India's National Manufacturing Policy

India’s new National Manufacturing Policy (NMP) is just around the corner. Newspaper reports have provided some glimpses of the thrust of policy changes, with stated goals of creating 100 million jobs and increasing the manufacturing sector share of GDPhttp://www.blogger.com/img/blank.gif from 16% to 25% by 2025. Several innovative proposals have surfaced. One is to provide capital gains tax exemptions to small-scale enterprises, allowing them to raise equity by selling inherited land. Another is to create joint sinking funds in specified manufacturing zones, allowing speedier resolution of payments to labour that loses jobs. Much has been made of greater flexibility for environmental clearances. Unfortunately, this is probably going to result in greater social costs, and may not be the main culprit in constraining manufacturing growth, despite the recent attention given to this issue.

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Did bank nationalization save India?

When India survived the global financial crisis relatively unscathed, several prominent public figures claimed that the country’s public sector banks had been pillars of stability and resilience, contributing to the economy’s strong performance under stress. Indeed, during the crisis, households and firms shifted money from private to public banks, and the latter outperformed the former through those tough times. But what really happened? At the recently held India Policy Forum, Viral Acharya of New York University provided a comprehensive and provocative empirical analysis. No such analysis is perfect, but there is great merit in actually digging into the data, rather than jumping to conclusions and shaping policy without adequate investigation.

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Competition in the Indian Market for Currency Derivatives

In 2009, MCX Stock Exchange (MCX-SX) “informed” the Competition Commission of India (CCI) that the National Stock Exchange of India (NSE) was acting anti-competitively in the nascent market for currency derivatives. Both NSE and MCX-SX provide platforms for trading instruments such as US Dollar-Indian Rupee currency futures of differenhttp://www.blogger.com/img/blank.gift maturities. MCX-SX essentially complained that NSE was using predatory pricing to drive its competitor out of the market, using its dominant overall position in providing trading platforms for financial instruments (especially equities), and resulting deep pockets.

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Getting India to Ten Percent Growth

The 10% growth target for India has had a magical allure. It is hard to say if anyone first held it out publicly as something to strive for realistically, but I do remember Vijay Kelkar as being an early believer. The current Prime Minister has also mentioned this target several times. Yet that double-digit growth rate has remained stubbornly out of reach as a short-term forecast of actual growth. Indeed, it seems that when the Indian economy nears 10% growth, inflation rears its ugly head, and fears of overheating spread. A few years ago, estimates of India’s medium-term potential growth rate tended to be in the 8-9% range. This may be about to change.

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Lady Gaga and Globalization

In the long-standing feverish celebrity culture of the US, pop singer Lady Gaga has scaled new heights. She recently displaced Oprah Winfrey at the top of Forbes magazine’s Celebrity 100 list, and Amazon.com used her latest album as a 99 cent promotion,http://www.blogger.com/img/blank.gif designed to challenge Apple’s dominant iTunes and its looming iCloud music services. The Amazon promotion garnered a Wall Street Journal headline, “Lady Gaga Wars.”

Now Lady Gaga plans to extend her fame to South Asia. In an interview with the WallStreetJournal.com, she said, “The reason I’m going to India now is because I can. I didn’t have the money or the resources before to travel and bring all of my things with me and reach an entire new territory of fans.” The entry strategy includes several Bollywood-style remixes of her songs, and employment of a firm that specialises in producing and distributing entertainment content aimed at South Asians all over the world.

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The Future of the IMF

The arrest and resignation of Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), has captured headlines for days. One of the http://www.blogger.com/img/blank.gifhttp://www.blogger.com/img/blank.gifconsequences of this sudden turn of events has been the clear surfacing of several candidates from developing nations, as well as strong claims from some emerging economy policymakers that Europe should cede its traditional right to the position. An English bookmaker made Turkey’s Kemal Dervis the favourite in early betting, with India’s Montek Ahluwalia not far behind in the odds.

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What Do Investors Know?

Globalization has flattened the world in some ways, but not in others. Many years ago, economists Martin Feldstein and Charles Horioka observed that national savings and investment rates are highly correlated, indicating that investors tended to keep their money at home, rather than diversify globally, even without restrictions on capital flows. Subsequently, other economists documented this ‘home bias’ for portfolios of shares—investors tilt toward holding shares of their own country’s companies.

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