nach oben

Erschienen in:

2016 | OriginalPaper | Buchkapitel

15. The Growth Experience in India: Is There a Hidden Model?

verfasst von : Pronab Sen

Erschienen in: Global Economic Cooperation

Verlag: Springer India

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

The growth performance of the Indian economy since the economic reforms of 1991 has been widely acclaimed as a validation of the benefits of shifting from a controlled economy to a market-driven one.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Vorheriges Kapitel Global Production Sharing and Asian Trade Patterns: Implications for the Regional Comprehensive Economic Partnership (RCEP)

Prior to this time, the only real vulnerability was from oil related shocks (1974, 1979 and 1991), which were driven mainly by political factors, and from monsoon failures.

Rough estimates of total factor productivity suggest that TFP growth slowed from above 2.5 % in the beginning of the period to around 1 % later.

The combined fiscal deficit of the Centre and States, including below the line items, dropped from a high of nearly 12 % of GDP to about 6.5 %.

Other than trade liberalisation, the other three pillars of the reform process were of little relevance to the SME sector, except perhaps in a very indirect sense. For instance, it could be argued that opening up of the capital account and the domestic capital market could have released bank resources for the SMEs.

Strictly speaking, the main expansion in government expenditure occurred in the Budget of 2008–09, which preceded the “Lehmann moment” of October 2008. The 2009–10 Budget continued the expenditure boost and added a significant revenue component through cuts in excise duties and service taxes.

In 2009–10, corporate investments fell by nearly 6.5 % points of GDP as compared to 2008–09. The non-corporate investment rate, on the other hand, rose by 3 % points.

During the boom period of 2003–08, Indian corporates borrowed heavily from global financial markets for investment in both productive and speculative assets. Post-crisis, many of them are facing illiquidity of their assets, mainly real estate, and are perceived to be over-leveraged by both the global and Indian financial sectors. The sharp depreciation of the rupee in May–June 2013 has made matters even worse by increasing the rupee value of external debt by nearly 12 %.

Calculations suggest that even an 8 % growth target would not support infrastructure investment of very much more than US$ 900 billion, and the basic infrastructure required to sustain a 7 % growth target is around US$ 650 billion.

This mood has not changed significantly despite considerable progress made in recent months by the Cabinet Committee on Investment on land acquisition, fuel and clearance issues.

There are some projects which are at different stages of implementation, and which may be revived sooner with a revival in corporate confidence.

The recent episode where a mere mention that Ben Bernanke was “thinking” about a “tapering” of the quantitative easing (QE) triggered off a crash in both the Indian stock market as well as the rupee exchange rate is a precursor to what can be expected once the actual tapering, and eventually the reversal, of QE happens, not just in the USA, but sooner or later in Europe as well.

Unfortunately, it is difficult to establish this empirically since the output data, unlike the investment data, is not broken up between corporate and the household (read SME) sectors. However, this appears to be a reasonable conjecture.

The 2005 Economic Census revealed that there were 42 million non-agricultural enterprises; while the latest (2013) Census counts over 58 million now.

There is a view that India actually has fewer entrepreneurs than it should for its level of development. See: Ghani, E., W.R. Kerr, and S.D. O’Connell, “Promoting Entrepreneurship, Growth and Job Creation”, in E. Ghani (ed), Reshaping Tomorrow, Oxford University Press, 2011. The difference between the two views arises from the Ghani, et al. definition that functional entrepreneurship is revealed only when it is formalized. We disagree.

In a weak global economy, it is almost certain that the government will have to provide fiscal support for any reasonable growth target. The main issue is whether this should be through consumption support or investment. An SME-led strategy allows for a more investment-based fiscal support.

Technology is deliberately not mentioned since technology access has improved in recent years, and the issue is partly covered by innovation.

Campus recruitment by corporates receives a lot of publicity and occupies considerable mind space, but this is probably far smaller than the lower end jobs which absorb most young people.

The quality of jobs created and of the working environment is a different matter altogether. Also, unemployment among educated youth is far higher than over-all youth unemployment in India mainly because of these and aspirational factors.

SMEs are much less able to cope with the costs associated with infrastructure deficiencies or rent-seeking behavior.

In India, government procurement has reservations for small scale units, but the conditions imposed always tend to favour established enterprises, which are quite often fronts for corporates.

In the rural roads case, high technical standards were laid down for low cost projects which allowed small companies to build up their capabilities. In the NHDP, initial contracts were for only 50 km, which enabled technically proficient but financially weak firms to compete.

The micro-finance sector has made significant strides in India and competes actively with informal credit providers. However, microfinance is relevant mainly, if not only, to the self-employed (own-account enterprises), and does not meet the needs of other small enterprises, who are forced to fall back on money-lenders and other informal credit sources.

For a brief but comprehensive overview of the measures taken by the Government of India and the Reserve Bank of India see: Chakrabarty, K.C., “Strengthening SMEs Capacities for Global Competitiveness”, RBI.

An actuarial approach is based on assessing the default probability of a class of potential borrowers rather than the individual risk assessment which is done in project appraisal. It is thus more suitable for application in cases where there are a large number of small borrowers.

A well-known “actuarial” product in banking is the Collateralised Loan Obligations (CLOs), which has been in vogue in the USA since the 1980s. However, this is an ex-post instrument, and what is required is an ex-ante procedure.

Unfortunately, the global crisis has brought into disrepute some of these financial innovations such as the CLO (too often confused with CDOs) and CDS.

India has a wide variety of informal (read traditional) financial intermediaries other than the basic moneylender, such as chit funds, nidhis, hundis, etc.:

In the past couple of years, when the real interest rate on bank deposits have been negative, ‘deposits’ with these informal institutions have provided a buffer, along with gold.

Casual empirics suggest that the lending rate of these credit providers is in the range of 23–24 % as compared to the 26–30 % that was being charged by microfinance institutions.

An important step forward has been taken with the Nachiket Mor Committee set up by the RBI. Its recommendations are, however, yet to be processed for implementation. Moreover, even in this Committee’s report, the role of the informal financial sector is missing.

Titel: The Growth Experience in India: Is There a Hidden Model?
verfasst von: Pronab Sen
Verlag: Springer India
Buch: Global Economic Cooperation
Print ISBN: 978-81-322-2696-3

Electronic ISBN: 978-81-322-2698-7

Copyright-Jahr: 2016
DOI: https://doi.org/10.1007/978-81-322-2698-7_15