Archive for August 26th, 2014

Shouldn’t our Hon’ble President/SC (or someone more important) explain the sacking/transfer of so many State Governors?

August 26, 2014

This is getting really really nasty. I am no political expert but all this random sacking/transfering of so many State governors is just preposterous.

It is true that ruling party is paying back to Congress as latter did the same in 2004 or so. Infact, it is like tit for tat. But after the 2004 sacking Hon’ble Supreme Court said such sacking should not be allowed. Or we don’t believe in SC anymore? The crazy amount of politicisation of everything in this country is reaching an alarming level. The executive is becoming way too powerful.

It is also true that all these State Governors are just used by Centre to sent their cronies/ministers. But then with ruling party replacing these State Governors with their own people instead of looking at capabilities/expertise does not take us anywhere. It is one party spokesperson replacing the other. The transfer of some Governors to NE States and they resigning on the pretense that NE States are not important speaks volumes about our so called focus on development of NE region.


Is fiscal stimulus any useful ? Some evidence from US States spending on roads..

August 26, 2014

Sylvain Leduc and Dan Wilson get into one of the oldest debates on importance of fiscal stimulus.

They look at the evidence of whether and how US states used the fiscal stimulus given to them by the Federal Govt:


NGDP targeting is more suited to developing economies..

August 26, 2014

Pranjul Bhandari and Jeffrey Frankel make a case for NGDP targeting in developing economies.

They say NGDP is more suited to developing world:


Economists beg Arun Jaitley for a ‘job’…

August 26, 2014

Gursharan Dhanjal of Inclusion takes a dig at several Indian econs looking for a job at the Indian govt.

Ever since the new govt has come,the amount of positioning one is seeing has never been seen before. Econs who benefited much from the previous UPA govt via several positions in govt have conveniently switched sides blaming all ills of Indian economy on the UPA govt.  There are only a handful of such econs/experts who acknowledge of their alliance with previous govt bodies. Rest have just conveniently switched tracks.

Those who are already sitting on several policy positions appointed by UPA govt are just plain lucky. Rest are shuttling around for benefits. It is all amazing and shameless really.

But NDA govt is not relenting so far. It is enjoying all the publicity given by these econs in the name of change but not interested in giving back the favors.

The author calls these econs as India’s new trade union..:-)


Which economies are expected to decline? Lessons from India’s history

August 26, 2014

It is not often that Indian economy is quoted/referred by econs for comparisons across the world except for poverty etc.

Tyler Cowen asks this question of  Which countries are expected to decline and refers to India’s history. Though, his quoting India is not for anything positive as well. He says few economies in Europe are expected to decline Once the decline sets in, difficult to grow back. Look at India as one such example:

Who are some of the possible losers in this radical transformation in the global economy?

These economies have a few features in common: They try very hard to preserve old jobs at high real wages, they are not very flexible at adjusting, and they have not engaged in a major economic restructuring. While China is not the main problem of these economies, Chinese export growth and wage competition may have been a kind of final straw that made old ways unsustainable.

If either France or Italy, much less both, is in for 15 or 20 years of economic stagnation, it’s hard to see how the eurozone will avoid another major financial crisis. Portugal and Greece, both of which have been de-industrialized over the last few decades, are also possible candidates for continuing, rather than temporary, retrogression.

n Asia, the most likely future candidate for this problem is Taiwan, where real wages were largely stagnant from 2000 to 2011. In 2012, Taiwan’s trend was even more disturbing: Its economy grew 1.3 percent, but real wages fell 1.6 percent, both adjusted for inflation. Taiwanese capital has flowed into China, creating a new class of Taiwanese millionaires but hollowing out the country’s manufacturing base as capital was reallocated to the mainland.

What about the United States? The chance of an overall economic reversal here is very slim. The American economy is relatively flexible, and various candidates for future growth are strong: technology, health care research, energy and higher education. Despite its slow recovery, the United States probably still has the best fundamentals of any major economy.

Italy, which is producing less today than it was in the middle of 2000, is undergoing a triple-dip recession. Croatia is in its sixth consecutive year of recession — and joining the European Union didn’t help it much. In France, the economy has slowed to a crawl, but because taxes there are already high, there isn’t much room for further budget adjustment. French citizens expect a great deal from their government, and strikes are a common response to reduced wages or benefits.

The India story:

we might look at a different exemplar for modern times, 18th- and 19th-century economic history  India. That country’s economic retrogression during that era may help us understand the quandary that some parts of the world face today.

In 1750, India accounted for one-quarter of the world’s manufacturing output, but by 1900 that was down to 2 percent. The West became more productive as a result of the Industrial Revolution, and India lost much of its leading export sector, textiles. While the data is fragmentary, the best estimates show that India’s living standards declined through the middle of the 19th century and that its economy retrogressed, even as it borrowed some technological improvements from the West. India just didn’t do enough to move toward production on a larger scale or with better machines.

This story of India’s loss to foreign competition is documented in “Deindustrialization in 18th and 19th Century India,” a paper byDavid Clingingsmith, an economics professor at Case Western Reserve University, and Jeffrey G. Williamson, an emeritus professor of economics at Harvard.

Economists are accustomed to emphasizing the benefits of international trade, and these arguments are largely correct. But in India, internal regulations and underdevelopment, combined with British colonial depredations, prevented Indian resources from being redeployed productively. The lesson is that a sufficiently large international trade shock can lead to decades of economic decline in a major economy, especially if that economy isn’t geared to mounting a flexible response.

The world economy going in circles..

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