India: Links for 2nd December, 2019

What else?

  1. “The non-government part tends to form 87-92% of the economy. In the July-September period, it formed nearly 87% of the economy. If 87% of the economy is growing at 3.05%, the situation is much worse than it seems.”
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    Vivek Kaul about the GDP data is worse than it looks.
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  2. “At its core, Indian industry is cooling rapidly, with industries like coal, steel, cement and electricity having contracted in October. Eight core infrastructure industries have not grown in the first seven months of this year. Manufacturing, led by the automobile industry, has contracted, and mining stopped growing in the second quarter. Energy utilities and construction saw their growth rates almost halving from the same quarter a year ago. Another three months of declines will officially qualify as a manufacturing recession.”
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    The R-word is being heard, louder and louder.
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  3. “The good news is that GDP growth in the next quarter or the fourth quarter could well be a wee bit higher. The pop thesis is that given the lower base of the previous year, growth could be statistically higher—a bit like standing next to Leonardo DiCaprio, who is six feet tall, and then next to Tom Cruise, who is 5 feet 7. The bad news is that the slowdown is not going away anytime soon. ”
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    Shankkar Aiyyar, in top form.
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  4. ““Besides monetary easing by the Reserve Bank of India (RBI), the government needs to simplify the goods and services tax (GST) and introduce a new direct tax code to clear the tax jungle created by our ancient income-tax law and rules,” he says.”
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    The “he” in this case being Arvind Virmani.
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  5. This may be behind a paywall for you, in which case, my apologies. But the final link in this set is from TN Ninan over at Business Standard.

India: Links for 18th November, 2019

  1. ““In the end it was this access to unlimited reserves of credit, partly through stable flows of land revenues, and partly through collaboration of Indian moneylenders and financiers, that in this period finally gave the Company its edge over their Indian rivals. It was no longer superior European military technology, nor powers of administration that made the difference. It was the ability to mobilize and transfer massive financial resources that enabled the Company to put the largest and best-trained army in the eastern world into the field””
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    An excerpt that itself was excerpted, but too delicious to resist – Alex Tabarrok writes an excellent review of William Dalrymple’s latest book on the East India Company.
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  2. “The problem is that, rather than examining independent indicators of economic activity, the Bretton Woods’ forecasts appear to be based primarily on (a) extrapolation of the official growth figures, and (b) some subjective adjustment based on staff’s assessment of policy changes.”
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    CGDEV on reporting of India’s growth numbers.
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  3. “Is all this working? Economists have talked about the possibility of green shoots of recovery in the second half of this financial year. However, looking at the data for July to September 2019, for now the slowdown is well and truly in place.”
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    Vivek Kaul isn’t impressed with the state of the Indian economy.
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  4. And perhaps with good reason: Somesh Jha on the fall(!) in rural demand.
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    “Consumer spending fell for the first time in more than four decades in 2017-18, primarily driven by slackening rural demand, according to the latest consumption expenditure survey by the National Statistical Office (NSO).”
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  5. Slate Star Codex on 1991, and the difficulty of using statistics. Econ nerds only!
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    “…”we need to study and raise awareness of the history of democratic, comparatively “nice” countries that did nothing worse than overregulate business a bit – and investigate whether even these best-case scenarios still doomed millions of people to live in poverty. My (biased) guess is that careful study will show this to be true.”

EC101: Links for 31st October, 2019

  1. “To make this easier to navigate, I’ve grouped the publications by one measure of influence, academic citations per year since publication. The categories are not indications of the quality of the research, just its academic influence to date. Within categories, I’ve ordered studies chronologically.”
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    A useful set of links: 100 of Michael Kremer’s most popular papers.
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  2. “Moreover, the key target of economic policy, Gross Domestic Product (GDP), doesn’t provide much help. So with a view to ‘remastering’ macroeconomics, in a new ING report, produced with the help of John Calverley, Carlo Cocuzzo and I investigate how GDP could be remixed. We pay particular attention to the impact of the rapid digitalisation of the economy that has been gathering momentum over the past 25 years. Pursuing the music analogy, our focus is on a digital remix of GDP.”
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    I’m not a big fan of the concept of GDP in the first place, but that being said, this article helps us understand how the digital economy might perhaps be underrated in national income.
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  3. “Nigeria, like other countries in sub-Saharan Africa, is facing a demographic boom. By 2050, its working-age population will have increased 125 percent. At current GDP growth rates, the local labor market will be unable to absorb all the new entrants. One way for Nigeria to reduce this pressure, and make the most of remittance and skills transfers, is to promote new legal labor migration pathways with countries of destination across the globe.”
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    A useful overview of the Nigerian labor market and how it might be made more effective Applies in part to India as well, I’d argue.
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  4. “Trouble is, the rescue is entirely fictional. The only reason it’s even being attempted is to delay — as long as possible — the collapse of this large shadow lender. Such an event, as S&P Global said in a rare show of plainspeak by a credit appraiser, could be powerful enough to deliver a “solvency shock” to India’s troubled banks. Neither the lenders, nor the Indian government, wants to contemplate this grim prospect. Hence, the make-believe restructuring.”
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    Andy Mukherjee explains the mess that is Dewan Housing. Not only is this not going to end well, I’d argue that there are a lot many more skeletons about to tumble out of the closet.
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  5. “The march of technology means oil’s days are numbered. And for the good of the planet, that transition has to happen as fast as possible. But it doesn’t mean the people who gave their lives to getting energy out of the ground should have to suffer.”
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    Noah Smith on the second order effects of the slowdown in demand for oil.

