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Thursday, March 15, 2012

Insights from the Economic Survey 2011–12-Human Development, India & Global Economy

The newspaper editions of tomorrow and dayafter will be filled with analysis and insights as people try to decipher the numbers and read the tea leaves, for both the Economic Survey and the Union Budget. However, this blogpost aims to capture the nuggets mentioned in the 14 chapters of the budget(which I did read today!), and does not claim to be exhaustive given the huge data overload! Anyways, here goes for Chapter 13 and 14(normal text is from the survey, bold text is mine) which can be read at these links

Chapter XIV is first of its kind, attempting to place India among its global peers-both emerging and developed. A must read,
  1. Avoiding the education loan bubble-this is a raging debate abroad and has reached India also, an interesting idea by ICL-the issue is whether this will lead to tax evasion eventually - A recently developed theoretical paper by the Indian Statistical Institute(ISI) deals with the impact of an ICL scheme in India, where the recipents repay the loan as an additional tax to the government, only in the event of success. In that case, when the agents fail, there is a lower bound to which their income can fall. The advantages of ICLs over subsidies and standard mortgage loans include fiscal advantages as they are self-financing; equity as ICLs can be targeted to benefit the poor; outcome orientation instead of outlay orientation of subsidies; and risk reduction for households. The risk borne by government is more than balanced by the positive spillovers from aggregate human capital accumulation, better socio-economic outcomes, and consequent tax base expansion and revenue increases.
  2. India lags the BRIC nations in fiscal parameters-even though others are more energy surplus, still this is not a good sign 
  3. Tectonic Shifts-When small economic crises crop up repeatedly over a relatively short period of time, policymakers in each country may treat each such episode as an independent event requiring independent action but, in reality, such ‘cluster crises’ may be a sign of some fundamental shift taking place in the global economy. Hence, faced with cluster crises, it is important to occasionally
    step back and take a more holistic view of the situation. There has been some research trying to do precisely that-for example, the skilled end of the labour markets in India and China is competing with its counterparts in industrialized nations and, as a consequence, its salaries are rising, resulting in growing inequality in these countries.

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