Jayati Ghosh’s Blog

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…

Suddenly, it seems like everything is shrinking in India: our capacity for tolerance and diversity, the space for democratic expression and dissent – and now, economic growth. The warning signs have reached a point where they cannot be ignored any longer and more people, including prominent business leaders, are speaking out. Yet, at least overtly, the government is in denial, claiming that this serious slowdown is at most a “correction,” resulting from “an excess of reforms,” all of which will make everything better very soon. Writing on the wall The economic data coming out now are stark. There is negative…

While the neoliberal focus has been on attempts to “shrink the state” on the grounds of corruption and inefficiency, sensible people have long recognised that high levels of public employment tend to be associated with better quality of life for people in a society. After all, the essential public services, from infrastructure to amenities, to security to social services, mostly have to be delivered by governments. This is because private markets simply do not provide them or underprovide them, and also because private provision, based on profitability, delivers much more unequal results. And delivering all this necessarily requires employing people.…

Inequality has increased since it caught the attention of the international community. The claims that global inequality has decreased because of the faster rise in per capita incomes in populous countries like China and India must be tempered by several considerations. National policies are crucial in this worsening state of affairs and the international economic architecture and associated patterns of trade and capital flows encourage such policies. More national policy space is required for governments, especially in developing countries, to pursue policies that would move towards more sustainable and equitable development which in turn requires significant changes in the global…