India: Links for 24th June, 2019

  1. “Was the earlier system, based largely on ASI (Annual Survey of Industries) for manufacturing (registered and unregistered), perfect? No, it wasn’t. Is the MCA-based system perfect? No, it isn’t. Despite problems with MCA, is the MCA-based system superior to the ASI-based one? The consensus (I didn’t use the word unanimity) among experts seems to be that it is.”
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    Bibek Debroy’s article discusses Arvind Subramanian’s paper. That excerpt above is probably the best way of thinking about it – and as I’ve said before and will say again: if thinking about GDP measurement doesn’t give you a headache, you aren’t doing it right. By the way, two of the twitter threads this past Saturday were about the same issue: worth reading, in my opinion.
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  2. “In manufacturing, the increase in informalisation is due to two reasons, according to a 2018 study by the Indian Council for Research on International Economic Relations: first, because of dispersal of production from larger to smaller units; and second, because of the creation of an informal workforce subject to fewer regulations, the fact that employing contract (or informal) workers reduces the bargaining power of the regular or formal worker, suppressing wages overall.”
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    Indiaspend reviews the state of employment in the country, and finds that there is far too much informalization – but also that this is increasing  over time. In this regard, the best book, by far, to read is Bhagwati and Panagariya’s “Tryst with Destiny”.
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  3. “Indian macro policy has been operating under an implicit 2-4-6-8 framework, which are the targets for the sustainable current account deficit, the desired level of retail inflation, the consolidated fiscal deficit target embedded in law and the aspirational rate of economic growth. There is a need to take a fresh look at this macro policy playbook for two reasons. First, the individual targets have been decided at different points of time by different parts of the economic policy ecosystem rather than emerging from a common analytical project. Two, there are reasons to doubt its internal coherence given that India has rarely been able to meet all four targets simultaneously over the past decade.”
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    The always excellent Niranjan Rajadhakshya comes up with a useful framework to keep a tab on India’s macro levers: 2-4-6-8 is a very useful mnemonic. The rest of the paper speaks about whether this framework makes sense!
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  4. “This crisis has systemic written all over it because the market can no longer distinguish financiers that are illiquid from those that are insolvent.”
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    I’m calling it: there’s a major crash just waiting to happen in the Indian equity (not just equity) markets, no matter what is done. Speaking of what is to be done, the five suggestions here make a lot of sense. Andy Mukherjee doing what he does best.
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  5. “India’s firm size distribution is excessively small, even compared to other developing countries. Also, complementarily, the number of really large firms are also excessively small. We have a “small is bad” problem. What is driving the small-ness? Is labour regulations responsible for discouraging businesses from “placing too many workers under one roof”? Is there anything else driving or contributing significantly to this trend?”
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    Bhagwati and Panagariya once again. Also, urbanization matters! Artificial dispersion of industries or people (same thing) tends to not work. Gulzar Natarajan on what needs to be done to increase productivity in India.

Tweets for 22nd June, 2019

 

 

 

 

