Indian Economy - News & Discussion 27 May 2012

[RoyG]

While I am no longer a socialist of the old, problem with Modi is that there is no heart.there is lot more to running a country than just efficiency, economically or otherwise. Not that it is not important. It is and vitally so. But then, what about inclusion? Where is the heart?

I'm glad you've matured. Now, what's the real reason why you don't support Modi?

[Gus]

The old saying by was it Churchill? If you are 18 and NOT a socialist you have no heart. If you are 40 and STILL a socialist you have no brains.

While I am no longer a socialist of the old, problem with Modi is that there is no heart

Well, clearly modi is not 18 anymore.

[Suraj]

Please take the stuff about Modi's heart and inclusion to the Modi thread. I'm sure one of us can also check his pulse to confirm on that thread that he does indeed have a heart.

[JE Menon]

Frankly, I don't get what it is with these chaps... Threat title is clear. Bloody stick to it guys... Virtually every thread has gone this route. Looks like a co-ordinated denial of service attack...

Blanket bans may become necessary.

[Arjun]

Vina, this distinction you make between leftist thought as 'means to an end' versus as an end in itself, is specious nonsense. I will leave it at that, since am not really sure what is supposed to be kosher on this thread.

We can continue this conversation on the 'Modi vs Dynasty' thread if you wish.

[vina]

No cell phone users by state. UP comes out on top , no surprise there I suppose. But TN at 2 , above, MH, AP, WB which have higher populations than TN and also , MH which has higher per capita income, is a surprise. Maybe the folks in TN love their phones that much more!

UP and TN have most cell phone users

[Arjun]

Excellent take-down of Amartya Sen-type economics from R Jagannathan: Stuck record: Why Amartya Sen is wrong on food security again

Good to see that Indian media has developed some genuine economic right-wing supporters with some IQ - unlike the 'right wing' charlatans and ex-socialist poseurs who go around pretending to attack the Commies, while actively supporting a leftist makeover of dynastic politics in India.

[amit]

^^^^

Right now I don't have the time to take part in this debate. However, I will leave a quick comment. First of all I don't think the Food Security Bill is a good idea.

However, this practice of fashioning every economic argument as either left driven or right driven is a zero sum game. Once you start doing that it's just becomes a p!ssing contest. Extreme rightwing economic policy is just as bad as extreme leftwing economic policy making.

As long as we're going to do this debate on the perspective of rightwing vis a vis leftwing then you throw analysis out of the window and the result is you get personal attacks masquerading as analysis like in the case of the Jagannathan piece linked above. Sen is/maybe wrong about the Bill but Jagannathan hardly shows his analysis with comments like this:

Next, he made silly claims about Manmohan Singh‘s eyesight. According to The Economic Times, Sen said that “there is no evidence that he (Manmohan) cannot see” the number of likely deaths of women and children triggered by non-legislation of the bill by parliament.

Sen’s ophthalmological qualifications are suspect. Manmohan Singh has been unable to “see” the scams in his own backyard – from 2G to CWG to Coalgate – and his ministers and officials are busy lying to the Supreme Court on his behalf to save his bacon. So the PM’s ability to “see” anything beyond his own political future is in doubt. The deaths of women and children due to non-passage of the Bill are secondary.

If that passes for economic scholarship then I need to take a chill pill. I know it would get "liberal rightwingers" (I use this Oxymoron deliberately) in a tizzy but from the perspective of scholarship, Sen has forgotten more about economics than most of his critics have learnt or will learn.

Example:

What Sen forgets is that all these Asian social sector success stories were achieved in monocultural societies, and which were all non-democracies (except Japan) at the time of their major social investments.

A typical drawing room chitchatting gossip being passed off as deep, insightful economic scholarship. A one sentence explanation for one of the marvels of recorded human history. More people have been taken out of poverty in one generation in these countries than has ever been before and is probably a one time epoch making event never to be repeated.

PS: Let me reiterate again, I don't think the Food Bill is a good idea. However, celebrating personal attacks on Sen isn't the right way to counter this move.

[Arjun]

What you call an oxymoron, Amit, seems to have gained some popularity in India - the recent Think India summit organized by Raghav Bahl (yes, the one with Modi) had the title: 'The natural rhythm of India is and has always been “Liberal Right wing" '. I wonder whether they got this terminology from BR ?

As for your rest of your post, the primary complaint is that Jagan got 'personal' in his attack on Amartya Sen. Out of about a dozen or so arguments that Jagan makes in his article against the Food Security Bill - you focus your entire post on a couple.

All I will say is that Jagan has resorted to far less of a 'personal attack' on Sen than Sen's own equally illustrious compatriot in the US (Jagdish Bhagwati, who recently likened Sen to an 'NY cockroach) - and less even than the language that Amartya Sen (& his live-in friend) have resorted to in relation to the Gujarat Chief Minister.

What we need to care about ultimately is the substance of the arguments made rather than about 'political correctness' - and there is enough substance in Jagan's article if you consider the arguments he makes in totality.

