Among the many concerns over globalization is that as nations compete for international firms, they will relax labour standards as a method of lowering costs and attracting investment. Using spatial econometric estimation on panel data for developing countries over 18 years, we find that the labour standards in one country are indeed positively correlated with labour standards elsewhere i.
This interdependence is more evident in labour practices i. Furthermore, competition is most fierce in those countries which already have low standards. Since there has been a decline in the labour practices and laws across all three groups, this is possible evidence of a race to the bottom as nations compete for investment. The second part of the thesis focuses on essays on the political economy of development in India. India is often hailed as one of the success stories of globalization Basu Indeed, after the inception of market economic reforms in , economic growth has been both sustained and impressively robust in terms of national economic indicators Basu However, despite rapid economic growth during the post period, the benefits of economic growth are unevenly distributed, and some areas and groups of people have seen their living standards decline Banerjee One could argue that this is somewhat surprising given the rapid surge in economic growth in recent years Bardhan In connection with this, two critical issues have attracted a lot of attention, both within and outside India.
First is the issue of corruption which is seen as a hindrance to prosperity and development, and the second is the emergence of India as one of the major donors of development aid. In chapter 4, we focus particularly on the influence of the timing of elections on controlling corruption.
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Firstly, we develop a conceptual framework that extends theories of political budget cycles to corruption, where an incumbent government considers controlling corruption based purely on political considerations. More specifically, we investigate whether the timing of elections affects the responsiveness of the incumbent government to control corruption.
Secondly, we empirically test the predictions of the conceptual framework using 30 Indian states during the — period. Consistent with the conceptual framework developed, i. In addition, we find that corruption cases registered tend to increase as a scheduled election year draws closer. The one big difference between the growth recession earlier this decade and the current one is that India has more macroeconomic stability.
The balance of payments is in better shape even though the withdrawal of foreign money from the domestic capital market is a worry. The biggest differentiator between then and now is inflation. It is under control, creating space for an immediate demand stimulus. There is definitely more space right now for a monetary stimulus rather than a fiscal stimulus. Total government borrowing is already soaking up most of the annual financial savings of Indian households, which is one reason why the government is trying to get access to foreign savings via a sovereign bond.
The fiscal deficit is anyway likely to expand this year, given the unrealistic tax collection targets in the July budget, thus acting as an automatic stabilizer. Monetary policy is the best bet right now.
Global Financial Crisis and Its Impact on India
However, it works with a lag of around three quarters in India, which means that a rate cut today moves the demand needle nine months later. So, the fiscal lever may have to be used as a last option in case demand destruction continues. It should ideally be directed towards sectors such as home building, roads and automobiles that have strong links with other parts of the economy.
Finally, one brutal fact: If the Indian economy continues to lose momentum over the next two quarters, then the country will be in its longest growth recession in a decade. You are now subscribed to our newsletters. Internet Not Available. Wait for it… Log in to our website to save your bookmarks.
It'll just take a moment. Yes, Continue. Your session has expired, please login again. The shift to joint-stock banking is a bittersweet moment in British financial history. It had big upsides: the ancestors of the modern megabank had been born, and Britain became a world leader in banking as well as bonds.
By the midth century the world was getting used to financial crises. Britain seemed to operate on a one-crash-per-decade rule: the crisis of was followed by panics in and To those aware of the pattern, the crash of seemed like more of the same. But this time things were different.
The Global Financial Crisis Of India
From there it led to crashes in Paris, Hamburg, Copenhagen and Vienna. Financial collapses were not merely regular—now they were global, too. On the surface, Britain was doing well in the s. Exports to the rest of the world were booming, and resources increased with gold discoveries in Australia. But beneath the surface two big changes were taking place. The first big change was that a web of new economic links had formed.
In part, they were down to trade. Americans bought more goods than they sold, with Britain buying American assets to provide the funds, just as China does today. Railway companies were a popular investment. Shares of American railway firms such as the Illinois Central and the Philadelphia and Reading were so widely held by British investors that Britons sat on their boards. That their earnings did not justify their valuations did not matter much: they were a bet on future growth.
The second big change was a burst of financial innovation. And a new type of lender—the discount house—was mushrooming in London. These outfits started out as middlemen, matching investors with firms that needed cash. In short, they were banks in all but name.
Competition was fierce. But because the central bank was also an active lender, discounting the best bills, its rate put a cap on what the discount houses could charge borrowers. With just one percentage point to play with, the discount houses had to be lean. Since cash paid zero interest, they cut their reserves close to zero, relying on the fact that they could always borrow from the Bank of England if they faced large depositor withdrawals. Meanwhile in America, Edward Ludlow, the manager of Ohio Life, an insurance company, became caught up in railway fever. New lines were being built to link eastern cities with new frontier towns.
In late spring , railroad stocks began to drop. Ohio Life, highly leveraged and overexposed, fell faster, failing on August 24th. As research by Charles Calomiris of Columbia University and Larry Schweikart of Dayton University shows, problems spread eastwards, dragging down stockbrokers that had invested in railways.
When banks dumped their stock, prices fell further, magnifying losses. By October 13th Wall Street was packed with depositors demanding their money. The banks refused to convert deposits into currency. As the financial dominoes continued to topple, the first British cities to suffer were Glasgow and Liverpool.
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Merchants who traded with American firms began to fail in October. There were direct financial links, too. Dennistoun, Cross and Co. The discount houses magnified the problem. They had become a vital source of credit for firms.
15 ways to define India’s slowdown
But investors were suspicious of their balance-sheets. As the discount houses failed, so did ordinary firms. As well as being global, the crash of marked another first: the recognition that financial safety nets can create excessive risk-taking. The discount houses had acted in a risky way, holding few liquid assets and small capital buffers in part because they knew they could always borrow from the Bank of England. Unhappy with this, the Bank changed its policies in Discount houses could no longer borrow on a whim.
They would have to self-insure, keeping their own cash reserves, rather than relying on the central bank as a backstop. That step made the crisis an all-too-rare example of the state attempting to dial back its support. It also shows how unpopular cutting subsidies can be. The Economist thought its tougher lending policy unprincipled: we argued that decisions should be made on a case-by-case basis, rather than applying blanket bans.
Others thought the central bank lacked credibility, as it would never allow a big discount house to fail. They were wrong.
Essay on India and Economic Growth | Economics
The Bank of England refused to rescue it, wiping out its shareholders. Britain then enjoyed 50 years of financial calm, a fact that some historians reckon was due to the prudence of a banking sector stripped of moral hazard. As the 20th century dawned America and Britain had very different approaches to banking. The Bank of England was all-powerful, a tough overseer of a banking system it had helped design. America was the polar opposite. An atomised, decentralised system developed. Americans thought banks could look after themselves—until the crisis of The absence of a lender of last resort had certainly not crimped the expansion of banking.
The period after the civil war saw an explosion in the number of banks. By America had 22, banks—one for every 4, people.
15 ways to define India’s slowdown
In most towns, there was a choice of local banks or state-owned lenders. Despite all these options, savvy metropolitan investors tended to go elsewhere—to the trust companies. By they were combining this safehouse role with riskier activities: underwriting and distributing shares, and owning and managing property and railways. They also took in deposits. The trust companies had, in short, become banks.
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