India: Links for 17th June, 2019

  1. “A changing global order, energy transitions and climate change and rapid technological advancement – India’s next government has the difficult task of steering the country through an interesting and crucial time. India 2024: Policy Priorities for the New Government, is a compendium of policy briefs from scholars at Brookings India, which identifies and addresses some of the most pressing challenges that India is likely to face in the next five years. Each policy brief is based on longer, in-depth and academically rigorous publications from the scholars.”
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    An excellent set of links to bookmark and keep handy to get a useful set of information about a) where India is today, and b) what she might need to do in terms of policy reform.
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  2. “While some of these issues can be resolved only in the next base-change exercise, greater transparency on the methodology and better data dissemination standards can help improve the credibility of the official GDP numbers. The CSO, which has now been merged with NSSO, can learn from the latter’s dissemination policies and start releasing unit-level data for all databases used in national accounts estimation (including MCA-21) in a machine readable format so that independent researchers can assess the quality of the data being fed into national accounts.”
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    Here’s a useful thumb rule to keep in mind when it comes to thinking about GDP. If the exercise doesn’t give you a headache, you haven’t thought hard enough about it. I am joking, of course – but only just. In this article, you get a sense of the myriad problems with the measurement of GDP in India. As the author of the piece above has mentioned on Twitter, what we need is a more reasoned discussion about how to measure economic data in this country, rather than fall into partisan debates of a political nature.
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  3. “Here is our contention: How far and how fast we can go below current 3.4 per cent as far as the centre’s fiscal deficit is concerned against the current demand slowdown? Do we stay put at 3.4 per cent (assuming it is met) for the first two years of the current government and then move down aggressively, as growth comes back to the system? We propose a radical shift in thinking as far as fiscal is concerned. The alternative to targeting fiscal deficit is that like most advanced economies and several emerging market economies India should target a structural deficit, which serves as an automatic counter-cyclical stabiliser.”
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    Lots to take away from this review of an article penned by two authors worth following in their own right, but rather more useful as a way to realize that this is how articles ought to be read: critical reading is exactly this.
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  4. “The government has completed laying optical fibre cables across more than 100,000 gram panchayats in the first phase and had aimed to complete connecting the remaining 150,000 councils by March 2019. The second phase has seen “zero progress”, according to government officials close to the matter. Pained by poor utilization of digital infrastructure, the Telecom Regulatory Authority of India (Trai) suggested auctioning BharatNet infrastructure on an “as is where is” basis after a meeting held in December at the prime minister’s office to take stock of the mission.”
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    Livemint on what needs to be done to revolutionize access to the internet even more in India. The role of gender in this case was not something I had thought about before, read the article to find out more. The bottom line is that we have come a long, long way – but also that there is a long, long way to go.
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  5. “There could be no compromise over values. And to understand those values, he rediscovered the wisdom from India’s ancient stories to bring clarity to our ambiguous present. And thus Karnad told us the meaning of what it means to be human.”
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    Livemint again, and this time it is Salil Tripathi mourning the passing away of Girish Karnad. RIP.

Links for 24th May, 2019

  1. “A few months ago, as I was reading Constance Reid’s excellent biography of Hilbert, I figured out if not the answer to this question, at least something that made me feel better about it. She writes:
    Hilbert had no patience with mathematical lectures which filled the students with facts but did not teach them how to frame a problem and solve it. He often used to tell them that “a perfect formulation of a problem is already half its solution.”
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    A very short, but oh-so-readable essay from Paul Graham. Please read it for a variety of reasons, but mostly to understand that reading is a long term activity with a lot (a lot!) of positive payoffs in the long run.
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  2. “When the Bureau of Economic Analysis (BEA) measures economic output, it categorizes spending with the National Income and Product Accounts (NIPA). Some of this spending, which is counted as C, I, and G, is spent on imported goods.1 As such, the value of imports must be subtracted to ensure that only spending on domestic goods is measured in GDP. For example, $30,000 spent on an imported car is counted as a personal consumption expenditure (C), but then the $30,000 is subtracted as an import (M) to ensure that only the value of domestic production is counted (Table 3). As such, the imports variable (M) functions as an accounting variable rather than an expenditure variable. To be clear, the purchase of domestic goods and services increases GDP because it increases domestic production, but the purchase of imported goods and services has no direct impact on GDP.”
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    From within the link to the Noah Smith article yesterday, a good, short explainer of GDP, and why imports don’t “reduce” from GDP.
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  3. “In economics, there is no free lunch. While TV channels feel that they are saving money by not paying the experts, what they get in return is a total mess and not some meaningful, coherent programming, in which people can take away some learning at the end.”
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    Vivek Kaul explains why people on the news shout so much. Incentives – it’s all, always, about incentives!
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  4. “In a 2009 summary paper of their respective decision-making sub-fields, psychologists Daniel Kahneman and Gary Klein spell out the conditions required for expertise to exist. They discover that in order for expert intuition to work, the practitioner needs to inhabit a domain where:The environment is regular. That is, the situation must be sufficiently predictable, with observable causal cues.
    There must be ample opportunities to learn causal cues from the environment.”
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    An interesting article about whether ideas from one domain should be used in another, and under what circumstances.
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  5. “Whether the East Asian Model will take hold in East Africa and beyond is not a given. But it also isn’t a stretch to see how the African “Lion economies” could accelerate their transformation by embracing the formula that successively produced the Asian Tigers and China.In his seminal Development as Freedom, Amartya Sen equated personal freedom with economic development. But to reach that objective requires traversing through the phase of “development as imitation” of successful models that came before.”
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    Can Africa achieve in this century what Asia did in the previous one, following the same playbook? This is going to be the most important question for this century, and this article helps you understand how to think about it. One useful way to start thinking about it, at any rate.