Below is given the Table of Contents of the
Issues listed above:
Volume 57.
No 2. July-September, 2009
ARTICLES / 1
Financial Crises and Regulatory
Diligence T.V.S. RAMAMOHAN RAO
For the past several years the
Indian economy has been making
attempts to integrate with
international economies. As a
result, our attempts to deregulate
the economy, attract foreign
institutional investors, and
introduce financial sector
innovations exposed our economic
system to some dimensions of the
recent global financial crisis. Our
banking sector has been managed in
such a way that its fundamentals are
sound. However, monetary policy, as
a means to resolve the liquidity
crisis, is inherently inadequate.
Our regulatory practices and
institutions, especially with
respect to the non-bank financial
intermediaries, turned out to be
inadequate as well. The present
study argues a case for more
specific industry and firm level
regulatory policies and better
institutional mechanisms for their
implementation. Utilising two simple
models, one at the macro
level and the other in the
microeconomic framework, the study
also provides some idea about the
requisite bailout calculations. In
the long-run, when appropriate
regulatory mechanisms are in place,
some growth may have to be
sacrificed to ensure stability and
minimise the frequency and intensity
of shocks that are integral to
innovative economic progress.
The author is a retired professor.
He can be contacted at
rmrao@iitk.ac.in.
ARTICLES
/ 2
An Optimal Control Model to
Avoid Output Collapse
With Reference to India Punita Rao
This paper identifies the key policy
instruments to be monitored to avoid
output collapse. A small econometric
model examining the developing
countries that come under the IMF
sponsored adjustment programmes.
Changes in exchange rates and
aggregate domestic credit are the
instrument in the fund supported
package to target the balance of
payments
improvements and the inflation
rates. The analysis carried out
attempts to indicate that demand
contraction based on domestic credit
restriction leads to improvement in
the balance of payments and in
inflation rates. The basic
macroeconomic problem of the Fund
adjustment programme is formulated
here as an optimal control problem
with two instruments (exchange rate
and domestic credit) and two targets
(inflation and foreign reserves).
Rain-fed
Agriculture: In the Throes of a
Crisis V.M. Rao
In the light of the grave concern
which the Prime Minister expressed
about the crisis in
agriculture, this paper looks at the
nature of the crisis with particular
reference to rain-fed
agriculture, locates it in the
emerging societal context and
considers the underlying processes.
The crisis is a creeping crisis in
the sense that it has gradually
grown into a menace it is now owing
to indifferent policies. It is
pointed out that the policies now on
the anvil hardly reflect the concern
felt at the highest level in the
government. The paper argues for
greater transparency and
accountability in the working of
policies and their effectiveness in
achieving the goals on which they
are focused. Practicable
institutional mechanisms are
suggested to improve policy-making
at the top tier in the government
which is seen to be responsible for
the poor functioning of the
government system despite its vast
pool of experts and administrators,
and a departmental structure
reaching down to the ground level.
The crisis places a special
responsibility on the agricultural
economics profession as a think tank
on the issues relating to
agricultural development and farmer
welfare. The paper concludes with
observations on the role that the
profession can play in helping the
government in reining in the crisis
and in realizing the substantial
development potential which the
rain-fed agriculture has.
V.M. Rao, Institute for Social and
Economic Change, Bangalore. E-mail:
vimora29@yahoo.com
ARTICLES
/ 4
Employment Intensity of
Government Expenditure Pravakar Sahoo
The level of employment in an
economy is a function of aggregate
demand, which in turn is dependent
on both public and private spending.
The fiscal reforms in India have
resulted in structural changes in
government expenditures. Thereby,
the objective of this paper is to
examine the impact of fiscal reforms
on employment through analysing the
employment intensity of government
expenditures during pre- and
post-reforms period. The results
show that public sector organised
sector employment is highly
responsive to total expenditure.
However, the employment intensity of
revenue expenditure is lower as
compared to capital expenditure.
Further, employment elasticity of
capital expenditure was the highest
during eighties but it significantly
declined during post-reforms period.
Overall employment is more
responsive to developmental
expenditures and therefore, slowdown
of developmental expenditures during
post-reforms period has contributed
significantly to the downfall of
total employment in India.
Government expenditure particularly
on agriculture sector and
infrastructure sectors such as
energy, transport, education and
health are important for bringing
about employment-intensive growth in
India.
