ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Pulapre BalakrishnanSubscribe to Pulapre Balakrishnan

Land Reforms and the Question of Food in Kerala

This paper explores the idea that the decline of foodgrain production in Kerala originated in the decline of agriculture following migration to the Gulf. It is this event, it is argued, that has stood in the way of land reforms working themselves out completely, a process that may be expected to take time. The author also points out the implications of the consequent import dependence of food supply in the state.

History versus Expectations in Contemporary Ukraine

Contemporary Ukraine UKRAINE was not just another constituent republic of the Former Soviet Union (FSU), indeed it was a very special one. This feature arose from its, quite unique, position of being both the bread basket and the industrial power house of the Soviet economy. Today, its economy is in the doldrums. There is little activity. The FSU having disintegrated, the Ukraine economy is integrated with the rest of the world, Ukraine is one of the economies of eastern Europe now attempting transition to a market-based system. The essential element in the transition to a market economy is that the private sector assumes the leading role in the economy. The task of bringing this about is substantial in an economy such as that of Ukraine which has little recent history of private enterprise in most sectors of the economy. Paradoxically, the role of government in fostering a vigorous market economy is non-trivial. This note is concerned with these issues. It is organised into four sections. The macro-economic environment is scanned first. Here it is observed that despite macro stability the Ukraine economy is mired in a decelerationist mode. Next the relative roles of 'history versus expectations' in determining aggregate economic outcomes is discussed. Following this, the sources of uncertainty in Ukraine today are outlined, though briefly. The intention is to suggest that uncertainty can stem from sources other than the macro-economic environment defined so narrowly as to contain the essential variables such as inflation and the exchange rate alone. Finally, some immediate macro- economic policy imperatives are noted. Among these is a move to much greater financial discipline on the part of government. Financial discipline has to be seen as something apart from the often encountered call for 'sound money., itself in turn to be dealt with by calling for (an attempted) control over monetary aggregates. In the situation under study it refers to the requirement that the government stick to its internal payment obligations and enforce its dues, the possible violation of which is overlooked. The paper is able to provide some evidence on budgetary arrears in the Ukrainian economy today and analyses the consequence of this for private sector behaviour.

Managing the Indian Economy

Pulapre Balakrishnan Indian Economy: Essays on Money and Finance by C Rangarajan; UBS Publishers, C RANGARAJAN has had the sort of career that many an economist would give a right arm for. Here's a man who has divided his working life almost equally between academia and the world of the economic adviser. He has been professor at the Indian Institute of Management, Ahmedabad, member of the Planning Commission and, the crowning glory for a monetary economist, governor of the Reserve Bank of India. And what is more, speaking of the last, Rangarajan has not been just another governor. During his tenure, he has had a significant professional profile, a wide following and has received rave reviews from the financial press. In fact, on the occasion of the annual meetings of the IMF and the World Bank held in Madrid earlier this decade the magazine Euromoney had judged him the best central banker in the world. The last is no minor accolade even as we may allow for the penchant for fashion and predilection for contacting contagion so often exhibited by the self-referential world of international economists. And now from the august perch of the governor of the state of Andhra Pradesh, he has despatched a collection of essays entitled Indian Economy: Essays on Money and Finance. The collection is arranged under the four sections: 'Monetary policy issues', 'Financial sector policy, banking technology and rural credit', ' External policy issues' and The state and the market'. Since this wide range and impressive-looking portfolio deserves much attention I shall review the collection in two parts, which I shall refer to, somewhat unimaginatively, as 'macro' and 'micro.' This distinction, I must hasten to add, is mine and I do not presume that the author will rush to endorse it. Above all it is a convenient classification of the essays presented according to a view of whether they address essentially macro- economic or micro-economic issues. I appreciate that in the process a simplification is effected.

COMMENTARY- Are Colonials Cousins

exports. It can be observed that it is with respect to the traditional exports that competition exists between the south-east Asian economies and India. Thus, gems and jewellery which contribute around 14 per cent to Indian exports face competition from Thailand, Indonesia and Malaysia. Similarly, in case of rice we face competition from Thailand. However, India mainly exports the 'basmati' variety of rice which Thailand does not produce at all, though it happens to be the major world exporter of rice. In this sense, basmati does not compete with Thai rice. However, if Thai rice were to become very cheap due to steep depreciation, then at what point would the consumers start substituting basmati with Thai rice is the moot question. Thus, though we know the areas where competition exists between India and southeast Asian economies, the manner in which our exports would be affected would depend on individual price elasticities and the role which 'quality' plays in our exports. What we can see from the data is that almost 40 per cent of our exports have become vulnerable to a greater or lesser degree due to the depreciations in the south-east Asian region and this in a scenario of lower world growth rates.

Quality of Public Distribution System-Why It Matters

Quality of Public Distribution System Why It Matters Pulapre Balakrishnan Bharat Ramaswami This paper argues that price formation in foodgrains markets cannot be fully understood without reference to consumer switches between the open market and the public distribution system (PDS) induced by quality differences. This is an important aspect of the food economy, for an evaluation of state intervention must consider not only the welfare of its targeted beneficiaries but also the welfare of households without access to the PDS but who may nevertheless be affected if the working of the PDS has a bearing on the open market.

Savings Rate in Indian Economy since 1991

Pulapre Balakrishnan It has been widely noted that the estimated household saving rate has declined for almost three years running since 1991. This has been interpreted variously. The government of India has rushed to argue that the 'measured' decline might only reflect a methodological practice. On the other hand, critics of the reform process have argued that the decline is not only real but a direct consequence of the strategy adopted which has encouraged increased consumption of durable goods.

