ligang Song, ANU

In late 2013 the Chinese Communist Party’s Central Committee authorised far-reaching market-oriented reforms, including policies to deepen capital, labour, goods and services markets. The new model for economic growth seeks to increase the consumption and services share of the economy, raise the relative income of poorer people (especially rural residents and unskilled urban workers), and reduce environmental degradation. Read more…

Indonesia’s transport planning lacks rigour

A train loaded with passengers heads to central Jakarta. (Photo: AAP).

Author: Howard Dick, University of Melbourne

Both of Indonesia’s presidential candidates have committed to tackling the country’s deficient infrastructure. Joko Widodo (Jokowi) promises 2000 kilometres of roads, ten new airports and seaports and ten new industrial zones, while Prabowo Subianto promises 3000 kilometres of roads and 4000 kilometres of railways. Read more…

The unintended legacy of Manmohan Singh

Indian Prime Minister Manmohan Singh attends a press conference on the Germany-India summit 11 April 2013. (Photo: AAP).

Author: Suhas Palshikar, University of Pune

Manmohan Singh is the only prime minister of India to have completed two full and consecutive terms since Jawaharlal Nehru, who became the first elected prime minister in 1952 and remained in office until his death in 1964. Singh, however, was not a politician until he was appointed finance minister by Narasimha Rao in 1991 — he had always distinguished himself primarily as an economist. His departure in May 2014 was marked by a stunning defeat of both his party and government. Read more…

Taxing times should prompt move to revenue reform

Protesters demonstrating against world financial institutions outside the Bank of England during the G20 London summit. There has been global public anger over profit-shifting. (Photo: AAP).

Authors: Ken Henry and Shane Johnson, ANU

Attempting to address the ‘great corporate tax dodge’ is high on the G20 leaders’ agenda, having endorsed the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) at their St Petersburg summit in September 2013. Leaders were prompted by global public anger over multinational companies’ failure to pay their ‘fair share’, and their own concerns about weak tax collections. The real question is whether these issues can be resolved by simply patching up the current system or whether more fundamental reform is needed. Read more…

Time to break down investment barriers between India and Pakistan

Indian Prime Minister Narendra Modi shakes hands with his Pakistan counterpart Nawaz Sharif prior to a meeting in New Delhi, India, 27 May 2014. (Photo: AAP).

Author: Samridhi Bimal, ICRIER

On 26 May, Pakistan’s Prime Minister Nawaz Sharif travelled to New Delhi to attend the swearing-in ceremony of Indian Prime Minister Narendra Modi. This was followed by a period of ‘letter and sari diplomacy’ between the two leaders, in which both expressed their commitment to a peaceful and cooperative working relationship. These moves are unprecedented and point to a significant change in India–Pakistan relations. One of the most promising areas for cooperation is foreign direct investment (FDI). Read more…

Japanese business needs more incentives than tax cuts

People walk at Tokyo Station. Japanese Prime Minister Shinzo Abe formally announced on Tuesday 24 June an outline of his long-awaited growth strategy, a slew of reforms meant to revitalise the economy and restore its global competitiveness. (Photo: AAP).

Author: Stephen Stapczynski, Sumitomo Corporation

On 3 June, Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) cleared a major hurdle to lowering the corporate tax rate. Finance Minister Taro Aso, who had resisted the cut, and Takeshi Noda, the head of the LDP’s internal committee on tax issues, both finally agreed to the tax cut. Japan has one of the highest corporate tax rates among developed economies and private-sector members of the government’s economic council have long been urging the government to lower the tax rate to below 30 per cent. Read more…

Capital in twenty-first century China

A beggar asks for money from people sitting at a pedestrian mall in Shanghai, China, 19 April 2012. (Photo: AAP)

Author: Wang Feng, UC Irvine

China’s inequality story received only scant attention in Thomas Piketty’s monumental new book, Capital in the Twenty-First Century. Piketty drew data mostly from sources in France, Britain, the United States and, to a lesser extent, Germany, Canada, Japan, Italy and Australia. These are all countries that have large quantities of capital and long histories of capital accumulation. Read more…

Enhancing public debate on inequality in Singapore

Guests of the Marina Bay Sands hotel in Singapore look over the financial district from a rooftop swimming pool on 13 May 2013. (Photo: AAP).

Authors: Mukul G. Asher & Chang Yee Kwan, NUS

The publication of Thomas Piketty’s 2014 book Capital in the 21st Century has brought the issue of income inequality to the fore of public policy debates in many countries. This is remarkable, given the book’s length (696 pages), the intricacy of the historical data series that forms the statistical foundations of the book’s main propositions, and its relatively narrow geographical focus (mainly the US, the UK, and Western Europe). Read more…