Most crucially -

- there is no need for covering 65% of India with the Bill. Identify the pockets of high malnutrition and hunger and focus on those
- The 'India growth'-killing quality of the Dynasty's social programs have been quite well documented by now
- Several studies have shown that sustained high growth is the best panacea to reducing poverty and backward social indicators
- The timing of introduction necessarily leads to the conclusion that this is more a vote-banking exercise than about anything nobler

[Prem]

Happy trade tidings for India?The improvement in India’s trade performance may be misleading. Its exports to growing markets have fallen

http://www.livemint.com/Opinion/lbXfQmZ ... India.html

Finally, there seems to be some good news on the merchandise trade front. After declining for most of the previous fiscal, exports from India moved into positive territory in the last quarter. In the first nine months of 2012-13, the major cause of concern was the steady decline in exports, down by almost over 5% as compared with the previous year. However, a pick up in exports since January this year has not only reversed the declining trend, it has also played a part—together with a perceptible slowdown of import growth—in preventing another large expansion in the trade deficit. As compared with a steep 56% increase during 2011-12, provisional figures available from the department of commerce indicate that deficit on the merchandise trade account increased by less than 4% during 2012-13. The reining in of trade deficit could help tamp down current account deficit (CAD) to gross domestic product (GDP) ratio from the alarming 6.7% during the third quarter of the previous fiscal to around 5% according to recent predictions of the Reserve Bank of India (RBI). At the same time, RBI has sounded a note of caution as the expected level of CAD will remain twice the sustainable level.
.
Were Indian exporters able to exploit the markets in the relatively faster growing economies and to stamp their presence? Available figures allude to the singular inability of the exporters to exploit the expanding markets, more so in the previous fiscal. It is clear that together with the government, the exporters will have to put in place strategies which help in repositioning Indian products in the dynamic regions of the world.India’s inability to penetrate the Chinese market should be one of the key concerns for policymakers. Although the Chinese economy has started cooling since last year, it nonetheless remains the fastest growing economy whose dependence on the global economy for inputs is quite considerable. In recent months, China has shown an increasing tendency for imports: in March this year, China recorded a trade deficit of nearly $900 million, with imports surging by over 14% from a year earlier.In 2012-13, India’s exports to the world’s second largest economy fell by more than a quarter, triggered by the steep fall in iron ore exports. This was caused primarily by the judicial ban on illegal mining in Karnataka and Goa. As a result, China has dropped off as India’s third largest exports destination for the first time since 2005. China also lost its position as the second largest trading partner, falling behind the US. The decline in exports to China was so sharp that it negated a modest decline in India’s imports. As a result, India’s already precarious trade imbalance with China has aggravated further; in the last fiscal, the $21.6 billion trade deficit was more than 1.6 times India’s exports to its neighbour.
The most worrisome aspect of India’s export performance is its dismal performance in the Asean region where exports fell by more than 10% during the previous year. The concerns are twofold. The first is that this region was among the very few that recorded higher growth in 2012, and India’s inability to exploit these expanding markets is, therefore, quite inexplicable. This dismal export performance is even more confounding given that India’s exports had increased by more than 43% a year earlier. The second and the more significant source of concern is that Indian exporters have preferential market access in these economies, following the implementation of the India-Asean free trade agreement (FTA). Expectations were that this FTA would allow India to exploit these fast-growing economies better and that this region would emerge as a major destination for India’s exports. However, several years after the implementation of FTA, the share of India’s exports absorbed by this region has hardly moved beyond 10%.The experience with other FTA partners such as Japan and Korea is hardly different. The share of these North East Asian countries’ in India’s total exports has remained range-bound to 14-16% over the past several years before it came down to around 13% in 2012-13. With both Japan and Korea, registering higher than trend rate of GDP growth in 2012, exports from India should have performed better than they eventually did.

[Supratik]

It is not necessary to provide FSB to 70% of the population except in really backward places like CH or BH. However, the FSB is INCs last hope for 2014. And BJP cannot really oppose it. So expect it to pass through.

[amit]

All I will say is that Jagan has resorted to far less of a 'personal attack' on Sen than Sen's own equally illustrious compatriot in the US (Jagdish Bhagwati, who recently likened Sen to an 'NY cockroach) - and less even than the language that Amartya Sen (& his live-in friend) have resorted to in relation to the Gujarat Chief Minister.

I hope this doesn't sound too personal Arjun. But I have to say that I never cease to be amazed at your ability to jump to conclusions based on an out of context shallow reading.

This what Bhagawati said:

"A lot of them (even luminaries such as Amartya Sen and Mahbub ul Haq) used to say that growth wouldn't influence poverty. Now, it is clear that growth did influence poverty. And they did shift their arguments continuously... (those economists) are like New York's cockroaches. You can't wipe them out. They will turn up perennially," says Bhagwati, claiming that he stands vindicated in his position that redistribution alone cannot make a big impact in bringing down poverty.

Bhagawati was making a general comment about the meta clash between two economic ideologies that has been going on since the early 1990s and you construe that to be a personal attack on Sen? You should read more of Bhagawati. If you do you'd find out exactly how much he respects Sen as a fellow economist.

In case you don't know there are two schools of though: Bhagawati represents the globalisation is good school and Sen represents the school who think social justice should come before a single minded pursuit of growth.

Now does that mean Bhagawati does not care for poor underprivileged folks? Certainly not. His solution is different, he think rising tide raises all boats (and I agree wholeheartedly on this). Sen on the other hand believes if you improve social indicators such has health, literacy (especially women literacy), food shortages and others, growth would come automatically.

Which one is a better approach? That's hard to say but the differences between Bhagawati and Sen are at a high level of economic interpretation. After all Economics at the end of the day is not a hard science like Physics where there can be only one correct answer.

This is what Kaushik Basu has to say about the differences between India's two greatest economist:

"I believe that the differences between Sen and Bhagwati are less substantive than what is popularly made out to be. On a variety of important policy matters, they use different languages but say similar things. My only worry is that even on this Sen and Bhagwati will agree that I am wrong."

The funny part is that you use Bhagawati's difference in prescription for economic growth vis a vis Sen's as an excuse for justifying Jagannathan making fun of Sen with comments like:

Sen’s ophthalmological qualifications are suspect.

Sigh! What can one say?

The second part of your post:

What you call an oxymoron, Amit, seems to have gained some popularity in India - the recent Think India summit organized by Raghav Bahl (yes, the one with Modi) had the title: 'The natural rhythm of India is and has always been “Liberal Right wing" '. I wonder whether they got this terminology from BR ?

