The Political Economy of the Modi Regime C. P. Chandrasekhar

At the end of its five-year term, the NDA government’s claim that the Indian economy has experienced rapid growth during its tenure sounds shallow. The GDP numbers many observers argue are wrong and possibly fabricated. The GDP figures have since 2011-12 been computed using some new data sources and a changed methodology, showing the economy in much better light when compared with the series with 2004-05 as base. But the change was so drastic that for the official statistical agency could not for long put out a “back series” that allowed comparison of performance across time. Scepticism about the GDP…

Housing Market Mayhem C. P. Chandrasekhar

Late in February 2019, the GST Council, prodded by the Centre, decided to modify Goods and Services Tax rates applicable to the housing sector. The declared intention was to reduce prices that home buyers would have to pay for their property. The modification, which takes effect as of 1 April 2019, involves doing away with input tax credit for residential property construction for sale and significantly reducing the GST rate applicable at the final stage of sale of housing. At present the GST rates stand at 12 per cent for normal residential housing and at 8 per cent for “affordable…

Migration and Remittances: The gender angle C. P. Chandrasekhar and Jayati Ghosh

The gender distribution of migrant workers has a macroeconomic impact – it affects both the level and the volatility of remittance inflows, as the Asian experience shows. The gender distribution of cross-border migration obviously matters because women migrating for work face very different conditions from those of men migrants, whether in the source country, or in the process of travel or in the destination country. These are crucially affected by the gender construction as well as the nature of labour markets in both societies of origin and destination. This is well accepted and now quite widely studied. However, the macroeconomic…

The use and misuse of Economics C. P. Chandrasekhar

When the final session, prior to the impending election, of the current Parliament ended in February, high on the list of the unfinished business of the Modi-led NDA government was its aggressive effort to rewrite the laws regulating wages and employment conditions of workers in India. While opposition by workers’ movements, trade unions (including those aligned to the ruling BJP), the parliamentary opposition and democratic opinion has managed to stall the effort, it is more than likely to be revived by future governments. The conservative legislative push of the NDA was presented not just as an effort at rationalisation that…

The Skewed Structure of India’s Bond Market C. P. Chandrasekhar and Jayati Ghosh

India’s efforts to activate its corporate debt market, not least by periodically raising the ceiling on investment by foreign portfolio investors in corporate bonds, are yet to succeed. Mobilisation of capital through the issue of corporate bonds has just about crept up to 4.4 per cent of GDP (Chart 1). Though that is much larger than the 0.2 per cent of GDP for mobilisation through new equity issues, it is way short of the figure (varying from 15 to 50 per cent) for most similarly placed emerging markets. Relative to the size of its economy, India’s corporate bond market is…

Neither Interim, nor Substantial C. P. Chandrasekhar

In a pre-election budget speech filled with propaganda about the supposed developmental achievements of the Modi government, substitute Finance Minister Piyush Goyal read out a text that both window-dressed the revised estimates and violated all norms that should apply to an Interim Budget. Principally, the speech lays out three sets of changes on the expenditure side with the hope clearly of winning votes at election time: one to provide for a Rs. 6,000 crore cash transfer in a year to “landholding” farmers with holding size upto 2 hectares; a contributory pension scheme for unorganised workers with monthly income upto Rs.…

The Strange form of “Disinvestment” C. P. Chandrasekhar

As the term of the current NDA government nears its end, with signs of popular dissatisfaction over its performance on the economic front, the urge to ramp up expenditure to woo the electorate intensifies. But a number of factors have combined to render that task difficult, with the failure of the government’s misplaced disinvestment programme being among the most important. Disinvestment receipts are crucial to the government this year for two reasons. First, while direct tax collections in 2018-9 are according to official figures on track to reaching targets, indirect tax collections have fallen short after implementation and periodic revision…

The mistaken obsession with the fiscal deficit C.P. Chandrasekhar and Jayati Ghosh

It’s that time of year again – the time when all eyes turn to those magic numbers, the actual and proposed fiscal deficits of the central government as shares of GDP. Breathless news anchors will interrogate financial investors on what the numbers mean, and why 3.5 per cent or 3.7 per cent is fatally worse than, say, 3.4 per cent or 3.2 per cent or less. Everyone will breathe a sigh of relief if the Finance Minister achieves his fiscal targets, while there will be gloom, doom and concern if the government is found to have overstepped. All this scrutiny…

The failed promise of employment C. P. Chandrasekhar

As election 2019 approaches, the Modi government, damaged by agrarian distress, is also being challenged by evidence that its record on employment generation has been extremely poor. To recall, in its campaign during the 2014 election which brought it back to power, the BJP-led National Democratic Alliance (NDA) promised to create 10 million jobs every year. The best source of information on employment we currently have is the privately conducted (and heavily priced) Consumer Pyramids Household Survey undertaken by the Centre for Monitoring the Indian Economy (CMIE). These figures are available from 2016 from a sample of more than 170,000…

Are Global Oil prices the culprit for India’s burgeoning Trade Deficit? C. P. Chandrasekhar and Jayati Ghosh

India’s external account has once again emerged as a source of concern, as the current account deficit widened to reach 2.4 per cent of GDP over April-June 2018. This increase was driven entirely by the trade deficit, which grew rapidly in 2017-18. Since 2014, as Figure 1 shows, exports have been mostly stagnant (after a period of healthy increases before then) but total imports came down and then increased sharply in 2017-18. This was reflected in the total merchandise trade deficit, which declined for several years from the large deficit observed in 2013-14, and only rose sharply once again in…