Articles by Murali Patibandla

Cooperatives as organisational arrangements of collective economic activity can break up interlocked capital, labour and output markets in rural areas and alleviate poverty. The recent parallel law on cooperatives provides an opportunity to take a fresh look at this issue. Some basic concepts are discussed while comparing different types of economic organisation, with a few empirical examples to bring out the conditions under which cooperative arrangements can generate economic surplus and alleviate poverty. An interesting feature of the simple cooperatives we discuss is that perhaps they benefit only the poor and not those who are better off and have access to mainstream credit and markets.

The agricultural sectors in the European Union countries and the US are provided with large amounts of subsidies by governments. The subsidies causes excess supply of food products in these countries, which makes producers to dump it into developing economies by cutting prices below long-run marginal costs. This note shows that high tariffs can be used to convert the additional revenues realised by the foreign producers through dumping into tariff revenue of the Indian government. The tariff revenue can be utilised to increase investment in Indian agricultural sector to improve productivity.

The import substitution policies in India, directly and indirectly, were responsible for 'islands of competitiveness' such as the software industry and also the general non-competitiveness of a large number of industries. They created certain supply side conditions that facilitated the birth of software industry as a by-product. Free trade with technologically advanced economies, especially with the US, from the initial stages of its birth provided scope for realisation of technological and informational externalities. The main lesson we can draw from the dynamics of this industry is that a combination of supply side policy support with trade-openness contributes to the creation and technological maturity of hi-tech industries in developing economies.

Institutional Failures Lessons for India Murali Patibandla Ramkanta Prusty We argue in this paper that the underlying factor behind the east Asian financial crisis is institutional failure in the context of financial sector liberalisation. Mature free market economies function on the basis of institutions that minimise informational imperfections and transaction costs and facilitate a high degree of transparency and accountability of government regulatory agents. When the institutional conditions fail to hold or are incomplete it results in adverse selection and moral hazard behaviour under principal and agency relations. These institutional failures are very much relevant to the Indian financial markets in the present context.

In the absence of necessary institutional conditions, market reforms in developing economies cause rent seeking and inequitable distribution of income. This, in turn, could stun economic growth and also thwart the emergence of the right institutions. It is important for government policy not only to minimise the short run costs of institutional failures but also to set the right initial conditions for the evolution of institutions in the right direction. This paper illustrates some of the costs of institutional failures and the policy implications in the present Indian context.