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About this book

This book discusses wide topics related to current issues in economic growth and development, international trade, macroeconomic and financial stability, inflation, monetary policy, banking, productivity, agriculture and food security. It is a collection of seventeen research papers selected based on their quality in terms of contemporary topic, newness in the methodology, and themes. All selected papers have followed an empirical approach to address research issues, and are segregated in five parts. Part one covers papers related to fiscal and price stability, monetary policy and economic growth. The second part contains works related to financial integration, capital market volatility and macroeconomic stability. Third part deals with issues related to international trade and economic growth. Part four covers topics related to productivity and firm performance. The final part discusses issues related to agriculture and food security. The book would be of interest to researchers, academicians as a ready reference on current issues in economics and finance.

Table of Contents


Fiscal Policy, Monetary Policy and Financial Integration


Impact of Debt on Short-Run and Long-Run Growth: Empirical Evidence from India

This study tries to analyse the impact of internal and external debt on economic growth in India during the period 1980–2014. Employing ARDL technique of co-integration, the study finds the negative impact of both internal as well as external debt on Indian economy in long run, thereby controlling for other variables namely trade openness, investment and population growth. The results of the error correction model (ECM) show that internal debt, external debt, investment, population growth and trade openness affect the economic growth both in short and long run. The relationship between debt (both internal and external) and economic growth turns out to be negative in long run. However, the short-run impact of internal debt is fluctuating; whereas external debt is negatively related to growth.
Nikita Pahwa

Fiscal Deficit and Economic Growth Relationship in India: A Time Series Econometric Analysis

High and persistent level of fiscal deficit is one of the major macroeconomic problems in India ever since mid-1980s. Fiscal consolidation is on the forefront of policy discussion since early 1990s to present day context. However, the actual administrative measure to control fiscal deficits in India took place in the year 2003 with enactment of Fiscal Responsibility and Budget Management (FRBM) Act and it brought into force in April 2004. The rationale behind keeping fiscal deficits under control is its adverse effect on macroeconomy and particularly the economic growth. On the one hand, the monetary policy makers in India (Reserve Bank of India) argue that higher fiscal deficits will impede the economic growth and hence requires a control. On the other hand, the fiscal policy makers (Ministry of Finance) argue that deficit spending is indispensable to augment the economic growth. Hence, there exists a puzzle that how fiscal deficit is affecting GDP in India. This paper tries to answer the puzzle by taking up a long-term time series analysis starting from the period 1980–1981 to 2015–2016. By adopting a vector error correction method (VECM), this paper proves that fiscal deficit is adversely affecting the GDP growth and therefore requires a strict control. Based on very few existing literature, paper also argues that if fiscal deficit money spent on capital formation purpose, it promotes growth and hence supports ‘Golden Rule’ of public finance.
M. R. Anantha Ramu, K. Gayithri

Relationship Between Monetary Policy and Industrial Production in India

The purpose of this research paper is to find out the empirical relationship between monetary policy initiatives of Reserve Bank of India and industrial production in India since April 1991–1992 to May 2015–2016. Monetary variables are the broad money and weighted average lending rate (WALR), whereas the industrial production variable is Index of Industrial Production (IIP)-manufacturing. Models used are VECM, ARDL-bound test and VAR. The study has found that there is long-run relationship between the broad money supply and IIP-manufacturing, similarly, changes in WALR have significant and immediate impact on the IIP-manufacturing. Based on these empirical results, it is argued that monetary policy variables and production share a strong relationship and policy to control only inflation may adversely impact the production in the economy.
Amrendra Pandey, Jagadish Shettigar

Co-movement Among Asian Forex Markets: Evidence from Wavelet Methods

In this article, we analyze the co-movements of nine Asian Forex markets China, India, Hong Kong, Malaysia, Indonesia, Singapore, Japan, Taiwan, Thailand, and South Korea using bilateral exchange rate against US Dollar from 03-01-2006 to 04-09-2015. We employ a wavelet-based methodology to analyze the extent to with the markets are correlated with each other across different timescales. It is found that the markets are moderately correlated at the intra-week scale and the extent of correlation increases with the increase in timescale. Near-perfect cointegration among the analyzed markets is found across annual–biannual timescale. The cross-correlation analysis shows that Singapore Forex market may lead the other Forex markets of the group across timescales from 16 to 64 days. Results indicate that there is a possibility of intervention as well as potential for portfolio diversification for the short term.
Anoop S. Kumar, Bandi Kamaiah

