ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Real Exchange Rate, Fiscal Deficits and Capital Flows: Erratum and Addendum

There is a case to be made for rapid progress towards capital account convertibility and a free float of the rupee as the 'fear of floating' is based on the unwanted dirigiste assumption of the omniscience of bureaucrats and the irrationality or ignorance of private agents.

The Real Exchange Rate, Fiscal Deficits and Capital Flows

India should use the opportunity presented by high reserves and low domestic inflation to now fully open the capital account (with a proviso about borrowing in foreign currency), make the rupee fully convertible and allow it to float freely. For in a world of fluctuating capital flows it is impossible for the authorities to predict, let alone implement, the requisite movements in the nominal exchange rate required for a managed float. If this is done, none of the fears that the authorities seem to have about absorbing capital inflows would be realistic and India could very quickly raise its growth rate, which continues to be suppressed by the misalignment of the real exchange rate.

Financial Exuberance

There have been significant financial sector reforms through the 1990s. One of the major policy changes affecting the financial markets has been reduction in government's recourse to claims on loanable funds through statutory liquidity ratio as well as high levels of Cash Reserve Ratios. The central government has switched to market borrowing to finance its fiscal deficit on a larger scale than before. There is a general move towards market determined rates and flows in the financial sector. One area where administered rates are still important is the small saving instruments. The government sets these interest rates and mobilises funds for meeting the fiscal deficits at the centre and more so at the state level. If these rates were to be determined by the markets, what would happen to the interest rates in general. One argument is that the small saving rates act as a floor to the deposit rates of the banking sector and hence also determine the lending rates. If the overall balance of demand and supply of loanable funds is such that interest rates can be lower, the small saving rates do not let that emerge. Further, as interest rates decline, there would be significant gains in economic growth. This paper is an attempt to examine this viewpoint. We develop a monetarist model of the economy and assess the implications of alternative methods of financing the fiscal deficit of the government, central and states combined. The results support the view that overall interest rates would decline if the small saving rates were to be liberalised but the gains in economic growth would not be dramatic.

Economic Reforms and Poverty Alleviation

The National Sample Survey has been among the most robust and well respected national household surveys in the world for almost half a century. It is therefore natural that most observers accept the estimates thrown up by the NSS. However, since mid-1980s there is another large-scale survey, the Market Information Survey of Households (MISH) of the NCAER, which can provide consistent information on income trends in the country. Which of these two surveys is to be believed about the trends in poverty redressal during the reform era: MISH which suggests a marked decline or the NSS which points to stagnation in poverty ratios? To answer this question is the primary purpose of this paper.

Agricultural Growth, Real Wages, and the Rural Poor in India

Rural Poor in India Deepak Lal A number of authors have asserted that the green revolution, despite its marked output-increasing effects, has not benefited the rural poor. This is taken as evidence of the incompatibility between red ressal of rural poverty and agricultural growth within the existing institutional framework. The implication is that, without fundamental institutional reform, alleviation of rural poverty is infeasible.

Private and Social Rates of Return in Indian Manufacturing

Manufacturing Deepak Lal This study on the private and social rates of return in Indian manufacturing industries shows that (a) there have been widely divergent social rates of return in different industries, (b) there is great variation in divergence between the private and the social rates of return of different industries, which cannot be explained as the result of any rational pattern of promotion of different industries, and (c) the average social (and private) rates of return in Indian industry have been declining.

Economics of Irrigation Engineers

Review of Agriculture June 1973 the price policy of Kharif Cereals for 1965-66 season, p 47.
2 lbid, p 47.
3 Report of the APC on minimum prices for Wheat and Gram for the

Planning and Concentration of Economic Power

Economic Power Deepak Lal This paper has two interrelated themes.
The first concerns a reappraisal of the role of planning in facilitating the efficient interand intra- temporal allocation of resources. It is necessary to re-state these results of the theory and practice of planning, to attack what is perhaps one of the most important factors retarding growth in India

Agricultural Development in Maharashtra- Some Aspects

There is a marked relationship between agricultural incomes and availability of water in the Ahmednagar district of Maharashtra. Ahmednagar being a dry area, the farmer has to depend on irrigation for assured water supply on which his ability to take to improved technology depends.

Indian Foreign Policy, 1947-64

Deepak Lal Indian foreign policy, the author argues, has been marked by a complete lack of ideological thinking and, in fact, has been very pragmatic. It would be a great pity therefore, he feels, if bewitched by the mechanistic models of the so-called realists, our foreign policy were to shelve its internationalist value assumptions.

Indian Foreign Policy, 1947-64

Deepak Lal Indian foreign policy has been marked by a complete lack of ideological thinking, and, in fact, has been very pragmatic. It has been based on a coherent and valid model which embodies value assumptions that the author strongly supports. It would be a great pity therefore if, bewitched by the mechanistic models of the so-called realists, Indian foreign policy were to shelve the internationalist value assumptions in its model.

The New Export Subsidy Scheme-A Comment

December 3, 1966 But none of these can satisfactorily explain the situation in sectors like construction, railways and communications, where productivity declined both in the first and the second half of the decade. Assuming gradual elimination of under-em- ployment as an objective of economic development, this should be a sad commentary on the performance of these sectors.


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