Archive for September 4th, 2012

India’s urbanisation woes piling up exponentially…

September 4, 2012

Time and again, one gets stuck in Mumbai rains. Having spent close to 4 hours in the local train yesterday I would know better. And this is not just about one time but repeats every year.  And it is not just Mumbai (which may be gets abnormal rains) but so many others. There are other regulars like Bangalore and Delhi too is getting added to the list. I wanted to say athe policymakers who make tall claims over Indian economy should be flown to these cities to be part of the logjam. However, with Delhi being a regular member now can’t even say it.

This does not mean Indian economy does not have any potential. Just that we are gloing nowhere if our cities keep collapsing like the way they do. Cities are engones of growth as popularised by Ed Glaesar.  It is really bad that nothing is happening except false promises. For instance there was hardly any communication, proper lights etc. The train timing boards were not working and no one really cared. There were so many people stranded on the railway stations waiting for the next train. Finally, it is the spirit of people which kep them going. But how long can the spirit last without any support from the promise-makers?

One keeps wondering why we keep building roads before rains and then obviously they are off during rains? I mean something never make sense…Is urbanisation only about building fancy buildings? How will an economy grow if people spend more and more time on roads (broken ones at that) rather than at work..

However, as is always the case in India there is still some hope.

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How to stimulate economies without increasing public debt..

September 4, 2012

This clearly is one of the key problems facing global economy:

  • Demand has collapsed
  • Central banks the first line of defence have tried a lot but cannot really do anything barring printing money and hoping somebody takes it. The research guys are at near war figuring whether mon pol worked or not in the crisis.
  • Fiscal policy guys tried but hands were tied mainly because of already high debt levels. As additional tax flows were difficult to come because of falling growth, the governments issued more debt to stimulate the growth. This added to the debt levels leading to sovereign debt crisis in major economies.
  • For the Krugman camp this was not an issue as debt was being issued at record levels. And once economy recovers, automatically the debt levels would come lower. The others typically European policymakers differed and ushered fiscal austerity which did not really revive growth prospects..

Hence, the issue became how does one really stimulate economies without adding to debt levels.

Richard Wood, a long serving economist at the Treasury in Canberra, has written this interesting paper (voxeu has a summary as well).

He says instead of central banks buying bonds doing QE, the c-banks could just give the money directly to the governments:

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