International Trade and Economic Growth


Nexus Between International Trade and Economic Growth

Trade is considered by many economists as an engine of economic growth. Trade openness accelerates economic development is believed by many economists. The main objective of this paper is to study the link between economic growth and trade and also to study how the link varies according to the level of income of the countries. There are allegations by poor and middle income countries that trade is not promoting growth for them but it helps the rich countries to become richer. The data for all the countries of the world is collected from the official website of World Bank from 1990 to 2014. The countries are divided into high income countries, middle income countries and low income countries. VECM is used to study the long–run- and short-run causality between trade and growth.
Laila Memdani

Causality Between Exports and GDP: An Empirical Evidence from BIMSTEC Region

The purpose of this study is to assess the empirical relationship between Export and GDP for BIMSTEC nations by using time series data from the period 1997–2015. Economic integration within regional trading blocs adds the significant value to increase economic growth, trade, investment, etc. BIMSTEC was proposed with the object to merge the Thailand’s “Look West” policy and ASEAN with the “Look East” policy of India and South Asia. To achieve the aim of study time series data had been used for testing econometric technique (Augmented Dickey-Fuller Test, Co integration and Granger Causality) to the assessment of hypothesis of GDP strategy led by exports and exports led by GDP. Granger Causality model is based on the following hypotheses for testing the causality and cointegration between GDP and export for BIMSTEC nations. (1) Whether there is bidirectional causality between GDP growth and export for BIMSTEC nations. (2) Whether there is unidirectional causality between the two variables, (3) Whether there is no causality between GDP and export for BIMSTEC nations. (4) Whether there exists a long-run relationship between GDP and EXPORT for BIMSTEC nations. The results explained the evidence of bidirectional causality between GDP and export among BIMSTEC bloc. The results support the exports led growth and growth-led export in case of BIMSTEC. For making BIMSTEC a “vibrant regional entity”, there are needs to revitalize coastal shipping preparations and inter-modal transport, practices for easy flow of goods and services.
Gurpreet Kaur, Vishal Sarin, Jasdeep Kaur Dhami

Productivity and Firm Performance


Intellectual Capital and Financial Performance: Evidences from Indian Business Process Outsourcing Industry

The purpose of this study is to empirically measure the impact of intellectual capital performance on the traditional financial performance measures of selected Indian Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) companies. Data of 13 prominent Indian BPO/KPO companies listed on Bombay Stock Exchange is taken for study. The selected companies of BPO/KPO sector are heavily reliant on intellectual capital. Financial data of nine years i.e. from 2007 to 2015 is collected from financial database CMIE’s Prowess. Literature available on intellectual capital and efficiency measurement is thoroughly reviewed. Value Added Intellectual Coefficient (VAIC™) method is used to measure the value based intellectual capital performance of the selected companies. The financial performance variables used in the study are return on assets, return on equity and operating income ratio for profitability and asset turnover ratio for productivity. VAIC™ and its components are calculated i.e. efficiency of capital employed and efficiency of intellectual capital. Empirical analysis is conducted using models of panel data i.e. fixed and random to analyse the impact of VAIC™ components on financial performance measures. Findings from the analysis suggest that intellectual capital efficiency has a significant impact on profitability but not on productivity. While capital employed efficiency has a significant impact on profitability and productivity both.
Mohd Anas Raushan, Ahmed Musa Khan

CSR as Investment: An Analysis of Ownership Structure and Firm Performance

CSR can be considered as an investment which is decided by the owners of the firm, and it can affect the performance of the firm. In this paper, we try to analyse how spending in CSR is related to the ownership pattern and firm performance in India. First, we analyse the CSR expenditure of Bombay Stock Exchange (BSE)-listed Indian firms and try to look at the changes in the number of firms actually spending on CSR over the years 2010–2015 due to the mandate on CSR spending in the Companies Act of 2013. Second, we analyse how the ownership structure, firm size and leverage of a firm affect its CSR expenditure. Finally, we look at the relationship between the performance of a firm and the CSR spending in these years. We use 176 listed firms in the BSE sourced from Centre for Monitoring Indian Economy’s (CMIE) PROWESS database. We find that CSR spending and institutional ownership share have a positive relationship while the leverage of the firm has a negative relationship with CSR spending. We also find that CSR spending has a circular causation with firm performance. It has a significant and positive influence on the firm value while the firm value affects CSR spending positively.
Vasiq Nuvaid, Sucheta Sardar, Sujoy Chakravarty

Productivity Performance of Indian Banks with FDI Contents

Indian banking has undergone a sea change after liberalization and reforms. Liberalization and reforms paved the way to foreign direct investment into Indian Banking Sector. It is more than a decade now that have we have received Foreign Direct Investment (FDI) in Banking and hence it is important to see its impact on the Indian Banking. The present paper is dedicated to analyze and evaluate the productivity performance of Indian banks in the post liberalization era with FDI contents.
Jayashree Patil-Dake

