Prof S.Ambirajan’s Thoughts on Development Economics

I have new article on forgotten Indian economic thoughts. This one explains the forgotten development economics ideas of Professor S Ambirajan. 

"On the growth of population, Prof Ambirajan firmly believed that “Generally a rapid rise in population accompanies rapid economic development” and “economic development alone can be the effective remedy to the threat of overpopulation.” According to him, “Economic development is but one of the many factors that determine a country’s or a community’s prosperity. Without social betterment and general cultural progress, mere economic development can have no meaning for us.” 

Eminent Economist Prof. A.Vaidyanathan-1931-2020

On 10th June, eminent economist and Prof A.Vaidyanathan passed away at Coimbatore city in Tamil Nadu. 

He had professional career ranging from economic policy institute to government, academic teaching and research, and grass-rout movements for making difference in environment, rural livelihood etc. 

He was known for multi-facets of economics, in terms of his professional contribution to the areas such as policy research, empirical research studies, public policy, and a gamut of sectoral issues and challenges. 

He was moreover known as data driven economist of any sort, but the data must be the critical sources for any findings and inferences to be drawn upon it. 

The following are some of the obit articles and news items written by various people including some were close to him.


Business Today - Remembering India's Data Man- Prof Vaidyanathan

The Wire- someone knew him very closely 

Remembering A. Vaidyanathan, the Scholar Who Changed the Role of Data in India

The Indian Express-A Vaidyanathan’s pioneering work on agriculture remains a reference point

The Hindu-In search of What and Why?

  

2019 Economics Nobel for Economics of World Poverty

After 21 years of first Economics Nobel Prize won by Indian born economist Prof Amartya Sen in 1998, this year, again Indian born economist and researcher Dr Abhijit V Banerjee won Economics Nobel prize along with his fellow economists Michael Kremer and Esther Duflo.

It is also interesting to see that both Banerjee and Duflo has came out a interesting book titled Good Economics or Hard Times

While it is both delight and slight disappointment on the prize for the works awarded. Nevertheless, the larger message from their experimental research about poverty reduction or eradication made significant elaborated debate in mainstream academia and researchers. 

The following are some of the interesting reactions on the Economics Nobel Prize from Indian media and public:

What the Nobel says about economics

We need many more women in the field of economics

Economics Nobel goes to a cook

Sorry Abhijit Banerjee, high taxes and freebies don’t create egalitarian utopia

And the Nobel Prize goes to… experimental economics

The much talked-about randomised controlled trials are more sinned against than sinning

Making sense of this year’s Nobel Prize in Economics

China......there is much that RCTs and contemporary development economics have missed. 

There is nothing wrong with providing a little extra understanding, on the margins. But RCTs don't easily handle the big questions.

The limitations of Abhijit Banerjee's methods

Interesting reading

Shubhashis Gangopadhyay on Real roads to the future-Don't debate distractions, look at real changes on the ground

 Ramachandra Guha on Himalayan heroines

Jagdish Bhagwati on One cannot discuss policy differences without citing opponents' writings

Modi’s BJP blues

Can Bhagwati-Sen debate bring the same change as Hayek-Keynes duel in the US in 1932

Confronting Amartya Sen's view: Why WHO's methodology on malnutrition is hopelessly flawed for India

"We are bold, and we are right…."

For every reason, there is a need for supporting the recently launched website "Niti Central" for helping us to understand the "if" and "buts" of what is good for our country. Below is a bit from that website's main motive:

• "The Establishment, needless to say, has become synonymous with the Congress. It is this undeclared alliance that guides the interests of our ‘national’ or ‘mainstream’ media which are often indistinguishable from those of the Congress. Contrived Centre Left ideology, really no more than a bogus veneer and as shallow as ‘Breaking News’, serves as a useful cover for mutually shared, and reflected, biases.
•  We believe enormous damage has been inflicted on India and the innate potential of Indians by pursuing policies designed to garner votes. We believe that every year that is wasted in the pursuit of such policies sets us back by many years.
• Worse, missed opportunities and wasted years (for evidence, look at the last eight years) threaten to drag us back to where we once belonged: Nehruvian socialist misery.
• We are not in the business of peddling frivolous ‘Breaking News’ or piffle as profound wisdom. We are not hostage to the Delhi-based bogus Left-liberal commentariat. We are not drum-beaters of the Establishment. We do not believe that any single individual or dynasty has the divine right to rule (as opposed to govern) India."

