ECONOMIC NOTES

Arun Jaitley on Electoral Bonds

ARUN Jaitley had outlined a scheme of electoral bonds in his budget speech on February 2, 2017. Now, exactly 11 months later, the notification of the scheme and some details of it have finally been announced in a Press Information Bureau release on January 2, 2018. Along with this release, Jaitley himself has also written an explanation-cum-defence of the scheme, from which it is clear that the scheme, far from countering the threat to democracy arising from large-scale corporate funding of elections, does not even address this issue.

The 99 Per Cent Failure!

IN assessing the impact of the Modi government’s demonetisation measure on the black economy, the fact that nearly 99 per cent of the outlawed currency came back to the RBI has been widely taken to indicate that the measure was a failure – its costs far outweighing any benefits. The obvious reason for this is that the return of almost all the notes establishes the fact that hardly any black wealth was destroyed as its immediate direct outcome.

A Year of Willful Economic Disaster

THE uniqueness of 2017 lies in the fact that never before has the country seen a government-caused economic crisis as serious as was witnessed in this year. There have certainly been worse years for the people, such as 1965-66, 1966-67, and 1973-74, each of which saw massive inflation. But these were years when economic hardships occurred for reasons that had nothing to do proximately with government policy. 1965-66 and 1966-67 when the “Bihar famine” had occurred, had seen a sharp drop in food grains output, a drop that had lasted two years.

India’s Industrial Sector: Myth and Reality

ONE of the elements of the so-called revival in GDP growth in the second quarter of the current year (2017-18) was an apparent rebound of manufacturing sector growth. The year-on-year growth rate of manufacturing, which had dipped to 1.2 per cent in Q1 of 2017-18 jumped to 7.0 per cent in Q2. On the face of it, therefore, the industrial sector is back on track after a brief demonetisation induced slowdown.

Marx on Imperialism

ON February 19, 1881, Karl Marx had written a remarkable letter to NF Danielson, the renowned Narodnik economist who had also gone under the name of Nikolayon and whose work had been much discussed by Lenin. In that letter Marx had said the following:

A Dangerous Move on Banks

THE BJP government, it appears, cannot remain content without inflicting irreparable damage on the institutions of the Indian economy. Its latest move in this direction is the Financial Resolution and Deposit Insurance (FRDI) Bill which was introduced in parliament on the last day of the winter session and is now with a select committee.

Economic Recovery or a Statistical Illusion: Some Observations on Recent Estimates of GDP Growth

ON November 30, the Central Statistical Office (CSO) came out with quarterly estimates of GDP for the second quarter (June to September) of 2017. Predictably, analysts and spokespersons of the government spent the evening in newsrooms of various TV channels celebrating what they claimed was a sign of revival of the economy. Next morning, revival of economy was the front page news in almost every newspaper. If there was any adverse impact of demonetisation and GST, it was claimed, here was the evidence that such an impact was only short-term and had started to wane.

Banks and Non-Performing Assets

WHAT exactly constitutes a non-performing asset (NPA) of a bank is not easy to determine. Since banks tend to roll over credit to borrowers, whether the request for such a roll over arises in the normal course of business or owing to a fundamental inability to pay back the loan, is difficult to decide. The tendency of late therefore has been to see NPAs as an extreme case of a wider category called “stressed assets” which are defined according to certain criteria.

Moody’s Upgrade

CREDIT-rating agencies, discredited by the collapse of the housing bubble in the United States when they had blithely endorsed all so-called “sub-prime lending”, are now crawling out of the woodwork, and the Indian establishment is predictably impressed by the sight. Moody’s have just upgraded India’s credit rating marginally and the BJP is beside itself with joy. Surprisingly, much of the media too have flashed the story of the upgrade as if India’s status being raised from Baa3 to Baa2 is a matter that calls for great jubilation.

One Year after Demonetisation

IT is exactly a year ago that Narendra Modi had announced the decision to demonetise, at four hours’ notice, as much as 86 per cent of the total currency of the country. After one year it is clear that none of the objectives that demonetisation was supposed to achieve has been achieved. This should not come as a surprise; indeed so obviously inapposite the measure had been for achieving its stated objectives that most economists, cutting across the ideological spectrum, had predicted its futility.

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