Is the Acquirer More Efficient Than Target? An Empirical Study from Selected Bank Consolidation in India

This paper tries to examine whether the acquirer banks are more efficient than the target banks in 16 consolidation deals in Indian banking sector during the period 1995–2013. We find that as far as technical efficiency is concerned, the hypothesis that the acquirer is more efficient than the target bank is supported in almost all the cases except for the deal between ICICI Bank and Bank of Madura in which Bank of Madura (target) was more efficient than ICICI bank (the acquirer). Finally, both the input and output models of overall efficiency are clearly showed that the acquirer is more efficient than the target, but it does not reflect in scale efficiency.
M. Kollapuri

Agriculture and Food Security


Foreign Exchange Rate and Agricultural Performances: A Time Series Exercise for India

The paper attempts to investigate and analyze the causal linkage between movements of foreign exchange rate and agricultural performances in terms of production and export empirically in India. Agricultural is described as the backbone of India, contributed largest but continuously declining share of national income. Indian agricultural exports, contribute a significant share of total exports, an important earner of foreign exchange. So foreign exchange rate can have a relationship with worldwide exports and well as output of India’s agricultural and allied commodities. In this context, the current paper explores the underlying long-term causal relationships among India’s foreign exchange rate and productions of exports of agricultural and allied commodities to fill gaps in the available literature. Yearly data on agricultural exports is calculated from DGCIS, Government of India over the period 1970–2015. Reserve Bank of India provides the yearly data on foreign exchange rate and data on GDP of agricultural and allied activities is collected from CSO, Government of India over the same period. The stochastic properties of variables are checked by applying ADF and PP unit root tests. Johansen cointegration test is employed followed by vector error correction mechanism (VECM) to find the long run dynamics. Our findings imply unidirectional long run causality between agricultural exports and India’s foreign exchange rate.
Madhabendra Sinha, Partha Pratim Sengupta

Assessing Nutritional Intake from a Field Study in Odisha

Nutritional Intake Assessment is still a popular method to measure household food security through food intake surveys. This measurement primarily detects the presence of inadequate intake among individuals and population groups. Even though, a sufficient intake of a nutrient does not guarantee adequate nutrition status for an individual, and an insufficient intake does not always indicate a deficiency, but such findings warn of possible problems. This article is a part of the doctoral research on Sustainable Food and Nutritional Security in Odisha-A Research Study on Nayagarh District by the first author. Data on daily food intake was collected from the 400 sample families. The data on cereal, pulses, vegetables, edible oil, milk&milk products and flesh food which includes meat/fish/egg. Then using dietary guidelines of National Institute for Nutrition (NIN), the energy from the food has been converted into energy in terms of Kilo Calorie, Separate conversion of energy from fat, protein and carbohydrates were also done. The research study has found that diversification of diet, percentage of family members working in agriculture, share of non-food essentials significantly affect the average food intake at the household level. The article is divided into four parts. Section 1 provides the introduction and review of literature on nutritional intake at household level. Section 2 has outlined the status of nutritional security at household level. Section 3 analyses various determining variables affecting food intake and the last section concludes the article. This study takes on average nutritional intake at household level as the measure of nutritional status at household level.
Bhabani Prasad Mahapatra, Bhagabata Patro

Dynamics of Food Grains Production in Telangana

Problem of food insecurity is a multi-dimensional, multi-faceted and multi-causal problem. Food grain production can be increased either by increasing the area under food grains or by improving the yield rate. Expansion and sustainability in the growth of food production is a big challenge as demand for land for non-agricultural purposes is bound to increase in the days to come. Expansion of urban agglomeration, growth of smaller towns, need for provision of physical and social infrastructures result in the decline in land available for agricultural purpose. The problem gets aggravated when there is a shift in cropping pattern from food crops to non-food crops. In this background, adequate food production can be maintained mostly by improving the yield of food grains. Against this backdrop, an attempt is made in this Paper to estimate the contribution of the ‘increase in area under food grains’ and ‘improvement in technology’ to the growth of food grain production in Telangana using Simple Decomposition Technique and to estimate the influence of determinants of per capita availability of food grains using Multiple Regression Technique. The results of the Study indicate that generally the yield effect is stronger than the area effect on growth of food grains, Cereals and Rice. However, yield effect seems to be declining with passage of time which casts shadow on the sustainability of food grain production. Improvement in productivity and extension of cropped area have positive influence on per capita availability of food grain while higher density of population would result in decline in per capita availability of food grains.
S. Indrakant
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