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2016 | Buch

Development in India

Micro and Macro Perspectives

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This book examines various facets of the development process such as aid, poverty, caste networks, corruption, and judicial activism. It explores the efficiency of and distributional issues related to agriculture, and the roles of macro models and financial markets, with a special emphasis on bubbles, liquidity traps and experimental markets. The importance of finite changes in trade and development, as well as that of information technology and issues related to energy and ecosystems, including sustainability and vulnerability, are analyzed.

The book presents papers that were commissioned for the Silver Jubilee celebrations at the Indira Gandhi Institute of Development Research (IGIDR). The individual contributions address related development problems, ensuring a homogeneous reading experience and providing a thorough synthesis and understanding of the authors’ research areas. The reader will be introduced to various aspects of development thought by leading and contemporary researchers. As such, the book represents an important addition to the literature on economic thought by leading scholars, and will be of great value to graduate students and researchers in the fields of development studies, political economy and economics in general.

Inhaltsverzeichnis

Frontmatter
Chapter 1. Introduction to Development in India: Micro and Macro Perspectives
Abstract
Our focus in this book is to look at the big picture from the vantage points of contributing authors’ thematic or sector specializations in order to draw out the successes and challenges of development theory as well as policy. Each one of the main authors represented in this volume are known for laying out specific research agendas that have been pursued over decades if not life times. By design, they distil and present the core ideas in an accessible style, which to some extent eschews technicalities that are normally unavoidable in modern day economics writing. Given one common characteristic of their Indian origin, their writing is either voluntarily or involuntarily suffused with Indian development policy debates. However, their international characteristic adds a more nuanced general perspective to these universal development problems that transcend individual country experiences. The book is organized into six parts: Formal and Informal Institutions; Aid and Poverty; Indian Agriculture Growth and Distribution; Financial Markets and Macro Economy; Technological Change, Trade and Development; and, Energy and Ecosystems.
P. G. Babu, S. Mahendra Dev

Formal and Informal Institutions

Frontmatter
Chapter 2. Caste Networks in the Modern Indian Economy
Abstract
Social networks support diverse economic activities in developing countries, using the information and the social sanctions at their disposal to sustain cooperation and to solve market imperfections. In India, the natural unit around which networks would be organized is the endogamous (sub) caste or jati. Caste networks have, indeed, historically supported, and continue to support economic activity and mobility. While this provides a novel economic explanation for the persistence of caste in modern India, a balanced assessment of the contribution of these networks to growth and the macro economy must also account for the static and dynamic inefficiencies that they generate.
Kaivan Munshi
Chapter 3. Evolution of Judicial Activism: The Supreme Court of India
Abstract
In this paper, we trace the origin of the Judicial Activism of the Supreme Court to the aftermath of the Emergency of 1975-77. We document the expansive process of activism since the Emergency, in particular since 2000. We also discuss the economic and legal issues arising from judicial activism.  
T. N. Srinivasan
Chapter 4. Corruption: Supply-Side and Demand-Side Solutions
Abstract
As any other economic transaction, corruption too has demand and supply dimensions. The focus thus far has been on the demand side, viz., government trying to control its own officials. Dixit shifts the attention to the supply side, viz., firms. He proposes that business community itself could set a norm of ‘no bribes’ and enforce it through ostracism such as ‘not doing business with those firms who give bribes’. Dixit suggests that largest firms could potentially take the lead as they may be better able to withstand initial losses till the norm takes roots.
Avinash K. Dixit

Aid and Poverty

Frontmatter
Chapter 5. Can a Country Be a Donor and a Recipient of Aid?
Abstract
India has now crossed the threshold into Middle Income Status. It is a nuclear power and has a space program. It has announced the formation of an agency to coordinate its aid donor activities. And yet India is the recipient of international aid as well. Can this configuration, on the face of it absurd, nevertheless make sense? This paper explores frameworks in which a Middle Income Country might go on receiving aid despite having crossed a poverty threshold on average. It begins with a discussion of “Global Rawlsianism” and its critics, most prominently Rawls himself, and assesses the moral salience of national level averages in determining global responsibility towards the poor in a country. The next section takes the perspective of Global Utilitarianism and discusses the allocation of global aid with the objective of poverty alleviation, and whether in this context it might make sense for a country to be a donor and a recipient of aid. Finally, the paper takes an operational perspective and discusses some of the key issues facing the international community in the next few years, including the nature of the replenishment of IDA, the World Bank’s concessional assistance window.
Ravi Kanbur
Chapter 6. Why is Poverty Declining so Slowly in India?
Abstract
Despite an impressive growth record, India’s poverty performance over the last two decades leaves something to be desired. During the high growth period of 1990–2005, the headcount ratios at both $1.25 and $2 levels have been declining more slowly in India than the LDC average and even more slowly than Sub Saharan Africa (Lenagala and Ram 2010). The goal of this paper is to explore why this might be so.
Ashok Kotwal, Arka Roy Chaudhuri

