India Development Report 1997

by Parikh, Kirit S.

• ISBN13: 9780195642070
• ISBN10: 0195642074
• Format: Paperback
• Copyright: 1998-02-12
• Publisher: Oxford University Press

Summary

This is the definitive source for information on the Indian marketplace, providing a detailed and current assessment of every facet of the economy: industry, agriculture, infrastructure, the financial and social spheres, food policy and security measures, and the environment. These valuable reports--as preceded by a telling overview of last year's economic activity--comprise a summary that will prove useful to capitalists and corporations up and down the ladder, and in both the public and private sectors. The India Development Report 1997 offers readers a more complete picture of the subcontinent's economic performance.

Table of Contents

1. Overview: Prospects and Retrospect	1	(26)
Kirit S. Parikh
1.1 The Setting and the Issues	1	(1)
1.2 The Macroeconomic Scene: Assessment and Outlook	2	(2)
1.3 Inflation, Exchange and Interest Rates: Closely Intertwined	4	(1)
1.4 Poverty and Public Policy: A Mixed Record	4	(2)
1.5 The Energy Sector: The Required Reforms	6	(2)
1.5.1 The Coal Sector	7	(1)
1.5.2 The Hydrocarbon Sector	7	(1)
1.5.3 Non-conventional Energy Sector	8	(1)
1.6 The Environment: Can Neglect No Longer	8	(2)
1.7 Agriculture and Rural Development: Stocks, Subsidies and Food Security	10	(2)
1.8 Industry: Coping with New Challenges	12	(2)
1.9 Labour Policy: Striking a Balance	14	(1)
1.10 Securities Markets: Towards Greater Efficiency	15	(2)
1.11 Banking: In a Deregulated Environment	17	(1)
1.12 Transport: A Crucial Infrastructure	18	(2)
1.13 Telecommunication: Monopoly vs Competition	20	(1)
1.14 Other Issues	21	(4)
1.14.1 The Role of Planning	21	(2)
1.14.2 Centre-State Relations	23	(1)
1.14.3 The Consequences of Political Uncertainty	24	(1)
1.15 In Conclusion	25	(2)
2. Macroeconomic Scene: Assessment and Outlook	27	(14)
Manoj K. Panda
Kirit S. Parikh
2.1 The Backdrop	27	(1)
2.2 Macro Developments	27	(8)
2.2.1 Growth Recovery	27	(2)
2.2.2 Inflation	29	(1)
2.2.3 Savings and Investment	29	(1)
2.2.4 Fiscal Developments	30	(1)
2.2.5 International Trade	31	(3)
2.2.6 Monetary and Credit Policy	34	(1)
2.3 Scenarios for 1996-97	35	(2)
2.3.1 Current Indicators	35	(1)
2.3.2 A Conservative Scenario	36	(1)
2.3.3 Higher Growth Scenarios	37	(1)
2.4 An Overall Assessment of the Growth Process	37	(4)
2.4.1 Some Key Questions	37	(1)
2.4.2 Has There Been Efficiency Gain?	38	(1)
2.4.3 Can the Economy Grow Faster?	38	(1)
2.4.4 Will Higher Growth be Sustainable?	39	(2)
3. Inflation, Exchange and Interest Rates: A Macroeconomic `Rashomon'	41	(20)
Ashima Goyal
3.1 Introduction	41	(2)
3.2 Events	43	(2)
3.3 The Macrostructure of the Indian Economy	45	(6)
3.3.1 Government Borrowings	45	(1)
3.3.2 The Relationship between Monetary and Fiscal Authorities	46	(1)
3.3.3 Is Growth Led by Domestic Savings or Investment?	47	(1)
3.3.4 Can Policies that Encourage Rapid Growth Lower Inflation?	48	(2)
3.3.5 Expectations and the Monetary Transmission Mechanism	50	(1)
3.4 Open Economy Issues	51	(3)
3.4.1 The Twin Deficits and Investment	51	(2)
3.4.2 Liquidity, Exchange and/or Interest Rate Overshooting	53	(1)
3.5 Financial Reforms and Interest Rates	54	(5)
3.5.1 Banks and Interest Rates	54	(1)
3.5.2 Interest Rate Fluctuations and Term Structure of Assets and Liabilities	55	(1)
3.5.3 The Importance of Monetary Policy when Financial Markets are Not Fully Integrated	56	(1)
3.5.4 Does Easy Liquidity Encourage Speculative Activity?	57	(2)
3.6 Conclusion	59	(2)
4. Poverty and Public Policy: A Mixed Record	61	(16)
S. Mahendra Dev
Ajit Ranade
4.1 Introduction	61	(1)
4.2 Estimation of Poverty: Approaches	61	(1)
