Dr.DEBESH BHOWMIK

Dr.DEBESH BHOWMIK

Sunday, 8 February 2015

The Productivity of Indian Foodgrain Production



The Productivity of Indian Foodgrain production

In agricultural growth the measure of agricultural productivity is of very much important in which productivity of foodgrain dominates because it is the central part of the supply side economics.From 1970-71 to 2009-10, India’s foodgrain productivity had increased very slowly at the rate of 2.32% per annum which played a  great role in creating food inflation in India.The estimated equation is given below,
Log(x) = 6.683+0.0232t
             (322.4)*  (26.402)*
R2= 0.948  , DW= 1.58  , F= 692.09* , * = significant at 5% level
Where x= productivity of foodgrain kg/hectres.the t values of constant and trend are significant.
In the figure the estimated line of foodgrain productivity is rising upward but the actual productivity line is shown volatile and was found autocorrelation problem.

The foodgrain productivity showed stationary during the study period and has unit root .The estimated ARIMA model is shown below,
Xt= 11722.27+0.997Xt-1+t-0.9578t-1
       (0.415)     (125.03)*         (-45.623)*
 R2= 0.939  , F= 279.18*   , DW= 2.03
Inverted AR root =1 and MA root = 0.96
Since t value of AR and MA are significant and F is significant ,so stationarity of the model is confirmed.
Even it has no ARCH error because heteroscedasticity ARCH test assures that nR2= 3.1867 which is significant whose F = 3.29 which is also significant. The conditional standard deviation is seen in the figure which is volatile.  

 Thus, in conclusion we can say that to reduce food inflation the growth of India’s foodgrain productivity is very low during 1970-71 to 2009-10 which must be enhanced in due course.

Thursday, 5 February 2015

CLOSING THE GENDER GAP


CLOSING THE GENDER GAP
(Courtesy Asian Development Bank)

The Asia and Pacific region has made impressive strides over the last decade on narrowing gender gaps in education, health, employment and political participation. Today there are more girls in primary and secondary schools, more girls participating in tertiary education, fewer women dying in childbirth, more women in wage employment outside agriculture and more women in national parliaments and decision making bodies. But, the progress and achievements are not spread widely and evenly across the entire region.
Watch how this film weaves a connection between the importance of workplace equality and the crucial role women play in building a strong society and economy.
Disparities remain in many areas. Many women are still denied access to basic services and essential assets such as land, and excluded from decision-making.  In some countries and among some groups, women still suffer from entrenched gender discrimination and exclusion that diminishes their life expectancy, education prospects, access to clean water, sanitation, and employment, and exposes them to gender-based violence.
Empowering women economically and socially and giving them `voice’ is crucial for achieving ADB’s goals of poverty reduction and inclusive development.

Promoting gender equity

ADB's Strategy 2020 highlights gender equity as one of five drivers of change for promoting and achieving inclusive and sustainable growth, reducing poverty, improving living standards and achieving the MDGs.
ADB's Policy on Gender and Development identifies gender mainstreaming as the key strategy and approach for promoting gender equality and women's empowerment across all sectors. A dual approach is adopted that includes both gender mainstreaming and targeted approaches to reduce glaring gender disparities.
ADB has set corporate gender targets to be met by 2016: 45% of all operations and 55% of those financed by ADF resources will address gender equality objectives. In 2013, ADB’s annual performance exceeded the 2016 gender target; with 55% overall and 59% of ADF financed operations categorized as "gender mainstreaming".
A new Gender Equality and Women's Empowerment Operational Plan, 2013-2020 (Gender Plan) was approved in 2013. The new plan provides the roadmap for guiding ADB operations and recognizes that more needs to be done to reduce gender gaps and disparities across the region.
The Plan calls for increased emphasis on improving implementation and monitoring for the delivery of better gender equality results. While gender mainstreaming across all operations will remain the priority approach, direct investments in women and girls will be pursued in areas such as: (i) girls secondary education and completion (ii) vocational and technical skills training for female youth; (iii) access to productive assets, labor saving technology, employment, and income earning opportunities; (iv) business development services for women entrepreneurs; (v) financial services and access to credit; (vi) policy and legal reforms to tackle issues of gender-based violence and anti-trafficking, and; (vii) giving women voice in decision-making in formal and informal institutions.
"ADB is firmly committed to promoting gender equality and women’s empowerment. We believe that ADB has a responsibility to set a positive example for the region in reducing gender disparities and supporting women's empowerment," said Bindu Lohani, ADB’s Vice President of Knowledge Management and Sustainable Development.