Some links

"BJP itself is seen as a party not seen as subscribing to an idea of India based truly on cultural pluralism."

It is ironic that after 50 years of failure we are still optimistic for in-kind transfers but won't give cash transfers even five years to build the necessary infrastructure.

The blame for the mismanagement of the economy in recent years should squarely lie at the gate of 10 Janpath, where political power resides.

Feted globally…

Just taking the main quote portions only from this interesting piece for the benefits of readers:

• In a confidential memorandum in December 1991, Lawrence Summers, World Bank Chief Economist, urged his colleagues: “‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs (Less Developed Countries)? I can think of three reasons.”

• Mr Summers elaborates: “The measurement of the costs of health-impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that”.

• Second, he says, “The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste”. Put simply, he regrets it is not economically possible to transfer waste and pollution wholesale to the developing world.

• Finally, he asserts, “The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable”.

Really interesting reading

A policy that cannot be policed by Bibek Debroy. 
An industrialist ponder All that happened over the course of a frenetic weekend!

Shopping in the villages by close relative of late Indian economist V K R V Rao.

Interesting reading

The great liberal Rajaji propounded that the State funded election expenditure should be the norm instead of corrupted political party funded election system. Professor Indiresan really pushes the arguments made by stalwarts like Rajaji on What can deter political corruption?

Poor will never ever govern the economy to achieve the ever aspiring higher prosperity in society.

Ramachandra Guha on "the national interest is regularly subordinated to partisan point-scoring." 

Aakar Patel on Casting out Boardrooms in India


Arun and Sudhir Krishnaswami analysis (pdf) on Healthcare Law in the US and the RTE in India Steps towards Universal Provision of Social Goods

Culture and economics

Niranjan has this wonderful piece on decoding the red-beacon culture and economics.


Here is another piece by Prof Boudreauk of GMU, USA arguing about "The mass production that is a hallmark of modern market economies is made possible not chiefly by money but by culture and institutions."

My latest article in Yojana Magazine!

Here is my latest article (with my friend Saravanan) on 'Growth Trends in Service Sector in India' which has been published in the Yojana (Planning) magazine in the September Issue, 2011.

"Yojana is a monthly devoted to socio-economic issues and started its publication in 1957 with Mr. Khuswant Singh as its Chief Editor. The magazine is now published in 13 languages viz. English, Hindi, Urdu, Punjabi, Marathi, Gujarati, Bengali, Assamese, Telugu, Tamil, Kannada, Malayalam and Oriya."

Here is gist of the article. It has interesting analysis covering last sixty years growth trends of service sector. It also looks at the sub-sectors growth within service sector of India. One of the key findings is that Indian economy has moved (income wise) directly from agriculture to services sector rather then the usual textbook method or the way the developed world experienced like agricultural to industry (or manufacturing) and then to services oriented economy. This is something that many people take no notice or ignores without understanding the structural changes that has taken place.

My latest article in French Journal!

Here is a good news. My latest article (with friend Vipin) has been published in the French Journal. See here for full article. The article is on 20 years of economic reforms in India. It has many new analysis.

Rich politics, not poor economics

Prof Abhijit Banerjee and Prof Esther Duflo have jointly written a new book on “Poor Economics”. Nothing more to say, but still poor understanding or rich politics is actually derails the good economics into poor economics.

Poor economics is poorly understood. Take the review in the HT newspaper:

• So much for the method, what about the object of their scrutiny? The myriad ‘small’ answers to the ‘small’ questions posed by the researchers draw out a few broad themes. The poor lack information to make decisions. The poor have more decisions to make than the rich. Both the State and the market tend to keep the poor out. The rich do not conspire to perpetuate indigence. And finally, defeatism does defeat. In themselves, these inferences ought to shape society’s attitude towards poverty, and, to an extent, they form the guiding principles of most social welfare systems.

