WP2011/04: Trends and Patterns in Consumption Expenditure: A Review of Class and Rural-Urban Disparities, Satyaki Roy, October 2011

Abstract:This paper primarily aims to capture the changing patterns of consumption expenditure of three broad classes, namely, the ‘upper’ ‘middle’ and ‘bottom’ classes in the rural and urban India. In contrast to what is generally held that differences in consumption of necessaries across classes decline more the economy grows, this paper argues that there had been hardly any sign of convergence. Furthermore, in the cases of most of the food and non-food items, especially, education and medical services the consumption expenditure in real terms is showing trends of a widening gap between the upper and the bottom classes.

WP2011/03: The Global Crisis and the Remedial Actions: A Non-mainstream Perspective, Sunanda Sen, May 2011

Abstract:The current global financial crisis, has spread across countries and sectors, affecting both financial and real spheres of economies in advanced as well developing countries. This has been caused by policies based on ‘rational expectations’ models advocating de-regulated finance, with uncertainty and facilities for easy credit and derivatives, globalised exposures for financial institutions and long term contractionary effects with underconsumption which contributes to further instability and contraction of finance. The responses so far from monetary authorities in US have been ineffective to cure unemployment, low growth, the lost monetary autonomy in developing countries and distress in Euroland. There is a need for a strict curbing of speculation in finance and instituting of an “employer of last resort”.

WP2011/02: Spatial Organization of Production in India: Contesting Themes and Conflicting Evidence, Satyaki Roy, April 2011

Abstract:The emergence of space as a determinant in the functional relations linked to production and growth is a recent development in theories of industrial organization. This paper primarily reviews the contesting themes in explaining changes in relative importance of space. In reference to industrial clusters in India, the paper argues that it is the heterogeneity of the industrial organizations that captures ‘space’ as an analytical category and broad generalizations often do not address the spatial dimensions. Neither also is it true, at least for developing countries such as India, that small enterprise clusters always reflect the post-Fordist dimension of change in the production organization. In the context of global production chain, this paper further argues that participation in such value chains might lead to contradictory outcomes in production organization giving rise to increased rift between the ‘global’ and the ‘local’.

WP2011/01: India's FDI Inflows: Trends and Concepts, K.S. Chalapati Rao and Biswajit Dhar, Febraury 2011

Abstract: India’s inward investment regime went through a series of changes since economic reforms were ushered in two decades back. The expectation of the policy makers was that an “investor friendly” regime will help India establish itself as a preferred destination of foreign investors. These expectations remained largely unfulfilled despite the consistent attempts by the policy makers to increase the attractiveness of India by further changes in policies that included opening up of individual sectors, raising the hitherto existing caps on foreign holding and improving investment procedures. But after 2005-06, official statistics started reporting steep increases in FDI inflows. This paper is an attempt to explain this divergence from the earlier trend.
At the outset, the paper dwells on the ambiguities surrounding the definition and the non-adherence of international norms in measuring the FDI inflows. The study finds that portfolio investors and round-tripping investments have been important contributors to India’s reported FDI inflows thus blurring the distinction between direct and portfolio investors on one hand and foreign and domestic investors on the other. These investors were also the ones which have exploited the tax haven route most. These observations acquire added significance in the context of the substantial fall in the inflows seen during 2010-11.
In most countries, particularly those that have faced chronic current account deficits, obtaining stable long term FDI flows was preferred over volatile portfolio investments. This distinction between long term FDI and the volatile portfolio investments has now been removed in the accepted official definition of FDI. From an analytical point of view, the blurring of the lines between long term FDI and the volatile portfolio investments has meant that the essential characteristics of FDI, especially the positive spill-overs that the long term FDI was seen to result in, are being overlooked. FDI that is dominated by financial investments, though a little more stable than the portfolio investments through the stock market, cannot deliver the perceived advantages of FDI. The net result is that while much of the FDI cannot enhance India’s ability to earn foreign exchange through exports of goods and services and thus cover the current account gap on its own strength, large inflows of portfolio capital causes currency appreciation and erodes the competitiveness of domestic players. The falling share of manufacturing and even of IT and ITES means that there is less likelihood of FDI directly contributing to export earnings. India seems to have been caught in a trap wherein large inflows are regularly required in order to finance the current account deficit. To keep FDI flowing in, the investment regime has to be liberalised further and M&As are allowed freely.
Even at the global level, the developmental impact of FDI is being given lesser importance notwithstanding the repeated assertions to the contrary in some fora. International data on FDI and its impact has never been unambiguous. If FDI has to deliver, it has to be defined precisely and chosen with care instead of treating it as generic capital flow. India should strengthen its information base that will allow a proper assessment of the impact that FDI can make on its development aspirations.