Investing in gender equality

ADB projects to improve the lives of women and girls in the region have included support for education, health, basic infrastructure and financial services. ADB projects that directly support gender issues span across both the social and economic sectors.
  • In some of our poorest borrowing countries such as Bangladesh, Nepal, Cambodia and Lao PDR, ADB has built schools in remote and rural areas to improve and expand access, provided scholarship to poor girls and trained female teachers to support girls’ school retention rates.  
  • In Papua New Guinea, Cambodia and Timor-Leste, ADB is providing rural water supply and sanitation to reduce women and girls work burdens.
  • In Vietnam, ADB is helping ethnic minority girls in 20 of the most disadvantaged districts by building schools with boarding facilities and teacher housing, providing scholarships and training ethnic minority teachers.
  • Girls’ skills development is being pursued through increasing support for technical and vocational education In Lao PDR and Cambodia to assist girls make the transition from school to work and enhance their chances of better employment outcomes.
  • In Uzbekistan and Nepal, we are providing financial and business services to help women start and expand their business enterprises.
  • In Bangladesh, ADB has supported women’s economic empowerment through constructing and reserving spaces for women vendors in rural markets; providing employment opportunities for destitute women in road construction and maintenance; helping women farmers to diversify into cash crops that yield higher incomes, and; building the capacity of locally-elected women leaders to give them “voice” in decision-making in local governance institutions.
Even in some of our middle-income countries such as Indonesia and Philippines we are tackling the remaining “pockets of disadvantage” in access to education and health in remote and disadvantaged areas and; supporting conditional cash transfer programs to tackle the demand side issues in education and health.

Gender mainstreaming tools

To ensure gender equality objectives are realized, ADB has adopted the project gender action plan (GAPs) as a mainstreaming tool to ensure concrete strategies and actions are designed into projects to deliver gender equality outcomes.  GAPs include clear targets, quotas, gender design features and quantifiable performance indicators to ensure women’s participation and benefits.  Key aspects of the GAP are incorporated into project assurances to encourage buy-in from executing agencies and other project partners.
ADB has also developed  Gender and Development Plans of Action as guide and  roadmap for translating the GAD Policy into concrete actions and programs. The plan of Action prioritizes 3 areas of action: country strategy partnership and projects; GAD capacity development and policy support and organizational effectiveness.
Country gender assessments (CGAs) are prepared to feed the development of country partnership strategies and programs. CGAs are also used by governments as strategic planning documents.
ADB regularly conducts gender assessments of projects under implementation to assess progress on implementation of the gender and development policy.
ADB engages in policy dialogue in countries and in the region to encourage and support  gender-responsive policy and law reforms. Examples include gender equality laws, temporary special measures for women’s representation in local government bodies and community-based organizations, and joint titling by husbands and wives when land is allocated.

Partnerships

ADB collaborates at the project level with many UN agencies, development partners, and nongovernment organizations in different countries to improve gender equality results.
The External Forum on Gender and Development established in 2001 promotes dialogue between ADB and external experts and advocates on gender and development issues.
ADB has been active in various gender knowledge networks , such as the UN regional thematic working group on gender, Multilateral Development Banks Working Group on Gender, and GenderNet under the Organisation for Economic Co-operation and Development.

Sharing knowledge

ADB supports gender equity through knowledge products such as country gender assessments, gender mainstreaming tool kits, a guide to mainstream anti-trafficking concerns into projects and research and studies on human trafficking, and gender-responsive HIV prevention programs in infrastructure projects. ADB’s community of practice on gender meets regularly through knowledge seminars and events to share experiences on gender-related activities and learn from cutting-edge research.

Gender equality within ADB

ADB also pursues and supports gender equality within the institution. Females make up nearly 35% of international staff and 27% of senior staff. A new Diversity and Inclusion Framework was adopted in 2013 to ensure a more gender balanced, diverse and inclusive work place.

Tuesday, 27 January 2015

US BUDGET 2014-2025

US  Budget 2014-2025


The federal budget deficit, which has fallen sharply during the past few years, is projected to hold steady relative to the size of the economy through 2018. Beyond that point, however, the gap between spending and revenues is projected to grow, further increasing federal debt relative to the size of the economy—which is already historically high.
Those projections by CBO, based on the assumption that current laws governing taxes and spending will generally remain unchanged, are built upon the agency’s economic forecast. According to that forecast, the economy will expand at a solid pace in 2015 and for the next few years—to the point that the gap between the nation’s output and its potential (that is, maximum sustainable) output will be essentially eliminated by the end of 2017. As a result, the unemployment rate will fall a little further, and more people will be encouraged to enter or stay in the labor force. Beyond 2017, CBO projects, real (inflation-adjusted) gross domestic product (GDP) will grow at a rate that is notably less than the average growth during the 1980s and 1990s.