Repressed Inflation-There s Nothing Official about It !

Repressed Inflation There's Nothing Official about It ! Pulapre Balakrishnan The government's claim in the Economic Survey of control over inflation through slowing of monetary growth does not stand scrutiny. The consumer price index shows no reduction in the inflation rate. The reduction in the wholesale price index is agricultural prices led and cannot have been caused by aggregate demand shifts of any kind. Over the last year or two the Indian economy has in fact been characterised by repressed inflation.

What are the Fundamentals

Pulapre Balakrishnan To attempt to control the economy by targeting certain so-called fundamentals, prominent among them the fiscal deficit, appears to be ambitious in the light of the recent experience. In any case no real fiscal 'correction' has occurred. To cut the deficit and call this 'fiscal prudence' reveals an Orwellian imagination. This article examines the foundations of the macro-economic aspects of the recent policy initiatives.

Waiting for Private Investment

While the economic reforms appear to have had a positive effect on the trade balance their impact on production, reflected in the figures for industrial growth, is far from evident The budget reflects the government's concern for reviving this segment of the economy. However, the efficacy of the instruments chosen is not assured. The slow growth of capital goods production suggests that this is very likely due to slack investment outlay. The private sector appears to be waiting for recovery. In the absence of a strategy to precipitate private activity the government is going to be left waiting for private investment A simple measure that might have helped a little is recommended in this essay. But even this can only be a palliative. The most elementary analysis of events in the past three years points to the reason for the slow growth of industrial activity. This is the slow growth of capital spending by government.

Rational Expectations and Price Behaviour in India

It has been claimed that a principal proposition of the New Classical Macro-economics, namely, the neutrality of anticipated monetary growth under rational expectations, is applicable to the Indian economy, I provide evidence to refute this view. The results presented here bear a greater claim being based, as they are, upon superior modelling and more acceptable econometric practice. They suggest, among other things, that the monetary authority in India cannot be certain of containing inflation solely by implementing a pre-announced reduction in the money growth rate, leave alone being able to do so costlessly.

Union Budget for 1993-94-Some Macro-Economic Considerations

Some Macro-Economic Considerations Pulapre Balakrishnan The claim that the budget is 'growth oriented' is puzzling. First, the fiscal stance is deflationary. Secondly, capital spending by government is down. For each of these reasons it is not at all clear that a recovery will be triggered or that private investment will take off As far as the role of budgets go, perhaps, this one may be accurately described as non-inflationary. But then inflation does have other crucial determinants. Since the budget's bookkeeping has been much lauded it bears mentioning that rhe revenue deficit is still with us, and growing. Apparently, the government's macro-economic adjustment programme is yet to catch up with its own consumption. Finally, for exports we have been provided with an enthusiasm rather than a strategy APART from some significant changes in policy instituted in the budget, the finance minister this time seems to have caught the imagination of many by some very deft book-keeping. There is widespread wonder at 'give-aways' not having had to be combined with 'take-aways'. Obviously these gentlemen have not heard of the newly introduced 364-day bills! Coming to specifics, for instance the media has focused on 'the lowest budgetary deficit (total expenditure minus total revenue) in a decade'. This is indeed correct. In fact, the deficit projected for 1993-94 is close to half that estimated (revised) for 1992-93. However, note (Table 1) that the decline is matched almost exactly by the increase in 'borrowings and other liabilities'. Thus the finance minister may be seen to have borrowed to reduce the budgetary deficit. This is no achievement. While still on the question of balances, the fiscal deficit is actually marginally higher. Thus the lower projected ratio of this deficit with respect to national income is to come about solely due to the anticipated increase in the latter. The revenue deficit, on the other hand, is projected to increase substantially, which is a marked turnabout from the provision last year when it was at least slated to fall, even though the budget estimates were exceed ed by close to 25 per cent. Thus if deficit reduction is considered a desirable objective, at least with respect to the revenue account, this budget makes little progress. The implication of a revenue deficit is that we are borrowing (or printing money) to finance government consumption. In response to this it has been pointed out by the government that one cannot be too critical of revenue deficits in the Indian case for some crucial government expenditures such as on education occur on revenue account. This is entirely to be dis- counted when it is made clear that expenditure on 'education and public health' amounts to 2.9 per cent of total expen diture on revenue account This alter the much touted increase in expenditure on education in the budget. On the whole, an attempt to rein-in expenditure has been made alright. However, while the growth in total expenditure has been curtailed, notice that the decline has been brought about by a reduction in the level' of expenditure on capital account (fable 1). This is of grave import, and with likely consequences of to which I shall turn subsequently. Fiscal stabilisation via reduction of capital spending reflects the political economy of macro-economic adjustment being attempted in India today. Simply put, it is obvious that this government has been unable to take the really hard decisions. But so much for the arithmetic, and on to the economic questions.

Union Budget for 1992-93-Much Ado about Nothing

Much Ado about Nothing Pulapre Balakrishnan Two objectives must guide the conduct of fiscal affairs at the present juncture. First, there is a need for macroeconomic stabilisation. Second, there is need for fiscal adjustment, meaning transition to a more imaginative use of the fiscal apparatus to promote development. It is on its ability to achieve these aims, along with the distribution across income groups of the costs of adjustment, that the budget for 1992-93 ought to be judged.

Pages

Back to Top