Vol. 2 No. 4 (Jul-Aug) (2021): Indian Public Policy Review

Capital flows to emerging markets are generally volatile, resulting in periodic "sudden stop” episodes – when capital inflows dry up abruptly, with significant negative effects on the economy and on financial variables. This paper reviews India’s experience with capital flows. The relative volatility of different kinds of capital flows in India is similar to that in other emerging markets. Our analyses suggest putting in place a medium-term policy framework that includes sound fiscal balance, a sustainable current account deficit, an environment conducive to investment, an appropriate level of reserves, avoidance of excessive appreciation or volatility of the exchange rate (through the use of reserves and macroprudential policy) and prepares the banks and firms to handle greater exchange rate volatility. In addition, it would be good for India to change the capital flow mix toward FDI flows and find ways to diversify the investor base toward investors with a longer-term view. It would also be useful to eventually graduate from the emerging market asset class. Finally, adopting a clear communication strategy to interact smoothly and transparently with market participants – involving regularly reasserting the commitment to sound policies, and reminders of the resilient underlying fundamentals – are likely to be helpful in risk-off times.

This paper traces the history of the swadeshi idea from its origins to the present day, identifies its political trajectory, assesses its impact on the Indian economy and outlines how it could be interpreted in the context of an independent, liberal democratic republic. It shows that swadeshi has always been a political project cast in economic terms and its empirical track record is far less impressive than its exalted place in the popular narrative. It concludes by arguing that India’s national interest is better served by acquiring capability than self-reliance and most importantly, by embracing an open economy. 

In the last half of the 19th century in the Bombay Deccan, Indian professionals and merchants began to openly challenge some practices of the colonial government. A major vehicle for this forthright criticism was the Poona Sarvajanik Sabha. Through its quarterly journal, the Sabha’s interactions with government gave rise to a competition of ideas and identities, between government and its Indian critics. This competition embraced many topics, but the denouement concerned government policies during two outbursts, some twenty years apart, of famine in the Deccan. Each side was convinced that its approach was right, with the government comfortable doing what it had always done, and the critics increasingly finding fault because of the failures of the government’s famine policy. The question was, which was more important, clinging to Utilitarian doctrine, or implementing a “newer” doctrine that emphasized saving human life? The Sabha not only accepted a “newer” doctrine, but also chose to hold the government accountable for not implementing it. More important, when the government failed to implement needed action, the Sabha took action to right the wrong. Eventually, government reacted to this criticism by acting to crush the Sabha. The eventual outcome is visible even today.

This paper adapts existing theoretical frameworks of social norms and their interactions with laws to study the case of rule violations in Indian road traffic. Specifically, we look at the case where existing laws and rules are violated with such regularity that breaking the law becomes the social norm. We investigate this framework in the case of road user behaviour in (urban) India, where road safety and traffic violations have been the focus of recent policy changes. We propose that a lack of road discipline and traffic violations have an impact on road safety, as well as on congestion. These, in turn, have implications for the economic productivity and development of a country, as well as the well-being of its citizens. Our application of the framework suggests conditions of enforcement under which such harmful social norms can be reversed. Policy interventions and scope for behaviorally-informed policies targeted at improving road user behaviour are discussed.

Capt. (Dr.) Hendrix’s sobering insights are the best representation of contemporary US maritime strategic thought. Seth Cropsey, on the other hand, has an entertaining set of fictional scenarios; although a bit alarmist, these ultimately convey the same message as Hendrix, that the US needs to renew its emphasis on credible naval power.