Rising Deficits After 2018 Are Projected to Gradually Boost Debt Relative to GDP

CBO estimates that the deficit for this fiscal year will amount to $468 billion, slightly less than the deficit in 2014 (see the table below). At 2.6 percent of GDP, this year’s deficit is projected to be the smallest relative to the nation’s output since 2007 but close to the 2.7 percent that deficits have averaged over the past 50 years.
CBO's Baseline Budget Projections
Although the deficits in CBO’s baseline projections remain roughly stable as a percentage of GDP through 2018, they rise after that. The deficit in 2025 is projected to be $1.1 trillion, or 4.0 percent of GDP, and cumulative deficits over the 2016–2025 period are projected to total $7.6 trillion. CBO expects that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year—more than twice what it was at the end of 2007 and higher than in any year since 1950 (see figure below). By 2025, in CBO’s baseline projections, federal debt rises to nearly 79 percent of GDP.
Federal Debt Held by the Public
Outlays
In CBO’s projections, outlays rise from a little more than 20 percent of GDP this year (which is about what federal spending has averaged over the past 50 years) to a little more than 22 percent in 2025 (see figure below). Four key factors underlie that increase:
  • The retirement of the baby-boom generation,
  • The expansion of federal subsidies for health insurance,
  • Increasing health care costs per beneficiary, and
  • Rising interest rates on federal debt.
Total Revenues and Outlays
Consequently, under current law, spending will grow faster than the economy for Social Security; the major health care programs, including Medicare, Medicaid, and subsidies offered through insurance exchanges; and net interest costs. In contrast, mandatory spending other than that for Social Security and health care, as well as both defense and nondefense discretionary spending, will shrink relative to the size of the economy. By 2019, outlays in those three categories taken together will fall below the percentage of GDP they were from 1998 through 2001, when such spending was the lowest since at least 1940 (the earliest year for which comparable data have been reported).
Revenues
Revenues are projected to rise significantly by 2016, buoyed by the expiration of several provisions of law that reduced tax liabilities and by the ongoing economic expansion. In CBO’s projections, based on current law, revenues equal about 18½ percent of GDP in 2016 and remain between 18 percent and 18½ percent through 2025. Revenues at that level would represent a greater share of the economy than their 50-year average of about 17½ percent of GDP but would still be less than outlays by growing amounts over the course of the decade. Revenues from the individual income tax are expected to rise relative to GDP—mostly because people’s income will move into higher tax brackets as income gains outpace inflation, to which those brackets are indexed. But those increases are expected to be offset by reductions relative to GDP in revenues from the corporate income tax and other sources.
Changes From CBO’s Previous Budget Projections
The deficit that CBO now estimates for 2015 is essentially the same as what the agency projected in August. CBO’s estimate of outlays this year has declined by $94 billion, or about 3 percent, from the August projection because of a number of developments, including higher-than-expected receipts from auctions of licenses to use the electromagnetic spectrum for commercial purposes. But CBO’s estimate of revenues has dropped almost as much—by $93 billion, also about 3 percent—mostly because of the enactment of legislation that retroactively extended a host of expired tax provisions through December 2014.
Over the 2015–2024 period, deficits are now projected to total about $175 billion less than CBO’s August estimate for that period. The current projections of revenues and outlays for those years are both lower than previously estimated, outlays a little more so.
The Longer-Term Outlook
When CBO last issued long-term budget projections (in July 2014), it projected that, under current law, debt would exceed 100 percent of GDP 25 years from now and would continue on an upward trajectory thereafter—a trend that could not be sustained. (The 10-year projections presented here do not materially change that outlook.) Such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments; restraining economic growth in the long term; giving policymakers less flexibility to respond to unexpected challenges; and eventually heightening the risk of a fiscal crisis.

The Economy Will Grow at a Solid Pace Over the Next Few Years

CBO anticipates that, under current law, economic activity will expand at a solid pace in 2015 and over the next few years—reducing the amount of underused resources, or “slack,” in the economy.
Economic Growth Over the Next Few Years
In CBO’s estimation, increases in consumer spending, business investment, and residential investment will drive the economic expansion this year and over the next few years. The growth in those categories of spending will derive mainly from increases in hourly compensation, rising wealth, the recent decline in crude oil prices, and a step-up in the rate of household formation (as people are more willing and able to set up new homes). As measured by the change from the fourth quarter of the previous year, real GDP will grow by about 3 percent in 2015 and 2016 and by 2½ percent in 2017, CBO expects (see figure below).
Actual Values and CBO's Projections of Key Economic Indicators
The Degree of Slack in the Economy Over the Next Few Years
The difference between actual GDP and CBO’s estimate of potential GDP—which is a measure of slack for the whole economy—was about 2 percent of potential GDP at the end of 2014. During the next few years, CBO expects, actual GDP will rise more rapidly than its potential, gradually eliminating that slack. For the labor market in particular, CBO anticipates that slack will dissipate by the end of 2017. By CBO’s projections, increased hiring will reduce the unemployment rate from 5.7 percent in the fourth quarter of 2014 to 5.3 percent in the fourth quarter of 2017, which is close to the expected natural rate of unemployment (that is, the rate arising from all sources except fluctuations in the overall demand for goods and services). That increased hiring will also encourage more people to enter or stay in the labor force, boosting the labor force participation rate (which is the percentage of people who are working or actively looking for work).
Economic Growth in Later Years
The agency’s projections beyond the next few years are not based on estimates of cyclical developments in the economy, because the agency does not attempt to predict economic fluctuations that far into the future; instead, those projections are based on estimates of underlying factors that affect the economy’s productive capacity.
For 2020 through 2025, CBO projects that real GDP will grow by an average of 2.2 percent per year—a rate that matches the agency’s estimate of the potential growth of the economy in those years. Potential output is expected to grow much more slowly than it did during the 1980s and 1990s primarily because the labor force is anticipated to expand more slowly than it did then. Growth in the potential labor force will be held down by the ongoing retirement of the baby boomers; by a relatively stable labor force participation rate among working-age women, after sharp increases from the 1960s to the mid-1990s; and by federal tax and spending policies set in current law.
Inflation and Interest Rates
The elimination of slack in the economy will eventually remove the downward pressure on the rate of inflation and on interest rates that has existed for the past several years. By CBO’s estimates, the rate of inflation as measured by the price index for personal consumption expenditures will move up gradually to the Federal Reserve’s goal of 2 percent, hitting that mark in 2017 and beyond. Interest rates on Treasury securities, which have been exceptionally low since the recession, will rise considerably in the next few years, CBO expects, but remain lower than they were, on average, in previous decades. Between 2020 and 2025, the projected interest rates on 3-month Treasury bills and 10-year Treasury notes are 3.4 percent and 4.6 percent, respectively.
Changes From CBO’s Previous Economic Projections
Last August, CBO projected real GDP growth averaging 2.7 percent per year for 2014 through 2018; CBO now anticipates that real GDP growth will average 2.5 percent annually over that period. The revision mainly reflects a reduction in CBO’s estimate of potential output and therefore of the current amount of slack in the economy. On the basis of the current projection of potential output, CBO now forecasts that real GDP in 2024 will be roughly 1 percent lower than the level estimated in August. In addition, the sharper-than-anticipated drop in the unemployment rate in the second half of last year caused CBO to lower its projection of that rate for the next few years.