WP2010/12: On the Sustainability of India’s Non-Inclusive High Growth, Surajit Mazumdar, December 2010

Abstract: This paper examines the sustainability of the unprecedentedly high aggregate GDP growth witnessed in India from 2003-04 till the eruption of the global crisis. It argues that the post-liberalization highly non-inclusive and corporate-sector led growth trajectory in India suffers from a fundamental contradiction which renders it inherently unstable. This contradiction is between increasing dependence of growth on investment demand and the absence of a commensurate expansion of either output or employment in organized manufacturing, the main sector where rapid growth of capital formation tends to be relatively concentrated. This had already generated a collapse of investment and a manufacturing centered growth slowdown in the second half of the 1990s. The paper shows that high growth in India after 2003-04 did not eliminate this contradiction. Instead, the transmission effects generated by an exceptionally expansionary phase of the global economy enabled a sharp revival of investment which generated this growth, but in the process the contradiction started surfacing again. With the global crisis this phase came to an end, and in the post-crisis situation revival of that growth trajectory appears unlikely. In such circumstances even modest gains on the development front from via the positive effects of high growth on public revenues cannot be guaranteed.

WP2010/11: Operation of FDI Caps in India and Corporate Control Mechanisms, K.S. Chalapati Rao and Biswajit Dhar, December 2010

Abstract: While India has generally been following an open door FDI policy, a few areas are still subject to caps on FDI and/or specific government approval. One of the justifications for the same is the need to retain a degree of control over the operations of the investee companies in Indian hands. The government specified the methodology for calculating direct and indirect foreign equity in Indian companies in order to remove the ambiguities in calculating the extent of FDI in a company. Based on empirical evidence this paper argues that percentage of shares or number of directors do not necessarily represent the extent of control and more direct intervention would be required if the objectives of imposing the caps are to be achieved.

WP2010/10: Indian Capitalism: A Case that Doesn’t Fit? Surajit Mazumdar, November 2010

Abstract: This paper critically examines the ‘Varieties of Capitalism’ (VoC) School’s approach to constructing typologies of capitalisms with reference to the specific case of Indian capitalism. It emphasizes that two factors related to its origin and initial emergence remain crucial for explaining many of the key and sometimes very specific outcomes being generated by the operation of Indian capitalism in its current stage. These factors are, firstly, that Indian capitalism was born out of the womb of capitalist colonialism, and secondly, that no thoroughgoing agrarian transformation happened in India before or after independence. These have strongly conditioned capitalist development in India after independence, first under a more statist and protectionist regime till 1991 and subsequently under a more open and market-oriented policy in the era of globalization. The transformational impact of this development has been consequently limited, even in comparison to other late-industrializing Asian capitalisms, and insufficient to transcend these factors. Yet changes have happened over time, which lie behind the break state economic policy made with the past in 1991. The paper argues that such a combination of continuity and change poses some vexing problems for the characterization of contemporary Indian capitalism as a particular variety.

WP2010/09: Big Business and Economic Nationalism in India, Surajit Mazumdar, September 2010

Abstract: This paper emphasizes that economic nationalism in India both contributed to and coexists with the liberalization process initiated since 1991, which marked a decisive break in India’s economic policy and pushed her towards increased integration with the global economy. It is however an inherently more exclusive form of economic nationalism in which capitalist priorities press down harder on an already constrained state. India’s capitalists embraced rather than resisted the liberalization process, in contrast to their active support for a strategy of autonomous development at independence. The paper focuses on this shift in the outlook of the capitalist class represented by India’s big business and tries to identify the reasons why it initially emerged and why it has gathered strength over time. The paper argues that this transformation reflected the development and evolution of Indian capitalism resulting from industrialization under the older autonomous strategy. Embracing liberalization became both possible and necessary for India’s capitalists. The shift in the Indian state’s policy thus was a response to the imperatives of national capitalist development, and the state has continued to assist Indian capital’s growth and development in different ways. Indian capital has in fact gained increased leverage with the state and with its support has grown rapidly and stepped on to the global stage. In the process it has also changed – become less industrial, and more integrated into global production and financial systems. This growth and transformation of Indian big business in turn has reinforced its support for liberalization.

WP2010/08: Aligning with both the Soviet Union and with the Pharmaceutical Transnationals: Dilemmas attendant on initiating Drug Production in India, Nasir Tyabji, August 2010

Abstract: The paper discusses the processes typically underlying the Government of India’s technological choices in the mid 1950s, with a case study of the pharmaceutical industry. It argues that questions of the future development of India’s pharmaceutical industry was impacted by debates over placing it in the public or private sector, and over securing finance from the government’s own budget, from transnational corporations or through Soviet aid. A close scrutiny of the trajectory of these debates reveals how the highly contested conception of the required scope of the production process finally emerged. This scope then determined why, when faced with an offer from the USSR for an integrated pharmaceutical complex also manufacturing dye intermediates; and from the German conglomerate Bayer for a standalone plant for chemical intermediates, both for drugs and dyes, the Government decided to accept the Bayer proposal.

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