You know something? When you or Raghav use a categorisation of "Liberal" you are carving out a subset from what is the Right Wing in India. So since you feel there's a need to distinguish yourself and others like you as "Liberal Right Wing" or "Right Wing Liberal" are you tacitly saying there's also a group within the Right Wing fraternity that is not liberal? In the context of this thread it would be useful if you identify them because they certainly shouldn't be allowed to take helm of India's economy if the Right wing comes to power in 2014. Can you do us a favour by naming them?

I'm sure you'll wriggle out of this naming, shaming because the "Liberal" is an artificial construct and its just Right Wing. Mind you I do not say this in a negative sense and after UPA2 I think we do need a dose of Right Wing economic policy in Delhi. However, "Liberal" is an artificial construct because it is copied from another equally artificial construct: "Left Wing Liberal". Willy nilly the Left has dominated the intellectual discourse in India for so long that the Right wing feels the need to borrow nomenclature from the Leftists in order to gain legitimacy. Why are you and other like you so shy to say you believe in Right Wing economic thought? Is it because you think that the nomenclature is still a dirty phrase?

As an FYI please note that even the Naxalites used consider themselves as Left Wing Liberals. So all the way from Jyoti Basu to Kanu Shanyal everybody was a "Liberal". I hope the same does not apply to the Right Wing.

I happen to think a true Liberal is one who does not feel the need to identify himself/herself as either Left wing or Right wing or even with the so-called Centrists. In this day and age of globalisation such nomenclature has outlived their purpose. What is needed - in economic planning at least - is pragmatism, borrowing from both so-called Left wing and Right wing concepts.

And that's exactly the core behind the success of South-east Asia and North Asia and not lack of democracy and homogeneous population as Jagannathan so simplistically writes.

Most crucially -

- there is no need for covering 65% of India with the Bill. Identify the pockets of high malnutrition and hunger and focus on those
- The 'India growth'-killing quality of the Dynasty's social programs have been quite well documented by now
- Several studies have shown that sustained high growth is the best panacea to reducing poverty and backward social indicators
- The timing of introduction necessarily leads to the conclusion that this is more a vote-banking exercise than about anything nobler

To be frank I haven't had a chance to go through the Food Bill in order to comment on it. However, like I wrote in my previous post my gut feel is that it's a bad idea. I'm a bit busy elsewhere now, if I do get a chance to go through what the Food Bill is all about and I think I can make a positive contribution to this thread, I'll post my thoughts.

[vina]

In response to Amartya Sen and Jean Dreaze's how many million people will die if the food security bill isn't brought about, they should ask back, how many millions DIED between 1950 and 1991, thanks to the socialist planned economy model of which Amartya Sen himself was one of the major contributors , operator , ideologue and evangelist.

From a rough calculation of an average growth rate of 3.5% we achieved between 1947 and 1991 (aka. the "Hindu" Growth Rate per ding-dongs like Raj Krishna) , in 1991, we were 4.54 times richer than in 1947, obviously a level of wealth that was insufficient to eradicate poverty and provide universal health , education, shelter and of course food.

Now if the growth rate had been 5.5% between 1947 and 1991 , in 1991, we would have been 10.5 times richer than in 1947 !That is a level where serious dents would have been made to poverty and poverty as a mass phenomenon in India and the attendant , health ,education and other social deficit indicators could have been meaningfully addressed.

So, who is to account for the millions lost between 1950 and 1991 due to Amartya's and his fellow ideologues mad scientist experiments? He and his fellow travelers retarded India's progress by at least 30 years.

Think of it, if we had averaged 5.5 % GDP growth rates until 1991, India would be a upper middle income country today.

[Anand K]

If I may butt in, the time period to consider should be 1967-1991. You know, despite the WB and Eugene Black and Indira Gandhi's abrupt turn.... methinks the Command Policy between 1947-1967 was okay.... given the low levels of capital and infra in newly independent India.
JMVHO of course. Back to my foxhole........

[Arjun]

I hope this doesn't sound too personal Arjun. But I have to say that I never cease to be amazed at your ability to jump to conclusions based on an out of context shallow reading.

No worries...I kind of expected that the ones to most vigorously protest 'personal attacks' on their icons, would be the first to initiate their own brand of 'personal' commentary.

As a return of compliment, will just say that I've never ceased to be amazed at your ability to ignore the nub of the debate and focus on the inconsequential. You have a detailed explanation for why Bhagwati terming Amartya and his ilk as 'New York cockroaches' is not as much of a personal attack as Jagannathan's banter about Sen's ophthalmological qualifications. Umm, whatever...There is far more substance worthy of debate in Jagan's article than this inconsequential sentence.

Now does that mean Bhagawati does not care for poor underprivileged folks? Certainly not. His solution is different, he think rising tide raises all boats (and I agree wholeheartedly on this). Sen on the other hand believes if you improve social indicators such has health, literacy (especially women literacy), food shortages and others, growth would come automatically.

Which one is a better approach? That's hard to say but the differences between Bhagawati and Sen are at a high level of economic interpretation. After all Economics at the end of the day is not a hard science like Physics where there can be only one correct answer.

The reason for the all the heat one sees between the leftist and rightist positions you've outlined so well is because of the enormous consequences of adopting either position. If you've arrived at the wrong conclusions - you have effectively condemned millions to a life of misery.

Btw, if you "agree wholeheartedly" with Bhagwati's thesis, how is it that you find it "hard to say which one is the better approach"?

