Deepening India’s export basket

May, 2014
Keya Chaturvedi
As India elects a new government in the summer of 2014, many analysts have vociferously discussed the incumbent government’s domestic economic management. Yet less attention has been paid to India’s external economic engagement. India has many domestic bottlenecks and structural constraints which stymie efforts to increase exports and integrate more deeply with global markets. Over time, this has resulted in a shallow export basket, consisting mostly of raw materials and intermediate goods. There also are growing trade imbalances — particularly with one of India’s key trading partners, China. As talks of a FTA between China and India continue, India needs to acknowledge that increased trade cooperation will do little to boost growth until it addresses domestic structural constraints, trade structure and policy .

Lifting Asia out of poverty needs to be done equally

April, 2014
Juzhong Zhuang
Developing-Asia’s impressive growth continues but faces a new challenge — inequality is on the rise. Over the last few decades, the region has lifted people out of poverty at an unprecedented rate. But more recent experience contrasts with the ‘growth with equity’ story that characterised the newly industrialised economies’ transformation in the 1960s and 1970s. Treating developing Asia as a single unit, its Gini coefficient of per capita consumption expenditure — a commonly used measure of inequality — worsened from 39 in the early 1990s to 46 in the late 2000s. It worsened from 32 to 43 in China, from 33 to 37 in India, and from 29 to 39 in Indonesia. Inequality widened in 12 of the 28 economies with comparable data — and these 12 countries account for over 80 per cent of developing-Asia’s population.

Thailand’s rice subsidy scheme rotting away

March, 2014
Peter Warr
Thailand’s rice subsidy scheme has turned into a political and economic disaster. The problem could have been avoided if the government had listened to its own advisors. Raising the price of rice received by Thailand’s rice farmers was a key promise of the ruling Pheu Thai Party at the 2011 election, targeted at the party’s rural power base in the poorest northern and northeastern regions of the country. The rice subsidy policy, known domestically as the rice-pledging scheme, had two objectives. First, the price offered to Thai rice farmers was to be raised through direct government purchase to levels about 50 per cent above the prevailing market price. Second, the international price was to be raised by reducing Thai exports. Roughly one half of Thailand’s annual rice crop of 20 million tonnes is normally exported.When the scheme was outlined in the Pheu Thai Party’s 2011 election platform economists inside and outside the Thai public service pointed to serious flaws.

The potential role of the Asian Infrastructure Investment Bank

February, 2014
Andrew Elek
China’s president, Xi Jinping, announced the creation of an Asian Infrastructure Investment Bank (AIIB) just before the October 2013 APEC meeting in Bali. If the new bank is managed professionally to finance commercially viable investments in economic infrastructure, it can begin to correct a very significant failure of global financial markets.

The forces driving RMB internationalisation

January, 2014
Yu Yongding
When renminbi internationalisation was making rapid progress in 2011, some leading investment banks predicted that by the end of 2012 Hong Kong’s offshore RMB deposits would reach more than 1 trillion yuan, cross-border RMB trade settlement would surpass 3.7 trillion yuan, and RMB-denominated bonds and loans would grow to 700 billion yuan. These predictions were way off the mark. However, on the other hand, RMB trade settlement has maintained its growth momentum: amounting to 2.6 trillion yuan and accounting for some 10 per cent of China’s total trade settlement as of late-2012. This is quite a remarkable achievement.

Trade held hostage to IP — it’s anti-development

December, 2013
Philippa Dee
Now that the intellectual property chapter of the Trans-Pacific Partnership has been leaked, our worst fears are confirmed — IP in TPP is OTT. This would be bad enough on its own. What is less well recognised is that the trade liberalisation agenda is being held hostage to the IP agenda, and the result is inimical to development.

The massive hidden costs of India’s food security act

November, 2013
Rajiv Kumar
India’s National Food Security Act is now a fait accompli. The United Progressive Alliance, desperate to maximise its electoral prospects, successfully ensured its passage through parliament in September. But the Act, with its exclusive focus on food grain and cereal availability, may well end up hurting the poor on two major counts. First, it will discourage much-needed diversification in the agricultural sector and aggravate the country’s shortage of proteins, dairy, fruits and vegetables, whose consumption would help redress malnourishment — the real problem India faces today. Second, the huge increase in centralised procurement of food grains will end up raising their market price, and the real poor, many of whom remain outside the leaky public distribution system, will suffer the consequences. But a more careful reading of the Act reveals other costs that will ultimately have to be borne by the aam aadmi, or average Indian citizen.

Understanding China’s unbalanced growth

October, 2013
Yukon Huang
That China’s growth is unbalanced is a fact. Consumption as a share of GDP has declined steadily over the past decade to 35 per cent, while investment as a share of GDP has risen to above 45 per cent — the lowest and the highest rates of any major economy respectively. But are these imbalances a vulnerability — as most observers believe — or a consequence of China’s economic rise, and therefore not inherently problematic?

Consumption tax fears risk stalling Abe’s ‘three arrows’

September, 2013
Takatoshi Ito
Abenomics is Japanese Prime Minister Abe’s policy package consisting of three ‘arrows’: aggressive monetary easing, flexible fiscal policy, and growth strategies. Together, they are aimed at lifting Japan’s economy from chronic deflation and stagnation to a normal economy with 2 per cent inflation and strong growth. But will they succeed?

Indonesia: bad politics meets a good economy

August, 2013
Maria Monica Wihardja
Indonesia came out of the 2008–09 global financial crisis fairly unscathed; its banks only had to deleverage themselves from a small portion of debt. But now its strong position is in danger: government meddling could cause a good economy to go bad. The government should eschew populism and fix Indonesia’s structural issues, including burgeoning fiscal subsidies and inward-looking trade policies, which pose a big threat to the country’s financial and monetary stability.