( courtesy- www.cbo.gov)

Friday, 16 January 2015

Book Review



FINANCIAL SECTOR LIBERALISATION IN INDIA –THEORY   AND EMPIRICS
---Regal Publications,NewDelhi,page,xi+352, Price- Rs.1480/-


This edited volume is the outcome of presented and selected papers of the Mid Year Seminar of Bengal Economic Association held in the Vidyasagar University,Midnapore on 6th October,2012.
It contains 21 articles  which explained the theoretical as well as empirical findings in the financial sector liberalisation in India.The book helps in understanding of interplay of various issues and forces that are emerging in this sector at present time.
Hiranya Lahiri,Chandana Ghosh and Ambar Nath Ghosh in their paper”Financial Sector Liberalisation and RBI’s policy Dilemma” argues that a rate cut by RBI  is likely to reduce growth rate and raise the rate of inflation through a model.
Prof.Biswajit Chatterjee in the paper , “ Financial inclusion:Issues and Challenges with Special Reference to India’s North –East” explained that financial inclusion should emphasise the low income people.
P.S. Das in his paper,” Economic and Financial Stability in the Post-reform India in context of global financial crises” considering the world economy  and the Indian economy .
Arindam Gupta in his paper on “Inclusion Driven Reform in Indian Banking Sector:The Government and the people” examined the role of the banking sector in promoting financial inclusion.
Asim Kumar Karmakar in his paper “liberalisation of the financial sector in India and China:An Overview” seeks to describe financial liberalisation and development in both India and China emphasising on banking sector liberalisation.
Dhiraj Kumar Bandopadhaya in his paper “ Financial Sector Liberalisation in India –An Examination of Linkage between Financial and Real Sectors” reviewed macro economic policies of RBI during the reform period.
Partha Sarker on his paper,”India’s Experiences with financial liberalisation” evaluated reform policies of the financial markets which became healthier due to liberalisation.
Anindya Mukherjee in his paper, “ Financial sector liberalisation in India vis-a-vis the political economy of our epoch” showed the fall out of hegemony of international finance capital.
Saktinath Bandopadyaya on his paper , “ The regulatory affairs of the Indian Financial System in the Backdrop of the 2008 financial crisis” identified reasons of the crisis and its regulation in India.
Anupam Parua in his paper “ Scam –prone India Inc:A study of impact of reforms  measures” attempted to list different reform measures in security market in recent years as well as to trace the impact of such measures.
Debasish Mukherjee in his paper , “ Financial sector reforms in India with special emphasis on the Banking sector reforms” gave brief account of the financial sector reforms in India identifying the emerging issues and exploring the prospects for further reform and assess the reform programme.
Ramesh Chandra Das, on his paper, “Interlinking among NPA,investment in government securities and credit-deposit ratio : A case study for India in reform period” examined trends of credit deposit ratio during reform period and found no causality between NPA and security investment.
Bratati Dasgupta in her paper,”Inclusive growth  and urban cooperative banks in the light of financial sector reforms in India” attempted the need for financial inclusion along with measures  and suggested to include environment problems including urban cooperative banks.
Sebak Jana and Kaberi Sarker in their paper , “Efficiency analysis of the district central cooperative banks in WestBengal” found variation in respect of different key financial indicators for the DCCB using DEA methodology during last decade.
Sarbapriyo Ray and Mihir Kumar Pal in their paper , “Exploring inflation and stock price behaviour in selected Asian Economics”  examined relationship between inflation and  stock prices in Hongkong, Singapore,Japan,Korea  and India and found causality and cointegrating relationships.
Rajnarayan Gupta in his paper, “ An empirical investigation into the Linkage between commodity derivative and spot market in India” investigates into the rationale behind such a conservative attitude towards the market and examines the ill effect of the market on the economy.
Bikas Das in his paper , “ Moving of Mutual Fund from infancy to Adolescence through liberalisation”  tracks various performances of mutual funds in India.
Kalpataru Bandopadhyaya and Tarak Nath Sahu in their paper, “ A critical view on rate of interest in microfinance sector in India” examined the riskiness of microfinance and ample scope to reduce interest rate.They want  review  of this sector.
Mahasweta Bhattacharjee in her paper , “ Impact of liberalisation on financial performances of public sector GIS in India” revealed that the major impacts on public sector non-life insurance companies due to theventry of private players to this area and how they are tackling the challenges from the private players and how successful they have been in facing such challenges.