Indian Agriculture: Growth and Distribution

Frontmatter
Chapter 7. Agriculture and Structural Transformation 1960–2040: Implications for Double-Digit Inclusive Growth
Abstract
If imports of food are constrained to levels only slightly higher than at present, at least a 4 % growth rate of agricultural GDP is needed to support GDP growth rates in excess of 8 %. This can be attained with a slightly optimistic agriculture TFPG growth rate of 2 % along with a slightly optimistic development of irrigation potential to 90 million ha (Mha) (net). But in the past two decades, agricultural growth has been less than 3 %, productivity growth has been lower than 2 %, and limits on total water availability in India, competition for water from urban areas, and slow improvements in water use efficiency have reduced the irrigation growth rate and could continue to reduce it in the future. Achieving the required agricultural growth further increase the need for TFP growth. The way agriculture develops would have a profound impact on structural transformation when labor is pulled out of agriculture at a speed that depends on the labor intensity of industry and services. A turning point is reached when the labor productivity differential between the sectors starts to diminish and the share of labor in agriculture starts to decline faster than its share in output. India seems to be far away from such a point and we seem to be heading for a system of part-time farmers with substantial income coming from rural nonfarm activities. This is also leading to feminization of agriculture.
Kirit S. Parikh, Hans P. Binswanger-Mkhize, Probal P. Ghosh
Chapter 8. Incremental Reforms in Food Policy: What Are the Possibilities?
Abstract
India’s food policy is in a state of flux. This is a rare moment. Food policies and their governance have enjoyed stability and continuity for many decades. Indeed, the framework for these policies was set by the war-time interventions of the colonial government in India. Those interventions consisting of direct procurement of grain and rationed distribution had the object of securing food supplies for urban populations. Even though the objectives of food policy have mutated over the years, the interventions have not materially changed form despite changes in scale. The public distribution system (PDS) owes its origins to the rationing systems of World War II. The Food Corporation of India (FCI), the principal Central government parastatal responsible for foodgrain procurement and storage, was set up in the mid-1960s. The practice of offering support prices to rice and wheat also dates from that period. The series of reforms since 1991 that saw greater integration of India with world markets along with greater freedom for entrepreneurial activity left the food and agricultural sector largely untouched.
Bharat Ramaswami, Milind Murugkar

Financial Markets and Macro Economy

Frontmatter
Chapter 9. A Model of Bubbles and Crashes
Abstract
This paper presents a model in which an asset bubble may persist despite the presence of a large mass of rational arbitrageurs whose joint responses would suffice to burst the bubble. The resilience of the bubble stems from the inability of arbitrageurs to temporarily coordinate their selling strategies. This synchronization problem together with the individual incentive to time the market results in the persistence of bubbles over a substantial period. The analysis suggests that behavioral influences on prices are immune to arbitrage in the short and medium run. The model provides a natural setting in which news events, by enabling synchronization, may have a disproportionate impact relative to their intrinsic informational content.
Dilip Abreu
Chapter 10. Experimental Exploration into Macro Economics
Abstract
Economics, long thought beyond the reach of experimentation, began gradually to yield some of its inaccessible secrets to laboratory and field investigations over the past century. Observation and analyses of laboratory games have led economists to think about markets as social artifacts, whether evolved or designed, to achieve predictable outcomes in specified environments. The value of potential insights into properties of macro economic models and policies had to overcome the barrier of virtual impossibility of conducting controlled experiments at macro economic scale. Fortunately, micro models of macro phenomena have allowed experiments to identify the more plausible from sets of multiple or indeterminate outcomes, and assess policy alternatives and institutional designs. Without attempting a comprehensive survey, this paper summarizes some important discoveries from experimental economics, with special emphasis on macro economics. Challenges ahead are mentioned briefly.
Shyam Sunder
Chapter 11. Does the Tail Wag the Dog? The Effect of Credit Default Swaps on Credit Risk
Abstract
We use credit default swaps (CDS) trading data to demonstrate that the credit risk of reference firms, reflected in rating downgrades and bankruptcies, increases significantly upon the inception of CDS trading, a finding that is robust after controlling for the endogeneity of CDS trading. Additionally, distressed firms are more likely to file for bankruptcy if they are linked to CDS trading. Furthermore, firms with more “no restructuring” contracts than other types of CDS contracts (i.e., contracts that include restructuring) are more adversely affected by CDS trading, and the number of creditors increases after CDS trading begins, exacerbating creditor coordination failure in the resolution of financial distress.
Marti G. Subrahmanyam, Dragon Yongjun Tang, Sarah Qian Wang
Chapter 12. Financial Crisis and Liquidity Trap Some Theoretical and Policy Perspectives
Abstract
Perhaps, the most notable feature of the ongoing global financial and economic crisis is the prevalence of near-zero interest rates along with persistence of large, often-growing, unemployment over the last 5 years in practically all advanced countries. Such a situation figures as a theoretical curiosum in the old-fashioned Keynesian theory, but has been conspicuous by its absence in the mainstream macro economic paradigm ruling since the mid 1970s—a paradigm that constitutes a synthesis between the new classical and new Keynesian economics. However, since both the economic travails of Japan during the last two decades and the ongoing crisis have highlighted how intractable the trap generally is, it is worthwhile to go into the analytics of the phenomenon and examine the efficacy of alternative policy instruments for escaping from the trap. Accordingly, we recapitulate the Keynesian theory of the liquidity trap, indicate the nature of its modern incarnation and briefly note its implications for the macro economy. As a prelude to a more fruitful discussion of the subject, we take stock of some stylized facts associated with some major episodes of the trap. This paves the way for identifying its main sources and drawing some policy conclusions.
Mihir Rakshit

