Beyond Microeconomics and Macroeconomics: The Need for Indian Social Economics

The country is in need of an integrated Indian social economics thought which applies all the established disciplines of economics including, in the main, micro and macroeconomics, to develop economic principles that are uniquely relevant to India. The need is to enhance capacities, capabilities and effectiveness in agriculture, infrastructure, manufacturing, renewal, employment, migration and behaviours. These are typically Indian issues requiring economic growth with social equity. However, lack of directed and issue-specific economic thought has prevented due progress and fulfilment of potential. India does have its general and applied schools of economics. Every premier college or institution has a department of economics. There are also specialized institutions like Madras School of Economics, National Council for Applied Economic Research (NCAER), Institute for Social and Economic Change and so on.

The established schools and centres, however, have not been focussed on economic issues relevant for India. Nor has there been an effort to develop economic principles that guide public policy and governance at central and state levels. While several case studies have been conducted, there has been no specific vision to develop an India-specific economic theory. Intellectuals and administrators are more focused on variations in known policy measures and instruments rather than develop India-specific prescriptions. Now that the NDA government and States are is keen to establish new centres of higher education and research, it would be appropriate to establish Indian Institutes of Social Economics and Research in the principal geographical regions of the country to develop India-specific economic thought and practice.

For more...

Economic Behaviour of Nations and Societies: A Strategic Role for Governments

Like individuals, nations also display an economic behaviour. A nation whose society, or sections of the society, prematurely considers that the peak of affluence has been achieved would give a goby to the core concepts of productivity and innovation as well as equity and equality that drive continuous development. A nation which tries to achieve growth through top down investments rather than grassroots development would face lopsided development. The competitive behaviour of emerging nations unfortunately has been ignoring such requirements. Governments have sought the easy way to attract development and foster industrialization by offering fiscal sops or incentives and subsidies rather than by creating durable high quality infrastructure.

Societies tend to chase affluence sans productivity. As an economy begins to transform itself skews in demand and supply of talent take place, with enhanced job opportunities chasing limited skill sets. This, in turn, drives up wage structures in certain classes of employment while leaving a broad base of jobs relatively untouched. This, in turn, leads to a spurt in the consumption of luxury goods and premium products. In such skewed societies imports tend to be on unproductive lifestyle products rather than essential technological tools and equipment. Gross capital formation thus tends to be into activities with poor capital-output ratios, sub-optimizing overall growth potential and maximizing inequities. Emerging nations need to strengthen their institutional mechanisms to ensure that economic behaviour is appropriately shaped.

For more...

India's Economic Independence: Minimal Imports and Maximal Exports

Michael Porter proposed that just as firms seek and possess competitive advantage, nations are often endowed with, and possess, comparative advantage as a national phenomenon. For example, Brazil and Colombia may possess comparative advantage in coffee while China and India may possess similar comparative advantage in tea. If India needs to be successful in its quest for global economic dominance despite similar competitive aspirations from other countries governmental policies and industrial strategies must target generation of trade surplus in each industry not merely as an industrial or corporate competitive advantage, but more as a national comparative advantage. Though export-import balance may seem like an industry or firm level competitive capability, it has a larger macroeconomic advantage.

More than the macroeconomic numbers, the industrial strength and vitality that gets established through a trade surplus situation provide a virtuous cycle of innovation and manufacturing for global marketing advantage for India. It is possible that an export oriented economy will be sought to be equalized in the global foreign exchange scenario through an appreciating Rupee; however, the benefits of continuing trade surplus far overweigh the risks. A strategy of minimal imports with maximal exports requires all-round improvement in infrastructure - educational, residential, medical, transport, energy and telecommunications - based essentially on indigenous equipment as much as possible. This would help the nation be not only more productive but also enhance the trade surplus for the benefit of the nation.

For more...