Disinvestment & Fiscal Policy

Quite coincidentally, just yesterday, we saw the relationship between disinvestment and fiscal policy in class in the context of the crowding out effect.  An article in today's Livemint discusses this issue.

http://www.livemint.com/Opinion/J1vd64xNZL1zMD5w59F9vM/The-right-approach-for-disinvestment.html

Reserve currencies and world seigniorage

Interesting read on the race to attain the status of international reserve currency.

http://www.theguardian.com/business/2015/oct/06/chinas-yuan-jumps-to-fourth-most-used-world-payment-currency

Can we make sense of all this?

Can we make sense from these three articles using macroeconomic theory that appeared in the Livemint, all on the same day?

A useful exercise for students to look at issues from a macroeconomics perspective.

http://www.livemint.com/Politics/Puwo4XzazcHApN5n1JK0eI/India-to-remain-the-worlds-fastest-growing-economy-IMF.html

http://www.livemint.com/Money/XGY7AWl1fNfNEsMWe0PMFO/If-economy-is-really-growing-74-why-is-consumer-sentiment.html

http://www.livemint.com/Money/1dgjHuBdeq6Tct7GwRGJ8I/PMI-data-shows-spluttering-economy-plunging-business-expect.html

Growth rate predictions!

Students often ask how economists arrive at their growth forecast.  Quite arbitrary I would say.

Here is an excerpt from a question posed to Arvind Subramanian, Chief Economic Advisor.

"Analysts are projecting GDP growth near about 7 per cent — Moody’s for instance talks about 7 per cent, Fitch says 7.8 per cent and Standard Chartered Bank 7.3 per cent versus 7.7 per cent earlier — and this is on the back of FY15 GDP growth coming in at 7.3 per cent. Are we still within this range including the lowest forecast by Moody’s at around 7 per cent?"

The interview can be read at:

http://www.thehindubusinessline.com/economy/you-should-never-make-predictions-about-the-future-certainly-not-oil-prices/article7707968.ece

The theory of perfect competition (contestable markets) is not all theory afterall

Doesn't this come close to textbook discussions on perfect competition?  Also, relate this to the long-term decision making problem of a firm when it does not have perfect foresight.  Do you think Kwid will be able to recover its fixed costs of Rs.3000 crore on a new plant with its aggressive pricing strategy?

http://www.thehindubusinessline.com/companies/renault-launches-small-car-kwid-at-rs-26-lakh/article7684827.ece

Here's some more food for thought ....

Will these strategies work?  Are legislative reforms sufficient to ignite growth?  And what about employment?

http://www.newindianexpress.com/editorials/Onus-on-Both-Govt-India-Inc/2015/09/25/article3046432.ece

http://www.thehindubusinessline.com/companies/bilt-pulls-out-of-malaysia-sells-stake-in-sabah-forest-for-500-million/article7686130.ece

http://www.thehindubusinessline.com/opinion/editorial/chinks-in-make-in-india/article7686002.ece

Aggregate demand, corporate debt and deleveraging

Here are a couple of articles which indicate the consequences of a slack in aggregate demand on corporate debt and the growing need for companies to deleverage debt through asset sales.  We can notice this trend not just in India but also in China.

http://www.livemint.com/Companies/JBn41JpbNPdPBxzOb2FzIO/LT-to-sell-assets-dilute-stake-in-noncore-businesses-AM.html

http://www.thehindubusinessline.com/opinion/editorial/taking-a-haircut/article7678161.ece

Does the government need to step in and increase infrastructure spending?  Can we hold on to "austerity" and worry about fiscal deficit targets?  How do we know that infrastructure projects will not be underutilized (like ghost towns in China)?

These are questions to ponder over.