♦AN ECONOMIST IN THE REAL WORLD: THE ART OF POLICYMAKING IN INDIA
BY KAUSHIK BASU
INTERESTING FACTS AND FIGURES MENTIONED IN THE BOOK♦
1. Kaushik Basu became chief economic advisor on December 8, 2009.
2. As I got out of government car, laptop and briefcase slung over my shoulder, a man came charging and snatched these from me. Since I’d experienced a similar incident when my wallet was taken from me near St. Mark’s square in Venice, I had to resist the urge to run after the man and wrestle him to the ground. I did not know that he was one of my two “men Friday “, who would be lodged in my adjacent office of my term as CEA and loyally run minor errands, thereby contributing in India’s unemployment statistic.
3. In 1958 Mao Zedong in china started The Great Leap Forward, collectivizing agriculture and taking away the individualistic drive that motivates farmers to grow more. It lead to China registering a growth of -27.1% in 1961.
4. The 2008 crisis is known as the “subprime mortgage crisis” where subprime means borrowers whose financial situation is precarious enough that lending to them is not safe.
5. US economy is the biggest driver of economic growth.
6. There are two kinds of loans recourse and non- recourse. Recourse loans -allow the lender to lay claim on to more than the asset on which loan has been taken. Non-recourse loan- does not allow the borrower to lay claim on anything beyond what has been explicitly mortgaged.
(In US the bulk of home lending is non –recourse; reference for 2008 crisis)
7. Buyers of a house have to pay property tax and seller’s capital gains tax.
8. Even after the 2008 crisis in 2009-2010 and 2010-2011 Indian economy grew at 8%. Whereas, in 2011 it slipped due to series of corruption scandals.
9. The construction of the Eurozone with its new currency was arguably the world second-largest deliberately planned economic experiment, the first being communism.
10. Euro provided its economies fiscal and banking autonomy with the lack of monetary autonomy.
11. In Dec 2011 and Feb 2012 the LTRO(long term refinancing operation) occurred when the European Central Bank infused $1.3trillion .they were basically three year loans creating a debt repayment cliff at the end of 2014 and early 2015.
12. In India the highest inflation occurred in September 1974 when inflation reached 33.3%.
13. Hyperinflation is usually defined as inflation over 50% per month.
14. World biggest episode of inflation occurred in 1923(Germany) and 1946(Hungary) and 2008(Zimbabwe) .The all-time record is held by Hungary from august 1945-july 1946, prices rose by 3.8*10^27.
15. A study of Brazilian economy shows that the nation did not have a single year where inflation was in single digits from 1962-1997.
16. When inflation is below 10% there is little correlation between rate of inflation and growth. But at higher levels inflation is usually associated with lower growth.
17. Each economy must have utmost one money –creating authority.it was with this principle in mind that The Bank Of England was created in 1694 though its monopoly rights to creating money would be affirmed clearly in the renewal of its Royal Charter in 1742.
18. Low income countries typically collect taxes between 10-20% of GDP, while average for high income countries is more like 40%.
19. By appropriately developing the macrostructure the acts of influencing the exchange rate and building up or running down of forex reserve can be separated from each other.
20. Eurozone is a monetary union, not a banking or a fiscal union.
21. The wealth of the ten richest people in the world is equal to the GDP of Nigeria.
22. Communist government ruled west Bengal for 30 years. The longest running elected communist government anywhere.
23. A comprehensive study by (khera) showed that 67%of wheat meant to be delivered to the poor misses the target.in other words to get 1kg of wheat to poor 3kg wheat is directed for them.
24. The secret of keeping profits limited and delivered food to the ultimate consumer is to release the procured grain in small quantities to large number of traders and millers and to give them the freedom to make profit.
25. {what the government should do for PDS} Taking in more when the weather is good, supply plentiful, and prices low, and less (maybe even nothing) when the weather is bad and prices high.
26. {State action to hold down prices} one way of achieving this for the government to announce an MSP above the (low) good weather price and below the (high) bad weather price.
27. {MR.Basu’s idea} the basic idea is that the subsidy should be handed over directly to the poor household instead of giving it to the PDS shop owner with the instruction that he or she transfer it to the poor. This can be done by handing over food coupons to BPL households, which they can use as money to buy food from any store .the store owner can then take the coupon to any bank and change it back for cash.
28. On Jan 28 ,1986 ,seventy three seconds after takeoff from Kennedy space center in Florida ,the space shuttle challenger broke apart in flame and smoke ,killing its seven crew members .this caused a setback to the us shuttle program for nearly three years .when the disaster occurred the early speculation was all about big failures –something major seemed to have gone wrong .but it subsequently became clear that the entire disaster occurred because of the failure of an “O-ring” seal-the o ring literally is a small ring meant to join and hold parts together. It was created and first patented in Sweden in 1896 by J.O.lundberg .The O-ring played a quiet role in the applied sciences and shot into everyday parlance only after the Challenger disaster.(O-ring became a metaphor for economists , for how good and grand policies can get foiled by matters of what is hardly visible )
29. In terms of efficiency of formal contract fulfillment India ranks 186th.one has to go through 46 procedures which usually takes 1420 days to enforce a contract on a reneging party. In Brazil it takes 731 days .in us 420 days .in Korea 230 days and Singapore 150 days.
30. In India long distance trucks carrying freight between cities spend close to 60 % of the travel time parked at check posts to pay and negotiate various regional taxes.
31. Bihar’s economy saw a puzzling growth sprint from 2006-2012 registering per capita income growth at 10.4 % per annum. This was remarkable because it came after a decade and half of 0.9% growth.(Nitish Kumar is th reason behind it )
32. “a Nash equilibrium of a game is simply a choice of action on the part of each person (or player) such that ,given other people’s choice s ,no one wants to change his or her own choice .hence ,it is also called a “self –enforcing” outcome.”
33. Barely 100 years ago japan was as tardy as the tardiest nations today. The fact that japan is today the most punctual society shows that norms that appear built into the DNA of a society are not so.
34. Rule of boycotting corrupt firms by other firms that enable them all to shift to a corruption free equilibrium that is a situation where it is no longer in a firm’s self-interest to be corrupt.
35. India shifted from “low –income” to “lower middle income” in the World Banks classification table between 2008-2009.
36. Ponzi schemes acquired their name and notoriety from Carlo Pietro Giovanni Ponzi, later known as Charles Ponzi (1882-1949). He was born in Italy .after squandering 4 years in the name of university education in Rome, which he treated as a vacation, paid for by his parents, he migrated to America, landing in Boston in November 1903. His lack of scruples as well as high intelligence soon became evident-the former when he landed in a Canadian prison for forging a signature, and the latter when he wrote to his beloved mother from the prison explaining his new address as part of his job as “special assistant” .Returning to Boston he went on to create one indigenous scheme after another to lure the vulnerable middle class families and to give financial fraud a proper name. The crash of one of his big schemes not only ruined many families but brought down 6 Boston banks.♦
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