4.3 Poverty Before and After Reforms	62	(3)
4.3.1 Post-reform Period	63	(2)
4.3.2 Did Economic Reforms Affect Poverty?	65	(1)
4.3.3 Regional Disparities	65	(1)
4.4 Other Evidence on Poverty-related Indicators	65	(2)
4.4.1 Hunger: How Many Get Two Square Meals a Day?	65	(1)
4.4.2 Per Capita Net Availability of Foodgrains	66	(1)
4.4.3 Trends in Wages for Agricultural Labourers	66	(1)
4.4.4 Trends in Unemployment Rates	66	(1)
4.5 Safety Nets for the Poor	67	(3)
4.5.1 Public Distribution System	67	(1)
4.5.2 Rural Works Programmes	68	(2)
4.5.3 Access to Information and Social Mobilisation	70	(1)
4.6 Non-Income Poverty Indicators and Policies	70	(3)
4.6.1 Indicators of Human Development and Qualitative Changes	70	(3)
4.6.2 The Poor and the Environment	73	(1)
4.6.3 Need for Changes in Anti-poor Government Laws and Policies	73	(1)
4.7 Summing Up	73	(4)
5. Energy System: Need for New Momentum	77	(18)
Jyoti Parikh
Kankar Bhattacharya
B. Sudhakar Reddy
Kirit S. Parikh
5.1 The Power Sector in India	77	(7)
5.1.1 The Nature of Problem	77	(1)
5.1.2 Why are the State Electricity Boards (SEBs) Financially Sick?	78	(1)
5.1.3 What are the Possible Solutions?	78	(4)
5.1.4 Energy Conservation Can Help a Lot, Quickly	82	(2)
5.2 The Coal Sector in India	84	(3)
5.2.1 The Background	84	(1)
5.2.2 What are the Problems?	85	(1)
5.2.3 Policy Objectives	86	(1)
5.3 The Indian Hydro-carbon Sector	87	(4)
5.3.1 The Oil Sector: The Present Situation	87	(1)
5.3.2 Problem Areas	88	(2)
5.3.3 Need for Deregulation	90	(1)
5.3.4 Natural Gas Policy: A Burning Issue	90	(1)
5.4 The Non-Conventional Energy Sector in India	91	(1)
5.4.1 Biogas	91	(1)
5.4.2 Wind Energy	92	(1)
5.4.3 Solar Energy	92	(1)
5.5 Climate Change and India's Energy Policy	92	(1)
5.5.1 North-South Transfers for Climate Change	93	(1)
5.6 Concluding Remarks	93	(2)
6. Environment: Can Neglect No Longer	95	(12)
Vijay Laxmi
Jyoti Parikh
Kirit S. Parikh
6.1 Air Quality	95	(3)
6.1.1 Urban Air Quality	95	(2)
6.1.2 Rural Air Quality and Energy Consumption	97	(1)
6.2 Water Quality, Sanitation and Health	98	(3)
6.3 Solid Waste Management	101	(1)
6.4 Nature Conservation	101	(6)
6.4.1 Forest Cover	102	(2)
6.4.2 Soil Degradation	104	(1)
6.4.3 Preservation of Flora and Fauna	104	(3)
7. Agriculture and Rural Development: Stocks, Subsidies and Food Security	107	(16)
Ajit Ranade
S. Mahendra Dev
7.1 Introduction	107	(1)
7.2 The New Economic Policy and Agriculture	107	(1)
7.3 Are Agricultural Subsidies Really Unsustainable?	108	(3)
7.4 Current Agricultural Output Performance	111	(1)
7.5 Excessive Buffer Stocks: Problem of Plenty	111	(2)
7.6 Declining Investment in Agriculture	113	(1)
7.7 Trade Related Reforms: Prospects for Exports and Agro-processing	114	(1)
7.8 PDS Offtake	114	(2)
7.9 Impact of Rural Development and Safety Net Programmes	116	(7)
8. Industry: Coping with New Challenges	123	(32)
Anindya Sen
Subrata Sarkar
Rajendra R. Vaidya
8.1 Introduction	123	(1)
8.2 Recent Trends	123	(6)
8.2.1 Recovery...	123	(2)
8.2.2 ...and Relapse?	125	(1)
8.2.3 An Optimistic View	126	(1)
8.2.4 Resource Crunch and Remedies	126	(3)
8.3 Swadeshi vs Videshi	129	(11)
8.3.1 Role of Private Foreign Direct Investment	129	(1)
8.3.2 Economic Nationalism in the Political Agenda	130	(2)
8.3.3 New Policies towards FDI	132	(1)
8.3.4 The New Nationalism	132	(1)
8.3.5 The New Nationalism vis-a-vis the Old	133	(1)
8.3.6 The Trends	134	(2)
8.3.7 Joint Ventures vs Fully-owned Subsidiaries	136	(1)
8.3.8 Some Success Stories, and Lessons	137	(2)
8.3.9 `What Is To Be Done?'	139	(1)
8.4 Takeovers: No Miracle Fix	140	(7)
8.4.1 The Indian Scenario	142	(1)
8.4.2 The Bhagwati Committee Draft Takeover Code	143	(1)
8.4.3 Some Other Issues	144	(2)
8.4.4 Postscript	146	(1)
8.5 The MAT	147	(2)
