Jayati Ghosh’s Blog

In a previous edition of MacroScan, we considered trends in central government employment, and showed how the number of people employed by the central government stagnated between 2006 and 2014, while the number employed by central public sector enterprises declined. Furthermore, the number of vacancies in public employment increased sharply over this period, amounting to more than one-fifth of the number employed. However, the labour force surveys provide a slightly different picture. These surveys capture all forms of employment at all levels of government (central, state, and local bodies as well as public enterprises) including not just those that the…

The Indian government should now be desperate to raise more tax revenues. It missed its tax targets massively in the last fiscal year, largely because of poor goods and services tax (GST) collections. Its declared budgetary target for the current year requires tax receipts to increase by around 25%, when the first quarter increase was only 6% over the previous year. In the misplaced belief that what is required to address the current slowdown is more tax relief to corporates, it has offered tax rate reductions to 25% of profits to companies that do not avail of other concessions, and…

It is only too evident that the Modi government is a strongly centralising one in many ways – and this is also clear from various fiscal moves. In 2015, it accepted the recommendation of the 14th Finance Commission to increase states’ share in total tax revenues, from 32 to 42 per cent. But it simultaneously cut plan grants and sharply reduced the Centre’s share of spending on Centrally Sponsored Schemes, almost neutralising any benefit to states. The imposition of the Goods and Services Tax in 2017 denied revenue-raising powers to states, creating further fiscal centralisation. But since then the government…

The Modi government has moved so rapidly to dismantle so many institutional and regulatory structures that have underpinned Indian democracy that it is easy to lose track. Among the many such moves that are likely to have long-term adverse consequences for the country are those relating to federalism. Of course, after the recent extraordinary move that transformed a state into two Union Territories, without even consulting its elected legislature, it may be doubted that federalism exists at all. But quite apart from the blatant and aggressive attempts at political centralisation, there have been serious attacks on the economic decentralisation and…

One of the unusual features of the Indian economy relates to the banking sector, with bad loans of commercial banks becoming a serious problem, even at relatively low aggregate credit to GDP ratios by international standards. Figure 1 indicates that even at the peak in 2013-14, aggregate bank credit amounted to less than 54 per cent of GDP, and it has declined relative to GDP quite significantly thereafter. The big collapse occurred in the aftermath of demonetisation in November 2016. But bank credit was already decelerating before then, because of the structural problem of accumulated Non Performing Assets (NPAs) resulting…

Project Syndicate catches up with Jayati Ghosh, Professor of Economics at Jawaharlal Nehru University in New Delhi and Executive Secretary of International Development Economics Associates.  Project Syndicate: In your latest PS commentary, you criticize the International Monetary Fund’s apparent belief in “expansionary austerity.” In the case of Ecuador – where you foresee IMF-imposed austerity leading to a growth slowdown – how could the current loan agreement be improved? Is it simply a matter of extending the timeline for fiscal consolidation, or do you think the IMF should actually be making the opposite demand: fiscal stimulus? Jayati Ghosh: For Ecuador (and Argentina), two imperatives are abundantly clear: external debt…

There is no longer any room for doubt on the parlous state of the Indian economy. The automobile industry, seen as a bellwether of activity in the post-liberalisation years, is in crisis, as automakers, parts manufacturers and dealers have laid off about 350,000 workers since April this year, with more job cuts likely. While this could still reflect falling demand only from higher income groups, recently, Parle Products, once the world’s largest selling biscuit brands, announced that it may have to lay off up to 10,000 workers (around a tenth of its workforce). The company blamed falling sales due to…

Despite recognising the damaging effects of austerity on Greece's economy, the IMF has made the same mistakes in its subsequent deals with Argentina and Ecuador. Click here for full article. (This article was originally published in the Project Syndicate on August 14, 2019)  

The euphoria around emerging markets faded a while ago, but somehow the hope persists that economies in Asia can buck the global trend and grow fast enough to create an alternative growth pole. It is true that the global financial crisis and its aftermath proved that Asian “decoupling” is a myth, and the ongoing trade-cum-technology war instigated by the U.S. against China does not generate much optimism about immediate prospects for China as the dominant economy in the region. But it is a season for grasping at straws. The basic problem is the inadequacy of effective demand in the global…

The global crisis and subsequent slowdown in imports of advanced economies put a brake on the export-oriented growth of developing Asia, forcing many countries in the region to look for other sources of dynamism. The instabilities and vulnerabilities in the northern markets were clearly the result of the end of the debt-driven bubble in the US and some other European countries, and should have served as a stark warning to other countries to avoid such a volatile trajectory. Ironically, however, that was not the lesson that was apparently learned by economic policy makers in developing Asia. Instead, to enable recovery…