You know something? When you or Raghav use a categorisation of "Liberal" you are carving out a subset from what is the Right Wing in India. So since you feel there's a need to distinguish yourself and others like you as "Liberal Right Wing" or "Right Wing Liberal" are you tacitly saying there's also a group within the Right Wing fraternity that is not liberal? In the context of this thread it would be useful if you identify them because they certainly shouldn't be allowed to take helm of India's economy if the Right wing comes to power in 2014. Can you do us a favour by naming them?

Political stances are generally defined by where one stands wrt economic issues as well as social issues. The term 'right wing liberal' defines my stance as 'right wing' on economic matters and 'liberal' on social matters. Raghav Bahl seems to have used the term in pretty much the same manner - though there might be differences in precise definition of each of these terms "right wing" and "liberal".

The meaning of liberalism (in my construct) in the social context is that there should be freedom of choice in social matters - and that as liberals we strongly oppose the spread of any dogma in the religious / social sphere.

However, "Liberal" is an artificial construct because it is copied from another equally artificial construct: "Left Wing Liberal". Willy nilly the Left has dominated the intellectual discourse in India for so long that the Right wing feels the need to borrow nomenclature from the Leftists in order to gain legitimacy.

Not in the least. In fact, my intention was the opposite - to reclaim for the right-wing a nomenclature that was associated with the right wing to begin with. Please look up the history of liberalism - what was originally called liberalism in Europe (and today termed 'Classical Liberalism") was pure and outright right-wing thought. And that makes sense - because liberalism is all about freedom of choice, which is exactly what the right wing stands for as well. The leftists stole this term from the right wing and gave it their standard flavour (look up 'social liberalism' vs 'classical liberalism').

As an FYI please note that even the Naxalites used consider themselves as Left Wing Liberals. So all the way from Jyoti Basu to Kanu Shanyal everybody was a "Liberal".

Yes, I agree this is a serious problem. All the ex-communists of yore have morphed (only in nomenclature though) into 'left wing liberals' who either continue to support communist thought or support the Dynasty in its leftist makeover of the country.

I happen to think a true Liberal is one who does not feel the need to identify himself/herself as either Left wing or Right wing or even with the so-called Centrists. In this day and age of globalisation such nomenclature has outlived their purpose. What is needed - in economic planning at least - is pragmatism, borrowing from both so-called Left wing and Right wing concepts.

And that's exactly the core behind the success of South-east Asia and North Asia and not lack of democracy and homogeneous population as Jagannathan so simplistically writes.

The pragmatism you talk about is difficult to achieve in India precisely because of its democracy and intense social divisions - which is what Jagannathan alludes to. If you are interested I can expand on my views on this issue in a separate post.

[vina]

If I may butt in, the time period to consider should be 1967-1991.

That will make the case even worse for the Amartya Sen types. That is the exact period when the divergence between a hitherto comparable country , South Korea became stark, along with Taiwan and others. In that period, we crashed and died, while Korea and Taiwan and others shot up and became developed nations.

Now, if Sen and co make the case that Taiwan and Korea are really command economies with Cheabols and state directed enterprises substituting (basically private monopolies and oligopolies) substituting for our Public Sector and Govt Sectors, I have nothing to say, but ask the leftist types to account for pushing the statist model.

[member_20317]

If I may butt in, the time period to consider should be 1967-1991. You know, despite the WB and Eugene Black and Indira Gandhi's abrupt turn.... methinks the Command Policy between 1947-1967 was okay.... given the low levels of capital and infra in newly independent India.
JMVHO of course. Back to my foxhole........

I have not studied the similarities (Sub Swamy may have) but I would be willing to wager that the nature (not scale) of Indian economy in 47 would be the same as that of china in 78. The systems are not comparable, I agree, but that should take nothing away from the starting point.

TIFWIW, already given a caveat earlier.

[amit]

Arjun,

You took a lot of space to just essentially repeat your earlier post. And I'm also glad that you are a fan of Bhagawati and his brand of globalisation - free market economics.

In that context I do hope to hear more from you about your "liberal right wing" views on, for example, the BJP's opposition to FDI in retail. It's stalling of GST reforms and more such stuff. Sure the right wing part of the liberal make up that you wear will be able to provide answers for that.

And I wonder what Bhagawati's reaction would be if someone said he was a "right wing liberal" in his economic and social thinking. Considering his rather acerbic tongue, it would be a blast to ask him his views on that.

Anyway like I said I really don't have the time to get into a debate over the next week or so.

However, I leave you with a thought. It is possible to be an admirer of Bhagawati's brand of globalisation while respecting Amartya Sen's brand of welfare economics that won him the Nobel.

And yes a general comment. Those who equate Amartya Sen economic thinking with CPI(M) funded and nurtured JNU johlawalas certainly know their economic history. Only thing is I certainly wouldn't want a 101 lesson from them. In this world of Coke and fast foods, everything is possible. A tour de force over a couple of paras.

[Suraj]

Now, if Sen and co make the case that Taiwan and Korea are really command economies with Cheabols and state directed enterprises substituting (basically private monopolies and oligopolies) substituting for our Public Sector and Govt Sectors, I have nothing to say, but ask the leftist types to account for pushing the statist model.

Sounds like a case of semantics. South Korea under Park Chung Hee would qualify as a command economy in many respects. They practiced aggressive import restrictions and import substitution, domestic market protectionism, discouragement of private consumption in favor of private savings driving investment and development of capital stock, and industrialization driven by a handful of chosen industries and chaebols. The chaebols account for ~80% of SoKo GDP.

Taiwan was less command driven, but again focused on import substitution combined with export promotion in their own chosen industries - textiles, toy and later consumer electronics being among them. They're also the world's largest maker of high end bicycles.

[amit]

The interesting point is Amartya Sen never held a government job in his life save for a brief period when he opened the Department of Economics in Jadavpur University in Kolkata. And yet he's being branded here by posters who should know better as the high priest of the JNU school of Marxist economists.

