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Macro Economy
Jettison Flaws in Doing Business Ranking business
- Published on 11 November 2016
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(Edited Image Courtesy: artnet.unescap.org)
“Many important policy areas are not covered by Doing Business; even within the areas it covers its scope is narrow. Doing Business does not measure the full range of factors, policies and institutions that affect the quality of an economy’s business environment or its national competitiveness. It does not, for example, capture aspects of macroeconomic stability, development of the financial system, market size, the incidence of bribery and corruption or the quality of the labor force,” says Doing Business (DB) Report 2017.
This observation aptly applies to India. And this is far more important than the 130th rank that India has got among 190 economies on 11 parameters of business regulation assessed in DB 2017.
This annual flagship report of World Bank (WB) group gives an over-simplistic image of doing business in India. It can thus mislead prospective investors. It also does not help policy makers undertake holistic reforms that can make India a more credible business place. WB should revise certain parameters and add new ones to its DB methodology to make cross-country comparison more realistic and inclusive.
Moreover, the domain of information on which DB report is based does not encompass a lot of valuable information. DB report banks on four main sources of information: the relevant laws and regulations; DB’s 39,000 respondents in 190 countries; the governments of the economies covered and the WB Group regional staff.
DB report should factor in all information that does not flow through these four channels for varied reasons.
India’s ranking, in all probability, would be much lower if DB methodology is widened by including vital parameters that bedevil business and economic growth in India and elsewhere.
DB methodology is of bygone era. It is devoid of ground reality about business challenges/regulations faced by all stakeholders including Government organizations, public sector undertakings (PSUs), organized private enterprises and informal business sector.
We can substantiate this contention by taking up specific cases.
View China’s slowdown forecasts along with its tax & allied reforms
- Published on 31 March 2016
- Hits: 4290
(Image Courtesy: World Bank)
China’s growth slow-down has transformed it into an intense subject of crystal-gazing. Reputed global entities have lately released interesting studies measuring the impact of slow-down on different countries, industries and commodities market under different scenarios.
Some studies have drawn policy lessons for other countries as well. They have also figured out opportunities for other countries to fill the gaps in global economy resulting from China’s slowdown. Another study has voiced concern over China’s tax receipts getting subdued under the impact of growth deceleration.
Crystal-gazing outcomes should, however, be accepted with a pinch of salt as the studies have not reckoned the growth-accelerating potential of stepped-up tax reforms, structural reforms and recently approved 13th five year plan in China –the world’s 2nd largest economy & the world’s largest exporter.
The impact and contours of inter-play of all variables might well be different from what analysts are predicting.
Pay Commission Articulates Govt Dharma: Charity Begins at home
- Published on 28 November 2015
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“There are various grounds, Sir. One such ground is that the financial implication is enormous. Then there is the question of weighing the different points of view and considering whether it would not be better to spend the resources for development purposes under the second -Five Year Plan rather than to raise the salaries now.”
That was Deputy Minister for Finance, B.R. Bhagat, in Nehru Government spurning the demand to set up second Central Pay Commission (CPC) in Parliament on 29nd February 1956.
He continued: “In fact, as a result of the implementation of the recommendations of the last (1st) Pay Commission regarding salaries, bonus, medical facilities, housing etc. the financial implication was to the tune of Rs. 30 crores. And there is nothing new that has happened. Even on the basis of the consumer price index or other economic indicators, there is no reason for the appointment of such a Commission.”
Pressured further by a belligerent member from the Opposition Benches, Mr Bhagat articulated the Government’s reluctance: “There are various reasons—price index and other indicators. But taking a long-term view, once the Commission is appointed and the recommendations are made, it will be difficult for the Government to resist such recommendations.”
Nehru Government ultimately buckled under the pressure from trade unions: It constituted the 2nd CPC in August 1957.
Over the next 60 years, successive Governments failed to resist pressure from trade unions, which have transformed governments and its appendages into heavens of prosperity and job security.
The ruling political alliances turned deaf ears to the advice from Finance Commissions and other entities against setting up of pay commissions to upgrade pay scales after every 10 years.
It is no wonder then that the annual burden resulting from implementation of respective CPC award on national exchequer has risen from Rs 30 crore in 1947-48 (Ist CPC) to Rs 1,02,100 crore in 2016-17 (7th CPC). Modi Government’s approval in the latest case is certain if the initial response of Finance Minister Arun Jaitley is taken as a valuable cue.
Don’t use Monetary Policy as a Magic wand to tame Inflation
- Published on 28 March 2015
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(RBI Governor & Finance Minister: Edited Image Courtesy-PIB)
Govt must be Equally Accountable as RBI for Failure to Subdue Inflation
Facts have become the casualty once again. And the urgency for an integrated approach to inflation control has got derailed with the national discourse riveted to media-hyped “rift” and “escalating tension” between Finance Ministry and Reserve Bank of India (RBI).
A few news stories have tried to project the old professional differences between the two entities as the ones between Finance Minister Arun Jaitley and RBI Governor Raghuraman Rajan.
Mr. Jaitley has thus aptly stated that there is no disconnect between the Ministry and RBI and both are engaged in constant and frank discussions.
Before coming to need for a rationale and comprehensive inflation control strategy, consider first a few facts. It is fact that the differences over public debt management agency (PDMA) and monetary policy committee (MPC) are not between Mr. Jaitley and Mr. Rajan. Both are merely reflecting the well-know respective stance of the respective entities they head.
The differences are not new. They had developed much before the two decision-makers assumed charge of their respective offices. It is just a re-emergence of turf battle that has simmered for several years.
Mr. Rajan has in fact staged climb-down from RBI’s well-reasoned reservations over setting up of PDMO and inflation management as stated in December 2012. RBI had communicated its reservations as feedback on Financial Sector Legislative Reforms Commission’s (FSLRC’s) Approach Paper.
Macro Economy