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Showing posts from April, 2011

Lokpal Bill

Social activist Anna Hazare’s resolution to commence a fast unto death on the 5th of April was in desperate response to the administration’s dillydallying on the design of the Lokpal Bill. This is intended to provide a framework for filing complaints against corruption by government ministers and officials. About 200 people including high profile members of civil society joined Mr Hazare in his fasting process and unleashed a movement which assumed national proportions, with pledges of support from millions of individuals on networking sites. Vigils of support are being organised across the country with the passionate participation of people from all walks of life. Two days ago, Sharad Pawar, a union minister in the Manmohan Singh cabinet resigned from the Group of Minsters empowered to consider the structure of the Bill. Mr Hazare had specifically identified Mr Pawar as being corrupt and therefore quite unqualified to participate in the discussions that deliberate the contents of the…

In the league of the extraordinary

I have argued in my writings, over the past several weeks, that the spectre of further consequences emanating from the financial crisis of 2008, is far from over. Businesses may justifiably be anxious of the near term prospects of a ‘double dip’ in the US (a relapse of the American economy that will again plunge the world into a nasty cycle of unemployment, falling wages and declining consumption). To my mind however, the more serious consequence is the longer term one – the phenomenon of ‘global rebalancing’. This is concerned with the balance of economic power, in line with the economic laws of gravity, shifting from the West to the East over the next two decades. Emerging market consumers will earn more and therefore, spend more; while developed countries will go through a painful process of paying for their past indulgences when they consistently spent far more than they earned on the presumption that they could buy their way out of trouble, either by printing more dollars (in the…

Growth Moderation

IMA’s recently concluded Human Resource Survey reveals rapidly rising salaries and therefore perceptions of an upbeat business environment. Whilst our own forecasts propose economic growth close to 8.6 percent in this fiscal year, I fear that going forward things may turn out rather differently. Rising imbalances in some economic and financial parameters throw up risks. If they played out, they could spoil the plot. This paper will seek to explain.

The Treasury has forecast a fiscal deficit of 4.6% of GDP in the coming year, down from the current 5.1%. On the face of it, the target does not appear particularly hard to achieve judging by a favourably downward trend in the past few years. However, its calculations assume a net rise in borrowings of only 2% and disregard the windfall profits from the sale of 3G spectrum. Effectively, the reduction in deficit amounts to approximately Rs 1 trillion. To make things worse the estimated subsidy on oil, which adds up to Rs 230 billion, is Rs 15…