Debesh Bhowmik ( me) in his paper , “Fiscal reform in India : Convergence and cointegration”  attempted to test the fiscal convergence among Indian states taking fiscal deficit and debt/GDP  during 1990-91 – 2011-12 and showed cointegration.He found no fiscal convergence of Indian states.He also found cointegrating relationship among fiscal deficit ,growth rate,inflation rate,money supply,current account deficit, non developmental expenditure,government liabilities and revenue deficit.He commented that FRBMA needs reform for its ineffectiveness.     

Thursday, 15 January 2015

51ST CONFERENCE OF THE INDIAN ECONOMETRIC SOCIETY


51st Conference of The Indian Econometric Society

The 51st conference of The Indian Ecomonetric Society held in the Department of Economics ,Punjabi University,Patiala  during 12-14 December,2014.The conference was inaugurated by Prof.M.S. Ahluwalia-the Ex .Deputy Chairman of the Planning Commission of India. Welcome address was given by Prof Sablok of Patiala University.The Presidential address was given by Vice President Prof. Pami Dua in stead of Prof. P.Pattanayak on Welfare Economics:Trends and its measurement.In the inaugural address,Prof Ahluwalia emphasised inclusiveness,labour laws reform,the policy to increase growth rates of the low income states of India,and to proper implementation of the 12th Five Year Plan.He also told that liberalisation may not harm to the backward states.But their growth rates must converge .In mentioning the poverty and inequality in India,he stressed that top 1% or 2% of the rich people may not matter the rest of the Indians.India should prioritise the scope of skill improvement.Lastly he expects that India must achieve the 8% growth rate of GDP.
Under the chairmanship of Prof.Biswajit Chatterjee,Prof.Satya Ranjan Chakraborty of ISI,Kolkata addressed on “Generalised Gini Polarization Indices for an Ordinal Dimension of Human Well –Being”
A panel discussion on the tribute of Prof. A.L.Nagar was held and Prof.K.L.Krishna,Prof.V.N. Pandit and Dr.Pami Dua showed their great tribute to Prof.Nagar.It was chaired by Prof.B.B.Bhattacharjee.
Prof. Chetan Ghate of ISI,Delhi gave a special lecture on Sectoral Infrastructure Investments in an Unbalaced Growing Economy which was chaired by Prof. R.B. Barman.(Ex.Executive  Director of RBI)
Prof.Mukul Majumder of Cornell University of USA gave special invited lecture on “Ruin Probabilities” which was chaired by Prof.K.L.Krishna.Prof.V.N.Pandit ,Former VC of SSIHL,addressed on “On Ethics,Economics and Finance” under chairmanship of Prof V.R.Panchamukhi.
Dr.Pami Dua of Delhi School of Economics, gave lecture on the topic “ Impact of Euro zone Crisis obn China and India” which was chaired by Dr.Shubhada Rao, Chief Economist,Yes Bank.
A special session on “Punjab Economy” was chairmed by S.Jaspal Singh ,Secretary,Govt. Of Punjab where Prof Upinder Sawhney of Punjab University lectured on “National Fiscal Issues with Special Reference to Punjab”, Prof. R.S. Sidhu of PAU,Ludhiana , lectured on “Agricultural economy of Punjab:Challenges and Way forward” and Prof. Sukhpal Singh of IIM,Ahmedabad, lectured on “Achieving Agro Industrial Development in Punjab:Potential ,Strategy and Mechanism”

There were six groups of technical sessions in which 290 papers on Economics and Econometrics were  presented so far ,all of which are high quality and innovative and of them most of them were discussed on recent issues on economics in both national and international contexts.
My paper (Dr.Debesh Bhowmik) was on the topic of “The determinants of Foreign Direct Investment :An econometric study with special reference to India” in which I took six variables namely, growth rate, openness, external debt, interest rate, and exchange rate and tested by cointegration and VECM  and good relation with unstable impulse response function.


The valedictory session was chaired by Prof Inderjeet Singh-Head ,Deppt. Of Economics who gave  praises to prof and staff and students of the Department to succeed the conference.The secretary,Prof.Bhanumurthy assured their good completion of the conference and Tresurer , Prof. Samugan gave mementos to all  volunteers of the department scholars. The valedictory lecture was given by Dr.T.C.A.Anant –the Chief Statistician of India on the topic “Harnessing the data revolution for measuring social development” where he mentioned about the technological advancement of data availability and pointing to useful or unuseful purposes of data. 

Monday, 5 January 2015

THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT: AN ECONOMETRIC STUDY WITH SPECIAL REFERENCE TO INDIA



The following paper was presented in the 51st conference of the Indian Econometrics Society at Punjabi University ,Patiala during 12-14 December,2014

THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT: AN ECONOMETRIC STUDY WITH SPECIAL REFERENCE TO INDIA
Dr. Debesh Bhowmik
JEL-F21,F23,O4,C12,C32
Key words – Foreign direct investment, determinants of foreign direct investment, co-integration,


Foreign direct investment (FDI) has assumed increasing importance over time, becoming a prime concern for policy makers and a trendy debatable topic for economists. The debate on FDI has several facets, but the particular aspect that policy makers in capital-starved countries are concerned with is the determinants of FDI inflows. Many countries have policies aimed at creating stronger incentives for foreign investors who are potentially capable of providing FDI flows. Understanding the determining factors of FDI inflows and unveiling the reasons why some countries are more successful than others in attracting FDI may provide policy makers with useful guidance for future policy prescription. The provision of incentives and the adoption of FDI-stimulating policies are motivated by the realisation that FDI is a more reliable source of capital than portfolio investment. Large number of (time series and cross section) studies have been conducted to identify the determinants of FDI (inflows) but no consensus view has emerged, in the sense that there is no widely accepted set of explanatory variables that can be regarded as the “true” determinants of FDI.

