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You are here: Home / Archives for Economy

Open letter to the Prime Minister on NREGA from Development Economists

October 15, 2014 by Nasheman

Photo: Ranjeet Kumar, The Hindu

The central government’s moves to dilute or restrict the provisions of the National Rural Employment Guarantee Act (NREGA) has serious implications on employment of about 50 million households, who benefit from the programme every year, say concerned economists. Photo: Ranjeet Kumar, The Hindu

Dear Prime Minister,

We are writing to express our deep concern about the future of India’s National Rural Employment Guarantee Act (NREGA).

The NREGA was enacted in 2005 with unanimous support from all political parties. It is a far-reaching attempt to bring some much-needed economic security to the lives of millions of people who are on the margin of subsistence.

Despite numerous hurdles, the NREGA has achieved significant results. At a relatively small cost (currently 0.3% of India’s GDP), about 50 million households are getting some employment at NREGA worksites every year. A majority of NREGA workers are women, and close to half are Dalits or Adivasis. A large body of research shows that the NREGA has wide-ranging social benefits, including the creation of productive assets.

Recent research also shows that corruption levels have steadily declined over time. For instance, official estimates of NREGA employment generation are very close to independent estimates from the second India Human Development Survey. While corruption remains a concern, experience shows that it can be curbed, and the battle against corruption in NREGA has helped to establish new standards of transparency in other social programmes as well.

No doubt, the programme could and should do even better. But the gains that have been achieved are substantial and amply justify further efforts to make it a success.

Against this background, it is alarming to hear of multiple moves (some of them going back to the preceding government) to dilute or restrict the provisions of the Act. Wages have been frozen in real terms, and long delays in wage payments have further reduced their real value. The Act’s initial provisions for compensation in the event of delayed payments have been removed. The labour-material ratio is sought to be reduced from 60:40 to 51:49 without any evidence that this would raise the productivity of NREGA works. For the first time, the Central Government is imposing caps on NREGA expenditure on state governments, undermining the principle of work on demand.

Last but not least, the Central Government appears to be considering an amendment aimed at restricting the NREGA to the country’s poorest 200 districts. This runs against a fundamental premise of the Act: gainful employment that affords basic economic security is a human right. Even India’s relatively prosperous districts are unlikely to be free from unemployment or poverty in the foreseeable future.

The message seems to be that the new government is not committed to the NREGA and hopes to restrict it as much as possible. We urge you to reverse this trend and ensure that the programme receives all the support it requires to survive and thrive.

Yours sincerely,

Dilip Abreu (Professor of Economics, Princeton University)

Pranab Bardhan (Emeritus Professor of Economics, University of California Berkeley)

V. Bhaskar (Professor of Economics, University of Texas at Austin)

Ashwini Deshpande (Professor of Economics, Delhi School of Economics)

Jean Drèze (Visiting Professor, Department of Economics, Ranchi University)

Maitreesh Ghatak (Professor of Economics, London School of Economics)

Jayati Ghosh (Professor of Economics, Jawaharlal Nehru University)

Deepti Goel (Assistant Professor of Economics, Delhi School of Economics)

Himanshu (Assistant Professor of Economics, Jawaharlal Nehru University)

Raji Jayaraman (Associate Professor of Economics, European School of Management and Technology)

K.P. Kannan (former Director, Centre for Development Studies, Trivandrum)

Anirban Kar (Associate Professor, Delhi School of Economics)

Reetika Khera (Associate Professor, IIT Delhi)

Ashok Kotwal (Professor of Economics, University of British Columbia)

S. Mahendra Dev (Director, Indira Gandhi Institute of Development Research)

Srijit Mishra (Associate Professor, Indira Gandhi Institute of Development Research)

Dilip Mookherjee (Professor of Economics, Boston University)

R. Nagaraj (Professor of Economics, Indira Gandhi Institute of Development Research)

Sudha Narayanan (Assistant Professor of Economics, Indira Gandhi Institute of Development Research)

Pulin Nayak (Professor of Economics, Delhi School of Economics)

Nalini Nayak (Reader in Economics, Delhi University)

Bharat Ramaswami (Professor of Economics, Indian Statistical Institute, New Delhi)

Debraj Ray (Professor of Economics, New York University)

Atul Sarma (former Vice-Chancellor, Rajiv Gandhi University)

Abhijit Sen (former Member, Planning Commission)

Jeemol Unni (Director, Institute of Rural Management, Anand)

Sujata Visaria (Assistant Professor of Economics, Hong Kong University of Science and Technology)

Vijay Vyas (former Member, Economic Advisory Council to the Prime Minister)

Filed Under: India Tagged With: Development, Economy, Employment, Narendra Modi, National Rural Employment Guarantee Act, NREGA

China just overtook the U.S as the World's largest Economy

October 9, 2014 by Nasheman

Photo: Reuters

Photo: Reuters

– by Mike Bird, Business Insider

Sorry, America. China just overtook the US to become the world’s largest economy, according to the International Monetary Fund.

Chris Giles at the Financial Times flagged up the change. He’d also alerted us back in April this year that it was all about to happen.

Basically, the method used by the IMF adjusts for purchasing power parity, explained here. The simple logic is that prices aren’t the same in each country: a shirt will cost you less in Shanghai than San Francisco, so it’s not entirely reasonable to compare countries without taking this into account. Though a typical person in China earns a lot less than the typical person in the US, simply converting a Chinese salary into dollars underestimates how much purchasing power that individual, and therefore that country, might have. The Economist’s Big Mac Index is a great example of these disparities.

So the IMF measures both GDP in market exchange terms, and in terms of purchasing power. On the purchasing power basis, China is overtaking the US right about now and becoming the world’s biggest economy.

We’ve just gone past that cross-over on the chart below, according to the IMF. By the end of 2014, China will make up 16.48% of the world’s purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion):

IMF, Google Public Data Explorer

It’s not all sore news for the US. It’ll be some time yet until the lines cross over in raw terms, not adjusted for purchasing power. By that measure, China still sits more than $6.5 trillion lower than the US, and isn’t likely to overtake for quite some time:

IMF, Google Public Data Explorter

But in terms of the raw market value of China’s currency, it still has a long way to go.

Filed Under: Uncategorized Tagged With: China, Economy, GDP, IMF, International Monetary Fund, USA

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