Technological Change, Trade and Development

Frontmatter
Chapter 13. Finite Change—Implication for Trade Theory, Policy and Development
Abstract
The paper traces the evolution of trade theory beyond the standard 2 × 2 models and looks for implications of higher dimensional structures and adjustment problems with large shocks. Typically trade theory and policy talk about expansion and contraction of existing activities. In this paper we explore various situations where certain activities vanish altogether. Similarly other activities may come to existence following major changes in the economic environment. Such regime shifts are interpreted as finite changes as opposed to infinitesimal alterations. These changes allow us to think differently about standard policy changes, all of which have direct implications for developing countries. Emigration, wage inequality and distribution, non-equivalence of tariff and quota in competitive models, capital mobility and corruption are some of the applications involving such finite change. At a theoretical level the paper starts by an interesting interpretation of factor price “non-equalization” hypothesis in the basic Heckscher-Ohlin-Samuelson type models without depending on standard text book type argument.
Sugata Marjit, Biswajit Mandal
Chapter 14. Information Technology and Its Role in India’s Economic Development: A Review
Abstract
Information technology (IT) is an example of a general purpose technology that has the potential to play an important role in economic growth, as well as other dimensions of economic and social development. This paper reviews several interrelated aspects of the role of information technology in the evolution of India’s economy. It considers the unexpected success of India’s software export sector and the spillovers of this success into various IT enabled services, attempts to make IT and its benefits available to India’s rural masses, e-commerce for the country’s growing middle class, the use and impacts of IT in India’s manufacturing sector, and various forms of e-governance, including internal systems as well as citizen interfaces. The paper concludes with an overall assessment of these different facets of IT in the context of the Indian economy.
Nirvikar Singh

Ecosystems and Energy

Frontmatter
Chapter 15. Value of Biodiversity and Ecosystem Services in South Asia and India: Past, Present and Future
Abstract
South Asia (SASIA) is endowed with a number of biomes that contain valuable biodiversity and provide ecosystem services of special significance to poor rural communities. The paper looks at trends in mean species abundance adjusted estimates of land areas under different biomes: ice and tundra, grassland and steppe, scrubland and savannah and three types of forests: boreal, temperate and tropical. Changes in these areas from 1900 to 2000 are assessed and valued and projections are made to 2050. Finally the current values and future values of services provided by forests, grasslands, wetlands, mangroves and coral reefs are presented for India alone.
Anil Markandya
Chapter 16. Climate Resilient Cities: Vulnerability Profiling of Twenty Indian Cities
Abstract
This paper discusses the implications of climate change and natural hazards that threaten Indian cities, explores the expected impacts of changing climate and hydro metrological hazard. The study develops a framework for rapid vulnerability assessment of cities by highlighting various risk exposures and vulnerability factors. Urban renewal interventions were identified in order to reduce impacts of climate change. We considered twenty Indian cities from 14 different states. These cities were categorized in terms of population, ecosystems in which they were located such as mountain, coastal, inland and river-based cities ranging from metros, mega cities, and medium sized cities and other characteristics such as commercial, historical, tourism or pilgrimage destinations, capital city, etc. This will help us to better understand the specific drivers of climate vulnerability and provide an information base for future action.
Jyoti Parikh, Geeta Sandal, Priyank Jindal
Chapter 17. Challenges for Sustainable Energy Development in India
Abstract
The scope of environmental concerns of energy cycles (from extraction to use to disposal) has become increasingly broader.  The first concerns pertained to the visible pollutants of the outdoor environment with localized effects.  These have broadened to include inter alia social concerns in sustainable development and environmental problems increasing both spatially (indoor, regional, and global impacts) and temporally (from immediate to delayed and long-term effects).  In India, successes have been modest in addressing environmental consequences of the energy sector.  When the affected parties include the elites and the urban middle classes, the problem is more likely to be addressed than when it affects the poor and unorganized.  Visible pollution has frequently been curtailed; invisible pollutants continue to be emitted.  Air pollution has sometimes been controlled; controlling water pollution is less than exemplary.    While the world is on its way to addressing stratospheric ozone depletion, climate change continues to defy an acceptable solution.  Based on my personal professional experience of the past three decades, I attempt in this paper to provide a historical perspective of the successes, challenges, and unresolved implementation issues in the energy environment arena in India.
Dilip R. Ahuja
Metadaten
Titel
Development in India
herausgegeben von
S. Mahendra Dev
P.G. Babu
Copyright-Jahr
2016
Verlag
Springer India
Electronic ISBN
978-81-322-2541-6
Print ISBN
978-81-322-2540-9
DOI
https://doi.org/10.1007/978-81-322-2541-6