Taking GDP growth rate, degree of opennesss, total external debt, interest rate and exchange rate as the important determinants of FDI in India during 1990-2013, the paper verified that the Engle-Granger methodology showed that there is co-integrating relationship where degree of openness and interest rate are significant where as Johansen test proved that there are 5cointegrating vectors  in the level series, 5 cointegrating vectors in the first difference series and 5 cointegrating vectors in the log series respectively. The VECM verified  that there are serial correlation and ARCH error with non-normal distribution where all roots lie inside the unit circle including 5 unit roots but impulse response functions do not approach to zero and error correction terms and residual systems are explosive. Similarly, the same conclusions were drawn in case of log series.
As concluding remarks we like to mention that a country which has a stable macroeconomic condition with high and sustained growth rates will receive more FDI inflows than a more volatile economy. Therefore, it is expected that GDP growth rate, industrial production, and interest rates would influence FDI flows positively and the inflation rate would influence positively or negatively. Market size plays an important role in attracting foreign direct investment from abroad. Market size is measured by GDP. Market size tend to influence the inflows, as an increased customer base signifies more opportunities of being successful and also the fact that with the rampant development the purchasing power of the people has also been greatly influenced moving to many levels higher in comparison to what it was before the economic growth.
Among the major reasons which discourage the international investors from investing in India
despite of its consistent economic growth includes: 1) Politics and corruption 2) Lack of
infrastructure 3) Inadequate Legal system 4) Instability of Indian Social and Political
environment 5) Absence of Corporate governance practices 6) Maturity of the financial markets
All in all a more open policy frame is required which can be integrated with developing

economies’ policy frame so that India becomes the most attractive destination and actually receive Foreign Direct Investment in the sectors which has potential to grow from foreign capital. Further, more the integration at National level is required as sectors which are covered under automatic route are subject to other caveats imposed by State and respective Ministry.

Saturday, 15 November 2014

25TH ASEAN SUMMIT AND CLIMATE CHANGE





ASEAN JOINT STATEMENT ON CLIMATE CHANGE 2014

WE
, the Heads of State/Government of Brunei Darussalam, the Kingdom of Cambodia, the
Republic of Indonesia, the Lao People's Democratic Republic, Malaysia, the Republic of the
Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom
of Thailand and the Socialist Republic of Viet Nam, Member States of ASEAN, on the
occasion of the 25th ASEAN Summit;
REMEMBERING
our commitments made in the Nay Pyi Taw Declaration on Realisation of
the ASEAN Community by 2015 (2014);
ASEAN Action Plan on Joint Response to ClimateChange (2012);
the ASEAN Leaders’ Statement on Climate Change to the 17th
Session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) and the 7thSession of the COP serving as the Meeting of Parties to the Kyoto Protocol (2011); the ASEAN Leaders’ Statement on Joint Response to Climate Change (2010); the ASEAN Joint Statement on Climate Change to the 15th Session of the COP to the UNFCCC and the 5th Session of the COP serving as the Meeting of Parties to the Kyoto Protocol (2009); the ASEAN Declaration on the 13th
session of COP to the UNFCCC and the 3rd session of the CMP to the Kyoto Protocol (2007); and the ASEAN Declaration on Environmental Sustainability (2007);
NOTING the wide ranging and collaborative research and policy development work in recent
years by ASEAN Member States on sustainable development, land use and landscapes,
and on forest conservation and governance, as recognised, for example, at the Forests Asia
Summit 2014;
REITERATING
our commitment to the UNFCCC, and its principles and provisions, as a framework for international collaboration on climate change mitigation and adaptation;
REAFFIRMING
the UNFCCC’s core principle of common but differentiated responsibilities and
that developed country Parties should take the lead in combating climate change and
the adverse effects thereof in accordance with this principle, while agreeing that renewed
efforts by all Parties to the UNFCCC are required to ensure mitigation goals are met;
WELCOMING
the Warsaw Framework for Reducing Emissions from Deforestation and forest Degradation
(REDD+), and the financial support provided by the United States,Norway and t
he United Kingdom, as an important outcome of COP19 and a critical step in
better valuing and protecting global forest carbon stocks;
PRAISING
strengthened efforts to mobilize the long term financing commitments from
developed countries to support developing countries and least developed countries in
pursuing ambitious mitigation and adaptation efforts;
RECOGNIZING
the United Nations Climate Summit held in New York on 23 September 2014;
HIGHLIGHTING
the urgency with which renewed mitigation efforts are required given the
latest reports prepared for the International Panel on Climate Change’s (IPCC’s) Fifth
Assessment Report (AR5) predict that, without additional mitigation, global mean surface
FINAL