8.5.1 The Zero-Tax Paying Companies	147	(1)
8.5.2 Planning for Tax Avoidance	147	(1)
8.5.3 And the Punishment Must Fit the Crime	148	(1)
8.5.4 Would MAT Put Them on the Mat?	148	(1)
8.6 The Performance of PSEs: Defending the Turf	149	(6)
9. Labour Policy: Striking a Balance	155	(12)
Pradeep Agrawal
9.1 Introduction	155	(1)
9.2 Growth of Employment and Real Earnings per Employee: An International Comparison	156	(2)
9.3 Labour Policies in India: A Comparison with East Asia	158	(6)
9.3.1 Laws Relating to Forming Labour Unions	159	(1)
9.3.2 Laws Relating to Industrial Relations	159	(2)
9.3.3 The Job Security Laws	161	(2)
9.3.4 Determination of Wages	163	(1)
9.3.5 Bonus: The Flexible Wage System	164	(1)
9.4 Conclusion	164	(3)
10. Securities Markets: Towards Greater Efficiency	167	(26)
Ajay Shah
Susan Thomas
10.1 Importance of Markets in the Financial System	167	(4)
10.1.1 Resource Allocation: Role of Banks and Markets	167	(1)
10.1.2 Banks and Markets in India	168	(2)
10.1.3 Banks and Markets: Healthy Competition	170	(1)
10.1.4 The Stock Market and Long-term Growth	170	(1)
10.2 Features of Healthy Markets	171	(1)
10.3 Evolution of India's Secondary Market	172	(10)
10.3.1 Key Events in 1994-96	172	(4)
10.3.2 Key Events in the Future	176	(5)
10.3.3 In Summary: Transactions Costs	181	(1)
10.4 Foreign Portfolio Investment	182	(4)
10.4.1 Euro Market vs Fll Inflows	182	(1)
10.4.2 Why Do Foreign Investors Buy Indian Stock?	183	(1)
10.4.3 Has the Correlation Changed after 1992?	184	(1)
10.4.4 Why Do Fll Inflows Matter?	185	(1)
10.5 The IPO Market	186	(2)
10.6 The Debt Market	188	(2)
10.7 In Conclusion	190	(3)
11. Banking: The Challenges of Deregulation	193	(26)
Jayati Sarkar
Pradeep Agrawal
11.1 Introduction	193	(1)
11.2 Structure and Evolution of Indian Banking	194	(2)
11.3 Banking Sector Reforms	196	(3)
11.4 Impact of the Reforms	199	(10)
11.4.1 Comparative Performance of Major Bank Groups Since Reforms	199	(3)
11.4.2 Availability of Credit	202	(3)
11.4.3 Interest Rate Trends	205	(1)
11.4.4 Bank vs Non-Bank Intermediation	205	(1)
11.4.5 Competition and Efficiency	206	(3)
11.5 Current Policy Issues	209	(5)
11.5.1 Liberalisation and High Real Interest Rates	209	(2)
11.5.2 Priority Sector Lending	211	(1)
11.5.3 The Case for Privatisation	212	(2)
11.6 Concluding Remarks	214	(5)
12. Transport: A Crucial Infrastructure	219	(20)
R. Ramanathan
12.1 Overall Performance	219	(1)
12.2 Rail Transport	220	(3)
12.2.1 Problem Areas	220	(1)
12.2.2 Recent Developments	221	(1)
12.2.3 Further Policy Directions	222	(1)
12.3 Roads and Road Transport	223	(4)
12.3.1 Problem Areas	223	(2)
12.3.2 Recent Developments	225	(1)
12.3.3 Further Policy Directions	226	(1)
12.4 Urban Transport	227	(3)
12.4.1 Problem Areas	229	(1)
12.4.2 Recent Developments	229	(1)
12.4.3 Further Policy Directions	229	(1)
12.5 Civil Aviation	230	(4)
12.5.1 Problem Areas	231	(2)
12.5.2 Recent Developments	233	(1)
12.5.3 Further Policy Directions	233	(1)
12.6 Water Transport	234	(3)
12.6.1 Shipping	234	(1)
12.6.2 Ports	234	(2)
12.6.3 Inland Water Transport	236	(1)
12.7 Issues Related to Private Sector Participation	237	(2)
12.7.1 Financing	237	(1)
12.7.2 Legal and Regulatory Aspects	238	(1)
13. Telecommunication: Monopoly vs Competition	239	(12)
Ajay Shah
13.1 Why Telecom is Special	239	(1)
13.2 An Economic Perspective	240	(1)
13.3 Basic Telecom in India	241	(5)
13.3.1 Telecom Policy Since 1993	242	(1)
13.3.2 Difficulties in India's Telecom	242	(3)
13.3.3 The Fundamental Flaw with Licence Fees	245	(1)
13.4 A Broader Perspective on Telecom in India	246	(1)
13.4.1 Computer Networking	246	(1)
13.5 The Way Forward	247	(1)
13.6 Telecom as a Case Study in Development Policy	248	(3)
Bibliography	251	(8)
Statistical Tables	259