Category: Asia

The long run evolution of the rich in India 1937-2012

Rishabh Kumar3 Comments

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Inequality in India may be returning to levels last seen during British Rule. To understand this, it is necessary to put India鈥檚 elite at the center of macro-history.

One of the central questions in political economy is how wealth evolves, particularly at the top. In Europe and the USA, we now accept that progression of wealth inequality followed a 鈥淯鈥� shape or what has been called the 鈥淚nverted Kuznets Curve.鈥� Briefly put, on the eve of World War I, the richest few percentiles dominated Western society with their massive wealth holdings. Fast forward to a decade after World War II and we see that their wealth declined substantially, but then started rising again in the late 1970s. Much has been written on this since (and due to) the publication of Piketty鈥檚 (2014) . My new and revised paper () puts the rich at the center of India鈥檚 economic history over the last eight decades. The main question I want to ask is the following: Is the state of contemporary wealth concentration in India a continuation or a break from its history?Read More »

How India can benefit from FDI: lessons from China

ilanstraussLeave a comment

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by Ilan Strauss and Vasiliki Mavroeidi*

With the launch of India鈥檚 Make in India campaign, Karl P. Sauvant and Daniel Allman asked in their recent Perspective: 鈥溾��, focusing on attracting FDI. However, the issue is not only attracting FDI, but benefitting from it fully. Liberalization alone will not enable Make in India to transform India into a manufacturing hub. Targeted industrial policies are required to ensure that FDI upgrades domestic capabilities.

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Is Competition Always the Answer? A Case Study of Vietnam鈥檚 Power Sector

nguyentueanh5 Comments

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Since 2001, the Vietnamese government has acknowledged the need to increase generation capacity in the electricity sector. With unprecedentedly , the electricity industry, however, commonly fails to deliver, especially during peak hours and dry seasons. It is reported that 鈥榠n the whole country there were 3,000 blackout incidents due to system overloading during the first 7 months of 2008鈥�, equivalent to 鈥�14 blackouts a day鈥� (). As a way to mitigate this chronic electricity shortage, the industry鈥檚 biggest player, Electricity Vietnam (EVN) has to buy in all that is produced domestically and import from neighbouring countries such as Laos and China. Yet, not only cannot EVN satisfy its primary objective of ensuring a secure electricity supply, but it also suffers significant annual financial losses of hundreds of million dollars. EVN claims that too low average pricing of electricity is the cause of this loss. In addition, audit reports reveal that EVN鈥檚 diversification policy had caused further losses.

The inefficiency in infrastructure investment and inadequacy in organizational management have caused anger amongst the public, creating an extremely negative attitude towards the traditional monopoly structure of the electricity sector. Utilising a popular measure, policy makers therefore choose to apply the 鈥榤arketisation鈥� or liberalization model that is, in theory, similar to the liberalization model that has been implemented in the UK and EU since the 1990s. The main reasons behind the policy are: 1) to assist the government in infrastructure investment; 2) to expose EVN to competitive forces through encouraging private and foreign investment which would force it to improve its financial and operational performance; and 3) to provide affordable and stably-priced electricity. These 3 major objectives are thought to be the outcomes of introducing competition to the traditional monopolistic market structure. This causal link is, however, usually assumed rather than discussed and tested.Read More »

What do we know about the wealthy in India? A case study prior to liberalization

Rishabh KumarLeave a comment

The first modern book in economics was called the 鈥淲ealth of Nations鈥� because its writer, Adam Smith understood (and transmuted the idea) that the key to prosperity and growth was the generation and distribution of wealth – not just the flow of income. Recent interest in economics has started to return to this question especially in the context of today鈥檚 rich countries. The academic attention on the metamorphosis and concentration of wealth has so far excluded poor countries. In fact the study of the wealth of poor nations should be a core question in development economics (over income growth) because wealth tends to cumulate all past prosperity or disparity.

I found it notable that despite the detailed historical analysis in Piketty鈥檚 book , there was no mention of Indian wealth (Piketty did study top Indian incomes). To an extent this is understandable because data on India is so limited and unreliable that documenting it would require a book in itself. Till date, the Indian central bank (RBI) does not follow the tradition of publishing regular household and private sector balance sheets at market value, to assess accumulation and asset prices. And yet due to its sheer size and importance, India presents a unique challenge to the notion of prosperity – it is simultaneously home to some of the and global citizens. In the past, the question of India鈥檚 colonial subservience was related to the , rather than income – the British enriched themselves at the cost of their prized colony. What happened once India became independent?

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My new paper 鈥溾�� tries to answer this question for a particular historical phase in Indian history. Read More »