This is a collection of essays written for the Financial Express, an Indian financial daily. The common theme of these essays, which cover a period of almost four years, from October 2010 to May 2014, is the issue of how India is finding its place in the world, after a history of colonization and post-colonial suspicions. The essays discuss rebalancing the world economy, the G20 and India’s place in that newish grouping, foreign policy and comparisons to the US, China and Russia, cultural and financial impacts of globalization, and the role of India’s diaspora. The concluding essay considers some global positioning options, good and bad, for India’s new government. 

This monograph compares the methodologies and progress of the different existing models of information and communication technology (ICT) use for broad-based development and economic growth in India. It will examine the role of complementary reforms in government administration and policies. The focus is chiefly on the rural economy, where the developmental needs are the greatest, and the use of ICTs presents the most challenges. It examines the nature of benefits in areas such as education, health, market efficiency, and democratic participation, the channels through which impacts can be realized, and the practical means for realizing potential benefits, including organizational innovations and government policy as well as structural changes.

We have certainly been living in interesting times. While avoiding the worst connotations of that concept (no global war or other catastrophe), we have seen the fall of communism, the rise of information technology, and the beginnings of a shift in the global economic balance, back toward the days before the industrial revolution, when Asia carried as much economic and political weight as the West. All three trends – the ostensible triumph of capitalism, the innovations wrought by digital technologies, and the growth of China and (to some extent) India – in some ways came to a head in the current financial crisis. The crisis was sudden, and at one stage seemed that it would engulf the world economy in depression and even chaos. It prompted some fevered writing, by journalists in particular. For my part, writing fortnightly columns for Indian financial dailies (first the Financial Express, then The Mint), I have seen my role as bringing analytical economic thought to bear on understanding current events. A column gives one some freedom to opine, but also imposes disciplines of concision and clarity, beyond the usual requirements of academia. The following dozen pieces were written between September 2007 and April 2009. They comment on the reasons for the crisis, and possible solutions, using economic theory to understand the issues wherever possible, but in relatively non-technical language. What keeps markets working well? What do financial markets accomplish, at a fundamental level? Why do markets fail? Why do scandals arise? What can regulators do to improve matters? I have tried to shed light on these basic questions in the context of current events. Along the way, I have had the temerity to take issue with Alan Greenspan, George Soros and Martin Wolf, all bigger names than I, but less well versed in the core principles of economic analysis. My sympathies lie with other professional economists: George Akerlof, Nouriel Roubini and Larry Summers come out well in these pieces, though I take issue with Summers’ implicit politics with respect to globalization. Several essays look at aspects of globalization, and view with optimism the potential of emerging economies. Another underlying theme is that the crisis was not about the collapse of capitalism, but rather arose from some specific failures of institutional design in so-called advanced economies. Getting this lesson right is critical for economies that want to go beyond being just “emerging.” Readers must judge if I have made my points clearly and convincingly enough.

In the post-colonial world, the countries of South Asia have evolved politically in different ways, amidst internal and regional conflicts, but retained some commonality of institutions and cultures. Since the 1990s, the promise of market-led development and the growth of a middle class, especially in India, have reshaped expectations in a way not seen since the immediate post-colonial period, and provided the prospect of a region that combines its particular approach to governance with common aspirations and achievement of economic well-being – what might be a new “idea of South Asia.” This paper examines some aspects of the development of the South Asian middle class, their role in economic development, and the potential of the idea that shared middle class aspirations of material consumption can be a regional driving force. The paper argues that, for this potential to be realized, the middle class in South Asia may need to aspire to something more than private affluence in the midst of public squalor. In that case, a new idea of South Asia will require building social capital in ways that will challenge all of the region’s societies. Effective collective action across, but first within, the nations of South Asia will be the true test of whether this potential South Asian identity emerges.

This paper examines several aspects of India’s system of Intergovernmental Fiscal Relations (IGFR). It first reviews the origins and context within which the IGFR system was established and examines how it has evolved. It describes the nature of the system, including assignment of powers and functions, intergovernmental fiscal transfers and the principles that guide their design. It examines several other dimensions of the IGFR system, such as its interface with policy imperatives, evolution of norms, and recent institutional developments. It concludes with an assessment of lessons learned so far, and key challenges that lie ahead.

This paper provides a self-contained overview of the present problems of state finances in India. It begins with an overview of historical evolution and current institutional structures, including economic, political, administrative and fiscal aspects of India’s federal system. The paper then reviews the current situation of India’s state government finances, going on to consider various developments that have shaped the states’ current fiscal situation, including the roles of national economic reform, the intergovernmental transfer system, tax reform, and local government reform. Policy options for reforming institutions of fiscal federalism system, borrowing mechanisms for the states, and governance are then discussed, with an emphasis on the principle that states should have appropriate incentives for fiscal discipline at the margins of revenue and expenditure.

This paper provides a comparative assessment of fiscal decentralization in China and India, including the standard components of expenditure and revenue assignments and institutions for intergovernmental transfers, as well as the nature of subnational authorities over general economic activity. In particular, the case of China, where town and village enterprises have been very active, is contrasted with that of India, where local governments remain circumscribed in their authority, despite decentralizing reforms. The implications of differences in decentralization for fiscal outcomes and economic growth are discussed. The characterization of each country in terms of concepts of federalism, i.e., competitive, cooperative and market preserving federalism, is discussed, in attempting to abstract from the two cases to more general lessons for fiscal decentralization.

This paper provides an integrated analysis of the role of the service sector in recent Indian economic development. It discusses the nature of services, their distinction from products, and their categorization. It provides an overview of India’s overall growth experience, and a detailed examination of the contribution of the service sector to growth. It includes an examination of the potential for spillovers from IT, ITES and other service sectors such as financial services, to the rest of the economy, drawing on econometric work, as well as input-output analysis of linkages to understand these possible spillovers and growth potentials. Based on this evidence, it appears that India’s manufacturing sector development may have been constrained in part by weaknesses in key service sectors such as transportation and electricity. The paper also considers the particular role of international trade in services, which is of growing importance. It discusses the consequences for employment of different growth paths, the challenges of education and manpower training to support and sustain India’s development path, and social and environmental issues, including regional inequality issues. The Indian experience is related to recent discussions of industrial policy, and development policy more generally.