Bhagawati on the other hand worked for the Planning Commission.

In his own words:

In fact, my first job in the Indian Planning Commission half a century ago was to devise a strategy to bring the bottom 30 percent of India’s poor above the poverty line so they would enjoy a “minimum standard of living”; and I came to the view, often expressed by the leaders of the Independence movement, that we had to grow the pie to do so: redistributing wealth in a country with “many exploited and few exploiters” as the visiting Marxist economist Kalecki put it graphically to me in 1962, was not a strategy that could produce sustained impact on poverty.

Growth was, therefore, regarded as a principal “instrument”, a strategy, for pulling the poor out of poverty through gainful employment, not as an end in itself. Growth was seen as what I have called an activist, radical “pull up” strategy to reduce poverty. In no way was it viewed as a passive, conservative “trickle down” strategy to reduce poverty, illustrated by the film of Robin Hood where the Earl of Nottingham and his vassals are eating legs of lamb and venison at the high table and crumbs fall below to the dogs and serfs underneath the table.

Mind you this is an inside view from the Planning Commission in the 1950-60s. Bhagwati then goes on to list the reason why despite the best intentions this strategy did not work. Read his speech here

The recent demonisation of Sen, who traditionally has been more of an ivory tower academic (who used to visit India once a year to meet his ex-wife Nabanita Deb Sen and his daughter) rather than a hands on economist of the type Bhagwati has been started from a chance remark he made at a Indus Entrepreneurs meeting in Delhi in 2010.

I managed to resurrect the memory of having said in passing, in a meeting of The Indus Entrepreneurs in Delhi in December, that it is silly to be obsessed about overtaking China in the rate of growth of GNP, while not comparing ourselves with China in other respects, like education, basic health, or life expectancy.

Perhaps "Right Wing Liberals" like Arjun find it very distressing that comparisons should be made in areas like education, basic health, or life expectancy.

But coming back to Sen, this is what he has to say about growth:

GNP growth can, of course, be very helpful in advancing living standards and in battling poverty (one would have to be quite foolish not to see that), but there is little case for confusing (1) the important role of economic growth as means for achieving good things; and (2) growth of inanimate objects of convenience being taken to be an end in itself. One does not have to “rubbish” economic growth — and I did not do anything like that — to recognise that it is not our ultimate objective, but a very useful means to achieve things that we ultimately value, including a better quality of life.

The link is here

Notice something? Hint look at the two color bolds.

Bhagawati says: "Growth is not an end in itself... (it is) what I have called an activist, radical “pull up” strategy to reduce poverty."

Sen says: "Growth... (is) a very useful means to achieve things that we ultimately value, including a better quality of life."

Incidentally these two writings - one a speech and the other an Op-Ed - are the so-called trigger to this manufactured story of a great rift between these two eminent economists.

I'm sorry to say this but the New York Cockroaches are coming back home to roost.

[Arjun]

In that context I do hope to hear more from you about your "liberal right wing" views on, for example, the BJP's opposition to FDI in retail. It's stalling of GST reforms and more such stuff. Sure the right wing part of the liberal make up that you wear will be able to provide answers for that.

Did anyone say the BJP is devoid of faults ? It is, however, crucial to have the mental clarity to identify the party which represents the bigger overall threat to right-wing ideals.

And I wonder what Bhagawati's reaction would be if someone said he was a "right wing liberal" in his economic and social thinking. Considering his rather acerbic tongue, it would be a blast to ask him his views on that.

Aah, perhaps I can help ease the suspense for you. Here's an article that describes Bhagwati as a "self avowed liberal". He is very definitely comfortable with both labels "right wing" and "liberal" as a description of his views.

However, I leave you with a thought. It is possible to be an admirer of Bhagawati's brand of globalisation while respecting Amartya Sen's brand of welfare economics that won him the Nobel.

Bhagwati is well-known both for (a) his anti-protectionist pro-globalization stance and (b) for his prioritization of growth as the panacea for reducing poverty and improving HDI indicators. (a) can well be complementary to Amartya Sen's ideology but definitely not (b).

[vina]

The interesting point is Amartya Sen never held a government job in his life save for a brief period when he opened the Department of Economics in Jadavpur University in Kolkata. And yet he's being branded here by posters who should know better as the high priest of the JNU school of Marxist economists.

You couldn't be more wrong. He was a prof at the Delhi School of Economics and it is no without reason, I slam the ISI/DSE/JNU/Planning Commission in a single breath. In fact, the work for which he won the Nobel was done during his tenure a DSE !

Bhagawati on the other hand worked for the Planning Commission.

He did. But he and his wife, Padma Desai were the first to realize that what they were doing were rubbish and had the intellectual honesty to say so in print, ask for a change in course as early as the 60s and hence were "banished". All this while and to this day Prof Sen, continued in his vein of being the intellectual prop for that nonsense and could never agree and admit that what he said and did back then made no sense and hurt the country badly .

To dismiss the fact that Growth positively impacts poverty as "common sense" is glib. This "common sense" didn't occur to him back then, but wanted redistribution and even advocated public sector units to continue make losses because they dispense "welfare" (or words to that effect). This is what Bhagwati meant as continually shifting positions and cockroaches that are great survivalists.

Mind you this is an inside view from the Planning Commission in the 1950-60s. Bhagwati then goes on to list the reason why despite the best intentions this strategy did not work. Read his speech here

Prof Sen ADVOCATED actively one of the key reasons why Bhagwati said it failed, that is inefficiency and continuing of inefficiency of PSU/Govt in the cause of "welfare".

The recent demonisation of Sen, who traditionally has been more of an ivory tower academic (who used to visit India once a year to meet his ex-wife Nabanita Deb Sen and his daughter) rather than a hands on economist of the type Bhagwati has been started from a chance remark he made at a Indus Entrepreneurs meeting in Delhi in 2010.

