Friday, February 26, 2010

Evaluation of inclusive economic growth

Dr Kaushik Basu, Chief Economic Advisor in the Ministry of Finance, Government of India, is the main contributor to the pre-Budget Economic Survey for 2009-10. The 420-page document, tabled in Parliament on 25 February 2010, has on its cover a diagram depicting the concept of “coupons equilibrium”, a theory that plays an important role in providing the micro-foundations for Keynesian macroeconomics. Dr Basu turned a new leaf, defining the parameters to evaluate the inclusive economic growth, so important for the country like India. Here are the parameters proposed by Basu:


(a)Economic growth: Instead of GDP measure the growth in per capita income of the bottom 20% (quintile) population.


(b)Food coupons: Help the poor directly, instead of trying to control process. He suggests that the subsidy on the food should be given directly to the household or the farmer, respectively, instead of giving to the public distribution system or the fertilizer manufacturer.


(c) Labour rights: Create market conditions that result in greater demand for labor sothat their demands can be realistically met by the market forces.


(d)Food inflation: During the periods of high food inflation, release small quantities of food grains in multiple locations at prices substantially below the market, instead of distributing grains through millers and traders.


(e)Cost cutting: Instead of managing then nitty gritty, create conductive environment to manage the costs.Justify Full


(f) Social awareness: Spread awareness about the positive social qualities for progress. Societies endowed with personal integrity and trustworthiness have natural advantage geared to progress, as the third party regulation is not needed.


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