Also read the Authors interview here.

Direct Cash Transfer in Budget 2011-12

Hema writes in the ET that:

Ms Nath is an advocate of reforms in the distribution of government subsidies. She is known to be in favour of creating an effective system to transfer cash directly to intended beneficiaries. Whether this will be reflected in the coming budget remains to be seen.

Economically illiterate jholawalas

• As someone who grew up in that era of central planning, licences and permits, I consider it my duty to describe what a shabby, sad, hopeless place India used to be. The economy grew at barely 3 per cent (a figure derided as the Hindu rate of growth) so most Indians lived in absolute poverty. Millions in our poorer states worked as slaves under the euphemism ‘bonded labour’. There was a miniscule middle class and even the richest Indians lived poorly by the standards of the world. 

• The only people who had easy access to the shoddy products of our controlled economy were politicians and bureaucrats. From their fine bungalows in Lutyens’ Delhi, they controlled quotas and permits as if all of India was their private estate. The rest of us lived with shortages of everything. Sugar, milk, bread, cooking oil, domestic gas, electricity, water and almost everything else was always in short supply. It is not that Indian entrepreneurs were incapable of producing adequate supplies of these things but that government policies ordained that they dare not without a permit or a license. This was based on the flawed economic principle that government factories would produce everything India needed. These factories were run in sloppy fashion by careless officials so an uncontrolled private sector would have put a quick end to them. This is why the private sector had to be licenced and controlled. So successful were these controls that our biggest businessmen could regularly be seen begging for licenses in the smelly corridors of Delhi’s Bhawans. 

• The people who should be most worried are the well-meaning but economically illiterate jholawalas who constitute Sonia Gandhi’s National Advisory Council. Under their guidance, she has emerged as the Lady Bountiful of Dr. Manmohan Singh’s government handing out jobs to the rural unemployed, forest land to tribal people and free food if the NAC’s latest scheme goes through. All these freebies have been made possible by the fact that the Indian economy, thanks to the enterprise of its private sector, has been growing at a remarkable pace. If Indian businessmen decide that they would be better off investing in some friendlier country, then we could go rapidly back to the way we used to be. So if anyone needs to heed the Prime Minister’s warning, it is Sonia Gandhi especially since many of the interfering ministers claim to be acting in her name. 

(From Back to the licence raj? by Tavleen Singh)

India in World Economic Freedom Index 2010

As usual Hong Kong is number one. But very soon it may drop down because it has not the crude Minimum wage Act.

On this year ranking the countries like Sri Lanka (107), Brazil (113), Indonesia (116), Pakistan (123), Kenya (106), Mongolia (94), etc are all ahead of India (124).

But countries behind India in this year Index are China (135), Russia (143), Bangladesh (130), Cuba (177) etc.

Total countries ranked are 179.  

For more see here.

New “eight millennium aspirations, in a Buddhist sequence”

Yes, the “former administrator, diplomat and governor” Mr. Gopalkrishna Gandhi crafted another “eight millennium aspirations” thankfully not a “goals”. The following are his “aspirations”:

With the experience of two decades of self-admitted failures behind us, we should own that more of the same would not work any longer. We need something new. Can we consider not in substitution, certainly not in competition, but in co-extensive mutuality with the eight MDGs the following eight millennium aspirations, in a Buddhist sequence, for the urgent needs of today’s world but with specific salience to India:

* Understand that the expropriating of our scarce resources will leave us nowhere;

* Think about the whys and wherefores of food insecurity to see how different the determinants of food security are today from those of the past;

* Speak to farmers, herders, fishers, who are going to face a worsening of soil degradation and sharp water scarcities, in order to learn from them about as much as to suggest to them ways of coping with those that will be ecologically intelligent;

* Act with speed to check the loss of plant and animal diversity that work as a natural bio-shield;

* Retrieve livelihoods from manipulators and monopolists, including from those trade unions and NGOs who by their creation of dependence bring trade unionism and voluntarism into disrepute;

* Set in motion efforts by those NGOs and trade unions or ‘faith groups’ to ensure that bulk users of energy and water cut waste and callous extravagance, and are not able to hide behind the ‘per capita’ principle;

* Be mindful of how rapidly villages are becoming towns, towns turning into cities and cities morphing into metropolises, see if we are not consigning ourselves to a future where we will all have to wear masks before venturing outdoors;

* Contemplate that the good intent of all those at the third summit, hope against fears that India which can stop a Vedanta in its tracks, and make the Lower Subansiri Project answer the world’s questions on its advisability, can also give us that gift of seeing, as U. Thant might have done, the practical wisdom of the Tathagata, or (adaptively) the ‘One Who Walked That Other Way’.