Rubbish. I have met Bhagwati multiple times, attended his lectures, met him on the streets of Morningside Heights / Upper West side and I know what he had been saying for a long time.

I have been posting here since atleast 2003 on this and this did not happen after 2010! Most mainstream media commentators too (including Swaminathan Aiyer) have commented about Sen, going back even to 1991. None of that is new. What is so new is that given our experiences over the past 2 decades ,we have enough experience and data under our belt to come to definite conclusions about the pre 1991 and post 1991 worlds. Avuncular assertions dished out by eminent economists, when no backed up by data and experience are leading to Emperor is Naked calls.

But coming back to Sen, this is what he has to say about growth:

This is the "continually position shifted" Sen of today and not the Sen of the 60s when he did the maximum damage. Now he is a nearly harmless old ivory academic who the Undie TV guys , esp Prannoy Roy (another ISI ding bat, who said he actually WROTE the economic surveys for the budget in the mid 80s) worship and fawn over .

I'm sorry to say this but the New York Cockroaches are coming back home to roost.

Indeed. This non entity here and of course other infinitely more eminent ones like Bhagwati and Panigriya are coming home to roost. They aint gonna go away. The ISI/DSE/JNU ding bats better go out of business.

[KSKumar]

Amaratya Sen is a complete China apologist, as well.

I remember reading an oped by Subramanian Swamy, many years ago, on China's fradulent statistics. He quotes Amartya Sen as estimating that China's per capita GDP in late 70's as being 1.000 USD. As it turns out, China's actual GDP was aroudn 300 USD, not much higher than India's

Can anyone sane, non-commie, be so wrong about anything?

And, not to mention this person's skulduggery in easing out APJ Kalam from the Nalanda University Project (APJ's brainchild, in the first place).

[Theo_Fidel]

The comparison with So Ko, Japan or even China in the 1950's is far too overblown and misses the blazingly obvious. The literacy rate....
In 1950 Japan & So Ko were essentially 100% literate. And this was a functional literacy. They had been held back and destroyed by war.
Once the wars stopped they took off.

India with 6%-10% literacy in 1950 was never in that position. Back then even the idea of education for all people and communities was actively opposed. Even by prominent folks like Kamaraj.
It is no accident that our growth rate hit 8% exactly as our literacy rate hit 70%.

--------------------------------------------
BTW. IIP has improved a bit. Economy is showing signs of life. Looks like global growth is doing some pulling as well...

[Singha]

Car sales have declined for six straight month now...

[Patni]

Just decided to do a comparitive study of how an investment choice made in 1st Jan 2000 of say investing 10,000/- INR in BSE sensex based fund and same amount invested in gold.

The annualised sensex return is



and same amount invested in buying Gold ( ~ 1 gold ounce) in jan 2000 would give return of :



As can be seen Indians who bought gold rather then invest in stock market came out lot better and gold definitely provided better protection against inflation by a long margin. The inflation adjusted return computed from 2005 onward comes to about 100% in 7 years!


All this buying gold is not good for economy makes no sense if power that be can not provide an alternate that prevents erosion of accumulated middle class wealth! In other words if one uses gold to protect wealth the government cant raid it or confiscate it as easily by inflating away as can be done with paper money.

Source links:
Historical BSE Sensex returns - updated 2013
Get Real about the Historical Performance of the Sensex
Goldprice.org

[Theo_Fidel]

^^
To be accurate you should include the Sensex dividend yield as well and reinvest the dividend.

Such effects are possible based on the time series selected. From 2002 to 2007 buying a house was the greatest investment an American could do.

[Patni]

^^
To be accurate you should include the Sensex dividend yield as well and reinvest the dividend.

Such effects are possible based on the time series selected. From 2002 to 2007 buying a house was the greatest investment an American could do.

Agree but the dividend yield will not be more then 1.5% annually! I have of course used Sensex as indicator for return calculation and not any individual stock out of 30 that makes up Sensex. All the same the dividend yield is no more then about 1.5% annually and it will only add about 600/- INR more on Dec 2012. We of course not taking in account any brokerage or demat account / annual service charges which are typically 500/- per year so if anything one should deduct from the Sensex return and it will make Sensex investment that much less favorable.

And the very reason for selecting more then a decade long investment period is to work out which one is better at wealth preservation over longer period! we are not talking about day trading and making ones living out of playing the market! The comparison is self evident as to what is best for that purpose. One can argue about RE returns being just in same range only that investing in RE in India has lot more downside risk from shady promoters to corruption prone local regulators.

[chola]

As can be seen Indians who bought gold rather then invest in stock market came out lot better and gold definitely provided better protection against inflation by a long margin. The inflation adjusted return computed from 2005 onward comes to about 100% in 7 years!

This is true only in the timeline you looked at. If you looked at gold between 1980 and 1995, you would have lose 75% of your investment. Inflation adjusted value of gold in 1980 was $2100 but fell to $550 by 1985.

Hoarding really does nothing for the economy and I agree that it is government's job to preserve wealth by keeping in check inflation. But it is not a straight line painless investment.

[Patni]

As can be seen Indians who bought gold rather then invest in stock market came out lot better and gold definitely provided better protection against inflation by a long margin. The inflation adjusted return computed from 2005 onward comes to about 100% in 7 years!

This is true only in the timeline you looked at. If you looked at gold between 1980 and 1995, you would have lose 75% of your investment. Inflation adjusted value of gold in 1980 was $2100 but fell to $550 by 1985.

Hoarding really does nothing for the economy and I agree that it is government's job to preserve wealth by keeping in check inflation. But it is not a straight line painless investment.