temperatures will increase in 2100 from 3.7°C to 4.8°C compared to pre industrial levels,
and that substantial reductions beyond 2020 will be required to limit temperature change to
2°C relative to pre industrial levels;
POINTING
to the clear evidence of climate change in our region over the past four decades,
which has major consequences for agriculture, energy supply and livelihoods;
REEMPHASISING
that climate change is already having significant impacts causing major
loss and damage throughout the ASEAN region, and disproportionately affecting developing
countries, with the experiences with Cyclone Nargis in Myanmar and Typhoon Haiyan in the
Philippines providing stark evidence of the destructive impacts and disaster prone nature of
the region that cannot be ignored;
RECOGNISING
the important role that forest conserva tion and sustainable management of
forests throughout ASEAN will play in helping to mitigate global climate change, reduce the
risks of extreme weather events and other climatedriven disasters, and provide sustainable
economic livelihood opportunities for local communities;
WELCOMING
decision 1/CP.17 of the Conference of the Parties to the UNFCCC in which
Parties decided to launch a process to develop a protocol, another legal instrument or an
agreed outcome with legal force under the Convention applicable to all Parties by 2015 to be implemented from 2020; and recognising that the 2015 global agreement must be balanced and comprehensive, including key areas of the Durban mandate such as mitigation,adaptation and means of implementation;
ACKNOWLEDGING
that universal participation is an essential ingredient for greater ambition in the 2015 agreement and in that regard, all Parties have a common obligation to
submit an intended nationally determined contribution as part of the 2015 global agreement,
while rec allingthe principle of common but differentiated responsibilities;
EXPRESSING
the view that technology transfer, capacity building and financial assistance
from developed countries to developing countries are vital to supporting
Nationally Appropriate Mitigation Actions (NAMAs) and Intended Nationally Determined Contributions and other activities on climate change effectively and efficiently in the long run;
VALUING
the importance of pursuing climate change mitigation and adaptation actions that
are consistent with broader sustainable development goals to the achievement of food
security and poverty alleviation throughout the ASEAN region;
RECOGNIZING
the progress made in the implementation of the ASEAN Multi Sectoral
Framework on Climate Change: Agricultur e and Forestry towards Food Security (AFCC), the ASEANGerman Program on Climate Change: Agriculture, Forestry and related sectors
(GAP CC) through newly proposed ‘Forestry and Climate Change (FORCC)’, and the
ASEAN Swiss Partnership Programme on Social Forestry and Climate Change (ASFCC)
endorsed by the 36th Meeting of ASEAN Ministers on Agriculture and Forestry (36th AMAF);
ACKNOWLEDGING
the role of regional forums, including ASEAN, in supporting countries tocollaborate on the local, regional and global challenges of climate change;
DO HEREBY DECLARE TO:
1.
CALL
upon all Parties to the UNFCCC, including ASEAN Member States, to
take note of the findings in the IPCC’s Fifth Assessment Report;
2.
URGE
Parties to take immediate action on ratifying the Doha Amendments to the
second commitment period of the Kyoto Protocol;

