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THIS book is an outcome of a conference organised in 2008 by the Delhi School of Economics and the Institute of Economic Growth. It deals with major issues of economic growth such as the growth process, measurement of national income and related aggregates, environmental issues, and monetary and fiscal policies. Suresh D. Tendulkar divides the Indian growth process for the last six decades as structural breaks (brief periods of stagnation, slowdowns and spurts) and lists methodological issues dealing with timings, durations and causes underlying the observed breaks.
Goldar and Mitra analyse growth linkages between different economic sectors and show how productivity growth in the service sector has contributed to an accelerated economic growth in India. Despite financing, insurance, real estate and business services witnessing the maximum growth of nine per cent post-1980s, the key to aggregate growth remains with the manufacturing sector, which must be revived. Ramesh Chand discusses the feasibility and constraints in achieving a four per cent rate of growth for the agricultural sector as envisaged in the 11th Plan. Three papers by Ramesh Kolli, S. L. Shetty, Savita Sharma and Janardan Yadav analyse some conceptual issues concerning measurement of GDP and other related national indicators. Kolli points out the need for annual enterprise surveys and annual labour force surveys to realistically capture the contribution of unorganised sector in GDP, while Shetty suggests integrated survey of household income, expenditure, and domestic savings and investments despite myriad problems associated with such surveys. Sharma and Yadav discuss reasons for divergences in estimates of private final consumption expenditure by two sources, namely the National Accounts Statistics and the National Sample Survey. The difference has increased from five per cent to over 50 per cent during 1972-73 and 2004-05 due to difference in coverage, timeframe, concepts and methodology of the two surveys. Discussing sustaining growth and the development process, Ramprasad Sengupta shows the need to address problems of income and energy poverty simultaneously, whereas Purnamita Dasgupta and Shikha Gupta provide policy insights into the sustainability of consumption growth path based on current investment data. Using various methods, they estimate genuine investment at 13.5 per cent of GNP for the year 2000. Using dynamic stochastic open economy general equilibrium models, Ashima Goyal suggests an improvement in the Consumer Price Index for a better monetary policy. Pradeep Aggarwal estimates investment function to see the impact of real interest rate. Contrary to the neo-structuralist approach, he finds an inverse relationship between investment and rate of interest above four per cent. Citing evidence from Thailand, Malaysia, Indonesia and Korea, he puts forth his argument that higher interest rates build non-performing assets and result in financial crisis for banks and other financial institutions. M. Govinda Rao suggests improvement in the system of assignments and transfers from the Centre to states. On Centrally-sponsored schemes, he suggests that states may be allowed to choose some priority schemes instead of fixing conditions for each scheme. Discussing Fiscal Responsibility and Budget Management (FRBM) targets at both the Central and state levels, D.K. Srivastava finds an improvement in three critical parameters, revenue deficit, fiscal deficit and debt/GDP ratio, but finds that the targets are sometimes breached by a substantive margin. He suggests stricter compliance of FRBM targets and not allowing any privilege to the ruling or Opposition parties to announce financial commitments without provisioning additional resources. The book ends with a
chapter by Pulin B. Nayak on the life and contributions of Prof VKRV Rao,
a visionary and institution builder.
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Errol
D’Souza augments the Solow’s growth model by introducing two
important variables — human and capital stock. He contradicts Solow’s
model for two reasons: assuming full employment in the long run, and
considering the entire labour force instead of employed labour force and
ignoring the role of institutional factors such as weak enforcement of
labour laws, changing composition of employment contracts mainly on
non-permanent basis and technological factors. While Solow’s model
assume all output resultant of private capital alone, D’Souza’s
production function includes public physical capital, best identified as
infrastructure, a key factor to growth.