Well none of the financial instruments one can use to preserve or hold assets in with idea of wealth preservation are immune from such black swan events as one you pointed out. Every market that is ever gets traded on exchange has seen a crash!

And for gold hoarding well is it not markets supposed role and function to offer return that convinces a saver to invest! principal of true price discovery? One cant make it a virtue out of making it impossible for saver to preserve wealth so that one is forced to " contribute to economy " how is that any different then Communism ? or free market is free only as far as power that be can have what they want when they want and which ever way they want?

[prahaar]

As can be seen Indians who bought gold rather then invest in stock market came out lot better and gold definitely provided better protection against inflation by a long margin. The inflation adjusted return computed from 2005 onward comes to about 100% in 7 years!

This is true only in the timeline you looked at. If you looked at gold between 1980 and 1995, you would have lose 75% of your investment. Inflation adjusted value of gold in 1980 was $2100 but fell to $550 by 1985.

Hoarding really does nothing for the economy and I agree that it is government's job to preserve wealth by keeping in check inflation. But it is not a straight line painless investment.

Cholaji, would you please oblige and provide the value in Rupees? I believe the Indian exodus to Gold is fed mainly due to uncertainty in the Indian Rupee, economy and lack of credible granular investment avenues.

[RamaY]

Wouldn't the stock value reflect future expected dividends?

[svinayak]

Saw Modi live on Satellite and his speech. Slowly and steadily the Modi show will expand
About Gujarat development and economy. How it is related to Indian economy of the future.

Gujarat economy
35% of the inbound shipping traffic of all India come through the Gujarat ports.

[Theo_Fidel]

Acharya wrong thread. Did you make a mistake. If so move it please.
-----------------------------------

Talking to folks on the ground people are buying gold because they have money and can buy gold. It is marketed to them relentlessly. Much of the purchase is as jewelery so it can be visibly given as dowry. So I don't entirely see that people are using it as personal savings.

As long as you start talking about demat charges, you need to start talking about gold maintenance charges and lockbox charges and losses during remelting.

And 1.5% dividend over 10 years is NOT Rs 600. You will have to see what the re-invested amount appreciated to.
-------------------------------

The question is never one of preserving wealth. No such thing exists. You must put your wealth to work for you. Through the world stock collapse of 2008 some folks like me told people to buy as much as they could on a regular monthly basis. Those who did so have been amply rewarded. To my mind buying gold and hoping it will escalate in value is a form of hedging. The underlying fundamentals are all based in fear. Now there is nothing wrong in a little hedging but it can not be your entire investment strategy.

[Patni]

Yes the divident income of 1.5% per year compounded for 10 years would be 1605/- and not 600/-.
No one is saying to invest every rupee of savings to be used in buying Gold only, The whole idea of comparision that i did was to bring out rationale behind why most all middle class Indians living in india tend to buy gold as their prefered way of investing the saving.
A typical middle class / upper middle class Indian household in class I city, with both husband and wife working, having 2 dependent parents and 2 kids, will not have more then about 1,00,000/- per year as saving. Most will be paying EMI for housing and car etc. which typicaly is 50% of household income, 35% to 40% on food/clothing/education/utility. So yes what we are talking about is cash in hand at year end which most ppl in western world will use up for annual vacation and Indians will go and buy gold!

[vera_k]

70% consent is working fine in Mumbai redevelopment projects as is 2X + market value for land for NHAI. Instead of making land acquisition more difficult they could have been more innovative e.g. life long return or return of 5% developed land, etc.

This consent business and value for land is yet another socialist handout. What value did the government pay when this land was originally expropriated from landowners and handed to farmers in land reforms?

Land acquisition is needed for nation building and should be administered as such. But the goal of creating a more educated workforce can also be met. For example, any family that surrenders land can be guaranteed unlimited spots in IIT or AIIMS for their dependents.

[Supratik]

This consent business and value for land is yet another socialist handout. What value did the government pay when this land was originally expropriated from landowners and handed to farmers in land reforms?

Land acquisition is needed for nation building and should be administered as such. But the goal of creating a more educated workforce can also be met. For example, any family that surrenders land can be guaranteed unlimited spots in IIT or AIIMS for their dependents.

Actually a lot of these lands in Mumbai are encroached. However, you do not want to get into a situation where the Medha Patkar types block everything for 50 years. It is a compromise to get things done.

[vivek.rao]

http://www.firstpost.com/business/why-g ... 85435.html
Why growth has stalled – and it’s not what the FM is telling us

It is interesting that the corporate sector, which has less than 12 percent of our national income, gobbles up nearly half the bank credit.

Even though the unorganised, or non-corporate sector, is the fastest growing segment, its credit needs are not met by the banking sector but by private money lenders, etc. And the cost of borrowing is as high as 5-6 percent per month – or around 70 percent per annum.

In other words, the most productive and growing sectors of our economy are starved of bank credit, forcing them to depend on moneylenders and other such usurious sources (including Saradha-type Ponzi schemes). We estimate that more than 70 percent of retail trade needs were met by moneylenders/chits, etc, in 2010-11.The crony capitalists who default on bank loans get a larger share for their wasteful expenditure.

Instead of meeting the credit requirements of our kirana stores we find that our Finance Minister is going around with a begging bowl to New York and Tokyo for FII funds. An aura has been created that FII and FDI flows are our Annalakshmi - even though in the last decade they have met only 6-8 percent of our investment needs.

Our kiranas and Udupi restaurants and one-truck operators and barbers, plumbers, masons and small-time contractors are crying for credit at reasonable rates. But we will not bother about them. They are not sophisticated enough to argue at the Confederation of Indian Industry or Ficci conferences. They are pan-chewing, dhoti-clad and English-illiterate entrepreneurs. They are the real engines of our economic growth.