3.
AFFIRM
that increasing pre-2020 ambition must be primarily achieved through the
implementation of the 2nd commitment period of the Kyoto Protocol and the outcomes
of the Bali Action Plan in accord ance with principles and provisions of the Convention, with
developed country Parties taking the lead;
4.
CONTINUE
to investigate increased renewable energy and energy efficiency potential
throughout the ASEAN region in recognition that such efforts can be the fastest and
most efficient way of closing the “ambition gap”;
5.
CALL
upon all Parties to the UNFCCC, including ASEAN Member States, to work
effectively and in good faith to adopt a protocol, another legal instrument or an agreed
outcome with legal force under the Convention applicable to all by the end of 2015, and to
table their Intended Nationally Determined Contributions well in advance of COP-21 in Paris
in December 2015 or by first quarter 2015 by those Parties ready to do so;
6.
URGE
developed countries to continue to show leadership, recognising historical
responsibilities, including by coming forward early with ambitious Intended Nationally
Determined Contributions by March 2015;
7.
AFFIRM
that we will put forward our Intended Nationally Determined Contributions
well in advance of COP-21 in Paris, or by first quarter 2015 for those Parties ready to do so,
as mandated by the decisions reached at COP-19 in Warsaw. These Intended Nationally
Determined Contributions will reflect our diverse national circumstances and be made in
accordance with the principle of common but differentiated responsibilities and contribute to
a 2015 agreement that is under the Convention and applicable to all Parties;
8.
REQUEST
support for developing countries and least developed countries in the
context of paragraph 2(d) of decision 1/C.19 in the preparation of Intended Nationally
Determined Contributions, and to pursue low carbon development opportunities that can
enable new mitigation efforts, especially focusing on renewable energy development, energy efficiency,and clean fossil energy technologies and forestry, to be included in their Intended Nationally Determined Contributions;
9.
URGE
developed countries to provide assistance to ASEAN Member States to enhance protection of the remaining forests,biodiversity and ecosystem services that can contribute to ambitious forest conservation and sustainable forest management goals in ASEAN Member States’ Intended Nationally Determined Contributions;
10.
URGE
all Parties to the UNFCCC to recognise the extreme vulnerability of ASEAN
Member States to climate change, and therefore the importance of adaptation activities and
enhancing capacity in the 2015 agreement;
11.
SUPPORT
the notion that apart from mitigation, contributions could also include
adapt ation, in the context that all Parties would submit intended contributions which are
nationally determined;
12.
ENCOURAGE
Parties to the UNFCCC to develop adaptation strategies that are consistent with, and address the threats identified in, the IPCC AR5 Working Group II report
on Impacts, Vulnerability and Adaptation;
13.
UNDERTAKE
concerted efforts to systematically rehabilitate our region’s mangrove
forests, in recognition of their critically important roles in mitigation and adaptation,
particularly their provision of disaster risk reduction services by minimizing the impacts of
coastal storms and flooding;
14.
ENCOURAGE
developed countries to recognise the potential to support the ASEAN
region to continue transition to renewable energy sources and increasing energy efficiency, as part of efforts to embrace low carbon futures;
15.
ENCOURAGE
developed countries to increase commitments, in terms of capacity building, technical assistance, technological transfer and financing, for developing countries
and least developed countries to pursue ambitious mitigation and adaptation objectives in
Intended Nationally Determined Contributions;
16.
ENCOURAGE
developed countries to accelerate their contributions to theGreen Climate Fund, to mobilise it as a matter of priority, noting that the distribution process should be effective, predictable and easy to access;
17.
AFFIRM
that finalisation and operationalisation of the Loss and Damage Mechanism is of urgent priority, and welcome the application of insurance oriented financial mechanisms,
such as crop insurance, throughout the ASEAN region with the support of
developed countries;
18.
AGREE
that enhanced financing from developed countries is critical for least developed countries and developing countries to pursue green economy pathways that can
preserve forest carbon sinks and to adapt to the emerging risks of climate change;
19.
ENCOURAGE
developed countries to prioritise financial and technological support for developing countries and least developed countries to rapidly pursue decentralized renew
able energy supply options, which is critical to allow poor communities currently
lacking electricity to pursue a clean energy future;
20.
ENHANCE
the potential of REDD+ to contribute to green development by protecting the remaining global forest carbon stock s and biodiversity resources, enhancing forest
carbon stocks and thereby increasing carbon removal reversing land degradation,
providing green products by sustaining management of forests improving the livelihoods of the rural poor, and aiding adaptation and mitigation efforts;
21.
ENCOURAGE
ASEAN Member States to strengthen existing regional collaborations,including in REDD+ readiness activities in order to capitalise opportunities under REDD+
framework and future climate regime, recognizing differences innational circumstances and
arrangement of REDD+ and/or forest related programmes in individual ASEAN Member
States.
22.
ENCOURAGE
all Parties to the UNFCCC to ensure that sustainable REDD+financing mechanisms are developed and implemented in order to enhance the potential forREDD+ to contribute significantly to global mitigation objectives;
23.
URGE
all Parties to progress in results-based REDD+ financing, taking intoconsideration conditions relating to forest protection and the rights of indigenous peoples
and local communities, and the principle that local communities and governments should be
supported in promoting genuine efforts to halt deforestation;
24.
REITERATE

countries with REDD+ implementation, including the incorporation of non-carbon benefits
into systems and activities, taking into account different phases of REDD+ implementation in developing countries;
25.
ENCOURAGE
developed countries to fully implement obligations regarding land use,land use change and forestry, noting that all future actions or negotiations concerning land use land use, change and forestry should take into account the full range of ecosystem services provided by forests and wetlands;
26.
ENCOURAGE
the establishment of a network of research centres in ASEAN Member States to share knowledge and lessons learnt on climate adaptable agriculturalproducts, which will enable us to combat the impacts of climate change on agricultural production patterns and promote regional food security;
27.
INCREASE
our cooperation to improve our collective capacity to deal with climate and weather management, including undertaking collaborative research to better under stand
how climate change will influence the weather systems of the ASEAN region and
technology development on climate outlooks and forecasting to better manage risks, building the capacity of decision makers from different sectors and different geographic
scales to link climate knowledge with humanitarian and development action, and developing regional-scale, high resolution climate models for the ASEAN region;
28.
STRENGTHEN
ASEAN rapid response capacity to be more efficient and effective in the event of natu
ral disasters through existing mechanisms under the ASEAN Agreement on
Disaster Management and Emergency Response (AADMER);
29.
STRESS
the importance of fast capitalization of the Adaptation Fund to continue funding priority projects since countries are alrea dy affected by climate change;
30.
SEEK
assistance in the form of technology transfer, for both the public and private sectors to support strengthened mitigation and adaptation efforts, which should be easily
transferrable, subject to low costs and exempt fro munreasonable patent fees;
31.
REQUEST
ongoing support from developed countries to ASEAN Member States to better understand, develop and implement Measurement, Reporting and Verification (MRV) process;
32.
CONTINUE
to promote ASEAN’s experiences in other regional forums to progress collaborative efforts on climate change;
33.
COMMIT
ourselves to pursuing a successful COP20 as a crucial step towards elaborating a 2015 agreement at COP21 for the post-2020 period.Adopted in Nay Pyi Taw, the Republic of the Union of Myanmar, this Twelfth Day of November
in the Year Two Thousand and Fourteen.