Pravakar Sahoo, Associate professor,
Institute of Economic Growth (IEG),
Delhi. Email:
pravakar@iegindia.org and
pravakarfirst@gmail.com
ARTICLES
/ 5
Temporal Causality between
Budget Deficit and Interest Rate
The Case of South Africa Josine Uwilingiye and Rangan
Gupta
This paper investigates the
direction of temporal causality
between budget deficit and interest
rate in South Africa using quarterly
data for the period of 1961:02 to
2005:04, and also for annual data
covering 1961 to 2005. Based on a
multivariate Vector Error Correction
Model (VECM), estimated using
Johansen's (1991, 1995) maximum
likelihood approach, we find that
budget deficit Granger causes
interest rate in the quarterly data.
However, for the annual data, no
causal relationship could be
detected between the budget deficit
and the treasury bill rate. The two
variables of interest are, however,
positively cointegrated for both
data frequency. Interestingly
though, exactly the same results
were obtained from the simple
Granger causality tests based on a
bivariate framework, comprising
merely of budget deficit and
interest rate.
Josine Uwilingiye, Graduate Student,
Department of Economics, University
of Pretoria, South Africa. E-mail:
juwilingiye@yahoo.fr
Rangan Gupta, Associate Professor,
University of Pretoria, Department
of Economics, Pretoria, South
Africa. E-mail:
rangan.gupta@up.ac.za
ARTICLES
/ 7
State Finances and Social
Sector Expenditures
A Case Study of Manipur State Thiyam Bharat Singh
The present paper attempts to
examine the trend of state finances
and its impact on the social sector
expenditure in Manipur. The study
found that Manipur faced fiscal
crisis in the 1990s and there was a
reduction in transfer of Central
resources to the state. The tax
system of the state also suffers
from various loopholes leading to
decline in the collection of own tax
revenue. The overall impact is the
decline in the per capita social
sector expenditure of the state over
the years. Keeping this in view, the
paper suggests that state government
should mobilise more resources by
widening tax base and plucking out
loopholes in the tax system and make
a larger provision of resources for
the social sector expenditure in
order to reverse the declining trend
of per capita social sector
expenditure. This will help in
promoting human development in the
long run. At same time, transfer of
resources from the Centre to the
state should also be increased
overtime for a poor state like
Manipur.
Dr. Thiyam Bharat Singh is a
Lecturer in Economics at TG Hr. Sec.
School, Imphal, Government of
Manipur and an Independent
Researcher. Email: drthiyam@yahoo.com
ARTICLES
/ 8
Convergence in Human
Development Levels across Regions
An Empirical Investigation:
1975-2005 D. Ajit and Lawrence Arbenser
The issue of human development
convergence for six regions of the
world for the period 1985-2005 is
examined using the stochastic
convergence framework. Employing the
two widely acclaimed panel unit
tests, viz., the Levin-Lin-Chu (LLC)
and Im-Pesaran-Shin (IPS), generally
we do not find any evidence of HDI
convergence across regions.
D. Ajit, Economics Program,
University of Northern British
Columbia Prince George, British
Columbia, Canada. Email:
dayanana@unbc.ca
Lawrence Arbenser, Economics
Program, University of Northern
British Columbia Prince George,
British Columbia, Canada. Email:
arbenser@unbc.ca
COMMUNICATION FOR DEBATE & RESEARCH
/ 1
Corporate Sector, Industrialisation
and Economic Development in India K.S. Chalapati Rao
K.S Chalapati Rao, Institute for
Studies in Industrial Development,
New Delhi.
Email:
kschalapatirao@gmail.com
COMMUNICATION FOR DEBATE & RESEARCH
/ 2
Human Rights and Globalisation,
Issues and Challenges
Canada and India K.K. Kaushik
K.K. Kaushik, Centre for Canadian
Studies Development Program, H.P.
University, Shimla. Email:
krishan_k_kaushik@yahoo.com
REVIEW ARTICLE /1
Asia's New Regionalism and Global
Role
Agenda for the East Asian Summit
(Editors: Nagesh Kumar, K.
Kesavapany and Yao Chaocheng.
2008.
pp. xii+274. New Delhi: Research and
Information System for the
Developing Countries and Singapore:
Institute of Southeast Studies)
Reviewed by Professor Charan Wadhva,
Centre for Policy Research, New
Delhi, India
Email:
cdwadhva@yahoo.com
REVIEW ARTICLE / 2
India Micro, Small and Medium
Enterprises Report 2008
(Institute of Small Enterprises and
Development. 2008. Rs.520. pp.254.
Cochin: ISED)
Reviewed by Dr. Nayanatara S. Nayak
Associate Professor
Centre for Multi-Disciplinary
Development Research [CMDR], Dharwad
email:
nsnayanatara@yahoo.com
