State-wise analysis of the Indian growth miracle

ARVIND SUBRAMANIAN of the Peterson Institute and UTSAV KUMAR of the Asian Development Bank analyze patterns in India's decadal growth in 2001-2009 vs the 1993-2001 as the turnaround in policy entered its third decade since 1991. 

In a Business Standard op-ed, "India: Growth in 2000s- Key Facts", they present four key findings on the state of growth in India  

1. Doubling of growth: Per-capita growth rates doubled in the 2000s in most states with the exception of Himachal Pradesh and Rajasthan 

2. Increasing divergence: Richer states on average grew faster and pulled away from the rest and inequality increased in spite of the stellar performance of hitherto laggards such as Bihar, Orissa and Chattisgarh 

3. Vulnerability to globalization: Globalization catalyzed growth as well as decline exemplified by states such as Karnataka, Andhra Pradesh and Maharshtra where growth accelerated prior to 2008 and declined sharply during the global financial crisis 

4. Demographic complacence: Demographically aging states such as Kerala, Tamil Nadu, Maharashtra and Gujarat did remarkably well while demographically dynamic states such as U.P, Rajastan and M.P did not fare as well.

They state that the Indian growth miracle continued to confound with India capacious enough to allow both Bania, reforming Gujarat and Marxist, reform-resistant Kerala to flourish.

Globalization-enabled corruption

ARVIND SUBRAMANIAN of the Peterson Institute and DEVESH KAPUR of the University of Pennyslvania state that the skyrocketing corruption in India and the consequent money-laundering indicated the usage of discreet foreign jurisdictions as destinations for black money and India’s financial integration had facilitated these transfers.

In a Business Standard op-ed, "India: Fighting Imported Corruption", they also state that macroeconomic analysis showed that the laundered money came back to India as the much sought-after 'foreign' investment with additional implicit subsidies such as secrecy and avoided taxes, with the monies round-tripping back through the banking channel from countries such as Mauritius and Cyprus with lower financial transparency and low tax rates.

They call upon New Delhi to take the lead internationally in pressing for data-sharing between governments and global financial institutions on overseas assets of citizens, trade flows and remittances, and recommend an abolition of double-taxation avoidance agreements with states such as Mauritius who were not members of the Financial Agenda Tax Force.

Dealing with Chinese mercantilism

ARVIND SUBRAMANIAN of the Peterson Institute draws lessons from history of Chinese mercantilism of the early 1800s to state that dealing with Beijing effectively required a greater sensitivity to its history that meant greater use of carrots rather than sticks and a multilateral rules-based approach rather than a unilateral approach related to specific outcomes. In an op-ed in Business Standard, "Chinese Mercantilism: The Long View", he calls for a long view on China that relied on nudging Beijing away from the path of mercantilism rather than a confrontational approach in spite of a range of unhelpful Chinese actions across a gamut of political and economic issues, stating that a dominant China may no longer be amenable to force

Capital flood

ARVIND SUBRAMANIAN of the Peterson Institute argues against opening up the floodgates to the capital sloshing across the world in an environment of mercantilistic policies across the world with countries across the world doing their best to repel capital. In an op-ed in Business Standard, "Reserve Bank of India's Fateful, Fatal Action", he argues that improving governance and regulatory reform rather than access to foreign capital was the need and that the RBI may be trading away a bird in hand (the tradable sector) for the bird in the bush (infrastructure).

The land-inflation linkage

ARVIND SUBRAMANIAN, fellow at the Peterson Institute for International Economics reviews the high inflation figures for India and conjectures that the combination of serious microeconomic distortions afflicting the land market coupled with macroeconomic factors such as surging capital inflows into real estate and housing could be raising cost of production in the Indian economy as a whole, pushing up cost-push inflation and making the goal of double-digit growth elusive. In an op-ed in The Business Standard, "India's Inflation Puzzle", he states that inflation in India could be far more dependent on services and land as an input and India would need to address microeconomic distortions through structural reforms of the land market and address macroeconomic aggravators of inflation through dampening of foreign capital flows into real estate and housing and higher provisioning for real-estate lending.

Test of Effectiveness for the G-20

ARVIND SUBRAMANIAN, fellow at the Peterson Institute for International Economics states that while the monopoly on power and influence wielded by the west was being broken for real with the G20, what was most significant was the impact of the de-cartelization of power and influence on the role of ideas.  In an op-ed in The Business Standard, "The G-20, Power, and Ideas", he states that the fate of two bad ideas (i) western leadership of the IMF and the World Bank and (ii) indispensability of the Doha round to the health of the world economy, could serve as a testing ground for the proposition that the G-20 might be better for the marketplace of ideas than the G-7.

Lumbering out of policy inertia on India's Financial sector

ARVIND SUBRAMANIAN, fellow at the Peterson Institute for International Economics recommends greater interaction between the government and the Reserve Bank of India on strategic and long-term issues such as the liberalization of the financial sector and that of the capital account. In an op-ed in The Business Standard, "What Globalization Strategy for India?", he states that a combination of factors such as greater availability of foreign capital seeking higher returns in India and a domestic political economy that favored foreign capital would ensure that India moved to a model based on reliance to foreign capital by default and this called for a jolt out of policy inertia and a greater co-ordination between the key stakeholders on strategic issues.