Skills and income inequality

Michael Walton has nice piece on how inequality is reduced in Brazil:

• A recent book from the UNDP helps us see why. The inequality decline matters: it looks like a turning point, even though there is a long way to go. And it has already made a large difference to poverty reduction. The Brazil study estimates that two-thirds of a substantial poverty decline between 2001 and 2007 was due to falling inequality. Growth would have had to be four percentage points higher if inequality had not changed. That kind of contribution to reducing poverty would be of great significance in India.
• What was going on? The two largest influences in Brazil, and elsewhere, were direct transfers and reductions in labour earnings differentials. Government transfers to households accounted for about half the Brazilian inequality decline, mostly due to old-age pensions and a cash transfer to the poor (Bolsa Família, which is conditional on children going to school, health check ups and an assets-based means test—like India’s Below Poverty Line measure). The Bolsa Família was substantially expanded under the Left-leaning (but largely pro-market) administration of President Lula da Silva.
• The other half of the decline mainly came from reduced wage differentials, especially linked to skills, and also to inter-regional and inter-industry wage differences. The fall in skill differentials represents a reversal of earlier increases. When Latin America opened up in the 1980s and 1990s, most countries experienced rises in relative wages, especially of college-educated individuals, as the economic restructuring increased the demand for skills. Only in the 2000s are the benefits of early expansions in education being reaped, a product in many countries of the return to democracy in the 1980s.

We, don’t bother our own Sen’s model of growth, why bother about Arthur Lewis at all?

As China chugs into its demographically destined territory, its journey has implications for India’s industrialisation policy. Over past 20 years, the share of India’s industry has remained constant at around 20 per cent. Large growth in industrial output and employment is missing. It is not as if the Lewis model has bypassed India, but India’s policy constantly seems to thwart Lewis. It could be labour laws which prevent large-scale flexible employment. It could be small scale reservation, which thankfully is reducing. It could be the fragmented fiscal federation which denies us a fully integrated common economic market. It could be inadequate financial inclusion which keeps many micro, small and medium enterprises excluded from finance. Or it could simply be due to the fact that our polity is very different from China’s. But the fact is that the demographic window which is closing for China won’t be open for India for too long. And we don’t want to be the economy which disproved Arthur Lewis!

All are culpable for this situation having developed

Dr Subroto Roy, economist and adviser to Rajiv Gandhi 1990-1991.” On:

“Public finances in India, state and Union, show appalling accounting and lack of transparency. Vast amounts of waste, fraud and malfeasance get hidden as a result. The Congress, BJP, official communists, socialists et al are all culpable for this situation having developed – over decades. So if you ask me, “Is the Indian state and polity in a healthy condition?” I would say no, it is pretty rotten. Well-informed, moneyed, mostly city-based special interest groups (especially including organised capital and organised labour) dominate government agendas at the cost of ill-informed, diffused masses of anonymous individual citizens ~ peasants, forest-dwellers, small businessmen, non-unionized workers, the destitute, etc. Demarcations of private, community and public property rights frequently remain fuzzy. Inflation causes non-paper assets to rise in value, encouraging land-grabs. And the fetish over purported growth-rates continues despite measurements being faulty, not reaching UN SNA standards, probably hiding increasing inequalities. India’s polity and economy are in poor shape for many millions of ordinary people. Armed rebellion, however, does not follow from this. Killing poor policemen and starting class-wars were failed Naxal tactics in the 1970s and remain so today. Naxals should put down their weapons and use Excel sheets and government accounting data instead.

See his blog here