The current slowdown is directly linked to the choking of these activities. The huge black money generated in our economy used to be partly financing them. Now that has also dried up since that money is more in to real estate and gold.

The solutions lie not in New York or Paris but have to be found out from Kottayam to Kohima and Ahmedabad to Agartala. We will find more Saradha-type institutions going through the cycle of rise and fall unless we understand our reality without the lens of Harvard and Wharton

[panduranghari]

Folks are not holding back on the gold bubble

Gold bubble? What is that?

The gold bubble has not popped! ...because gold is not in a bubble. There is no gold bubble. There is no such thing as a gold bubble. Never has been. Never will be. 1980 was not a gold bubble. And anyway, today's situation is entirely different.

In fact, gold is the opposite of bubbles. It is the inverse, the recipient, the beneficiary of "frothy air" that escapes at lightning speeds when bubbles pop. It has already capitalized on the demise two bubbles this decade. And it is now about to absorb the froth spontaneously expelled by two more, the two biggest bubbles the world has ever seen.

Two Historic, World-Class Bubbles are About to Pop in a year or three.

Bubble #1: Government Debt (with a nominal value in the tens of TRILLIONS)

Bubble #2: Perceived Wealth, denominated in purely symbolic, un backed, unsustainable-Ponzi-debt-based currency (with a nominal value in the HUNDREDS of trillions)



In 1971 we could say that the high value of the US dollar was actually in a bubble. The clearest sign that this bubble was about to pop was Charles de Gaulle's demand of US Treasury gold as France expressed its desire to end the dollar's wealth reserve function. In pure desperation, the gold window was closed and boarded up like a bungalow in the Keys before a hurricane. This display of pure weakness and fright was like a pitchfork impaling the dollar bubble and gold promptly rose 2300%.

In 1929 the Stock Market Bubble burst and even though gold was under strict parity rules, severe pressure had to be released by raising its price 70%. But even this wasn't enough to contain the panicked flight of capital so domestic gold possession had to be outlawed as well.

In 1720 France, John Law's paper currency and "Mississippi Company" bubble popped. The entire capital flow went right into gold and silver. A frantic Law first limited the amount of gold that could be redeemed to stem the flow, then attempted to turn his company stock into actual currency, doubling the money supply and further impaling his bubble. Ultimately he outlawed the ownership of gold in a desperate and feeble attempt to save his dying bubble. But this only made things much worse for him and he was finally forced by the King to flee France for Venice where he died penniless eight years later.

Lastly, from the day the Dot Com Bubble popped until the Housing Bubble popped (7 years later) gold rose 140%. Then, again, from the Housing Bubble implosion until today (a little more than 2 years), gold has risen another 70%.

Gibbons paradox scheme and strong dollar policy kept the price of gold suppressed but its now unravelling.

Investment demand, the kind of demand that uses any object of desire as an investment rather than a useful commodity, can obviously flow into almost anything; Tulip bulbs, stocks, bonds, real estate, computer geeks working out of their garage, etc... And as investment demand exceeds utility demand, malinvestment occurs producing the object of desire beyond its commodity demand, creating an inventory surplus.

But changes in the gold price are mostly driven only by investment demand. Industrial supply and demand in gold is very stable relative to investment supply and demand. So any significant rise in the price of gold is a clear indication of growing investment demand and is also a positive confirmation of the premise behind that demand, that gold will rise. This creates a self-affirming feedback loop of positive reinforcement.

And since gold production cannot be ramped up to meet demand like it can in bubblicious items, there is no reason for gold to fall back. Gold mining does not debase gold in the same way that dollars, tulips, homes, Dot Com IPO's or government bonds are debased through production. Mine production is taken from known reserves that are already valued, owned and traded, and all gold on the planet Earth is a fixed amount, the same fixed amount it was a million years ago. All we do is move it around, like poker chips on a table, to those savers that value it the most.

Furthermore, the price of gold is completely arbitrary. This means that gold can go as high as the people of Earth want to take it without EVER exceeding objective valuations by common metrics like earnings, interest or the sum value of its component elements. Gold IS the element. It cannot be broken down further, except perhaps by the LHC.

One of the most common criticisms of gold's use as an investment is that it cannot be valued the way stocks, bonds and real estate can. They are all commonly valued by their yields, and gold has no yield, therefore it cannot be fairly valued, or so the argument goes. But if we invert this argument then gold can never be OVERvalued either, whilst those other things can, and are... in a bubble!

The price of gold is arbitrary, ergo, there is no such thing as a gold bubble.

From linhttp://fofoa.blogspot.co.uk/2009/12/gol ... ubble.htmlk

[panduranghari]

^^ that logic can be applied to anything.

A $1 fall in a oil price per barrel means $1.73T loss to humanity. A Rs 1L fall in housing price will mean India's net wealth falls down by Rs 7.86T rupees and so on.

Someone's loss is someone else's gain. People are buying gold at $1700/ounce and they are buying gold at $1000/ounce.

RamaY Saar

Price is different from value.

Price is always known. Value is always unknown. Price changes, value remains static even if its not known exactly. Price can be higher or lower than the value.

To understand the real value, see if the government is trying to suppress it or asking people to not buy it? If it is trying these things, then value is definitely higher than price.

Value can be called 'dearness coefficient'. Very important difference which needs to be understood.

1 oz of gold bullion has the same value as another 1 oz gold bullion.

You travel to your work in 1 Ferrari. The Ferrari has style, comfort, street cred, safety, pretty much everything you wish to have. It takes you from home to work and back.its got its value.

Now If you have 1 Ferrari and you buy another and then another. Say 1 Ferrari for every day of the month. Do you think the value of your 1st Ferrari is similar to your 2nd or 3rd or 30th?

Of course not. That is the difference between value and price.