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This paper analyzes the growth performance in India over the past two decades. We use several statistical and economic methodologies to estimate the growth rate of potential output. The annual growth rate of potential output is estimated for 2011 to be in the range of 7.7-8.2 percent. All the estimation techniques suggest that there was a big boost to potential growth between 2002 and 2007, but since then it has not increased significantly. Based on statistical approaches and conditional on moderate annual growth forecasts of 7-7.5 percent between 2012 and 2014, there is some evidence that the recent decline in growth is likely to be driven by structural factors. Most of the methodologies indicate that output gap continues to be positive, suggesting caution in further loosening the monetary policy stance. Overall, while the Indian growth story may/may not have withered, the evidence does give indications that the growth story may have faltered.
The deterioration in India's current account has led to a series of debates in the policy arena relating to sustainability, the importance of exchange rates in influencing the trade balance, and the role of high and rising inflation. Against this background, this article takes a step back and analyses the performance of the external sector in India since 1990. It estimates the sustainable current deficit to GDP ratio to be 2.3%. Importantly, even to sustain a 2.3% CAD, India would need net capital infl ows of the order of at least $50-70 billion annually over the next five years. Given the uncertainty around both the push factors (e g, rising global risk aversion) as well as the pull factors (slower growth in India) that determine capital flows, attracting such magnitudes of flows could very well be an uphill task.
This paper reviews the monetary transmission mechanism in low-income countries (LICs). We use monetary transmission in advanced and emerging markets as a benchmark to identify aspects of the transmission mechanism that may operate differently in LICs. In particular, we focus on the effects of financial market structure on monetary transmission. The weak institutional framework prevalent in LICs drastically reduces the role of securities markets. Consequently, traditional monetary transmission through market interest rates and market-determined asset prices are weak or nonexistent. The exchange rate channel, in turn, tends to be undermined by heavy central bank intervention in the foreign exchange market. The weak institutional framework also has the effect of increasing the cost of bank lending to private firms. Coupled with imperfect competition in the banking sector, this induces banks to maintain chronically high excess reserves and to invest in domestic public bonds or (when possible) in foreign bonds. With the financial system not intermediating funds properly, the bank lending channel also becomes impaired. These factors undermine both the strength and reliability of monetary transmission, which has important implications for the conduct of monetary policy in LICs.
Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or in gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation. Large scale membership of women in local councils affects crime against them more than their presence in higher-level leadership positions. (JEL D72, J16, K42, O15, O17)
This paper estimates the effect of China's exchange rate changes on exports of developing countries in third markets. We develop an identification strategy in which the degree of competition between China and its developing country competitors in specific products and destinations plays a key role. We exploit variation across exporters, importers, products and time-afforded both by disaggregated trade data and bilateral exchange rates-to estimate this "competitor country effect." We find robust evidence of a statistically and quantitatively significant effect. Our estimates suggest that a 10 percent appreciation of China's real exchange rate boosts a developing country's exports of a 4-digit HS product to third markets on average by about 1.5-2.5 percent.
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