Articles by C P Chandrasekhar

We, as economists, academics and social activists are deeply concerned about the continuing crisis in the education sector in Sri Lanka.

The decision to allow qualified foreign investors to invest in India's equity markets is a source of concern both for the kind of funds that will be attracted and what this says about the government's own state of mind. Unless there is some urgency about seeking out additional sources of capital inflow, it is difficult to explain why the government must open the doors to a source that is unlikely to deliver much foreign capital and would, if it does, increase rather than decrease speculation and volatility.

Following the reiteration in the Union Budget of the decision of the government and the central bank to issue new bank licences, the union cabinet has approved certain amendments to the Banking Regulation Act in order to enlarge the influence of private promoters. A year after the proposal was first made and months after the issue of a Reserve Bank of India discussion paper, the purpose of licensing new private banks remains unclear.

The large current account deficit of the United States, the growing foreign holdings of US treasury bills and then the recent financial crisis that erupted in the US have led to a revival of the question of the worth of the dollar as a reserve currency. Those who say that it is time for the dollar to go, are not basing their argument on the greater strength of another currency to replace the dollar. Rather, the most popular alternative is the Special Drawing Right of the International Monetary Fund, which is more a unit of account than a currency and whose value is itself linked to that of a weighted basket of four major currencies. There are three implications of such an argument. First, even when the weakness of the US and the dollar is accepted, the case is not that the dollar should be completely displaced, since even in the basket that constitutes the SDR the dollar commands an influential role. Second, there is no other country or currency that is at present seen as being capable of taking the place of the US and the dollar at least in the near future. And, third, the search is not for a currency that can be used with confidence as a medium for international exchange, but for a derivative asset that investors can hold without fear of a substantial fall in its value when exchange rates fluctuate, because its value is defined in terms of and is stable relative to a basket of currencies.

The growth strategy underlying Budget 2010 intensifies a recent tendency wherein private consumption expenditure has increasingly substituted for public expenditure in order to induce growth. It also accepts a regressive bias in fiscal policy as part of the strategy. In the Union Budget, the government has restructured the tax system so as to curtail revenue expenditures, while maintaining past direct tax concessions and using a part of its revenues to provide new concessions that are expected to spur demand, sustain and increase corporate savings and encourage corporate investment, all with the intention of "facilitating" growth. The potentially "inequalising" fallout of such an approach is possibly seen as collateral damage in realising a high rate of market-driven (as opposed to state-driven) growth, which needs to be redressed separately - if at all it will be.