Pages: 8

Anindya Sen has been an academician throughout his life. After completing his graduation from Presidency College, Calcutta, and post-graduation from the University of Kolkata, he worked as a lecturer in economics at the University of Calcutta for about 5 years. Afterward, he went to the University of Southern California, USA, where he received his doctoral degree in 1990 in the broad area of industrial organisation. Immediately after, he joined the Indira Gandhi Institute of Development Research (IGIDR) and worked there as a faculty member. He was the dean of Graduate Studies at IGIDR. He joined the Indian Institute of Management, Calcutta (IIMC) in 1998. Prof. Sen spent the majority of his academic career at this institute, teaching courses in economics, including microeconomics and economics of business policy.

Pages: 181

No chapter abstract available.

Pages: 17

The economies of scale in household consumption arise as the per person cost of the ‘public’ good decreases with household size, thereby releasing resources for the ‘private’ goods in larger families. The empirical evidence in support of this fact has met with limited success in the Indian context. This chapter re-examines the public good approach to measure economies of scale in household expenditure using the Indian Human Development Survey data for the year 2011–12. A preliminary analysis shows that as disposable income expands with economies of scale, consumption diversifies towards a more varied diet and from food to non-food items. As of 2019–20, about 44% of rural and 39% of urban households in India belong to non-nuclear families. Furthermore, larger households are over-represented among the poor. The detailed findings from this study provide policy ideas as to the behaviour of households across income and social strata regarding their response towards consumption and investment and how they balance them to ensure higher living standards.

Pages: 23

Given reduced social interactions and economic distress, concerns about mental health have gained primacy during COVID-19. In this chapter, the authors estimate the prevalence of mental health problems during the first wave of COVID-19 and identify its determinants among the general population of Indian metropolitan cities. The data were collected from over 1200 adults randomly selected from the list of mobile phone users in Bengaluru, Chennai, Delhi, Kolkata, Mumbai and Hyderabad. The Depression Anxiety Stress Scale was administered to the study participants. The study employed a multiple-indicator, multiple-cause model to measure depression, anxiety and stress using observed indicators of these latent constructs and identify the socio-economic groups at risk of these disorders. Preliminary estimates suggest that close to 50 percent of respondents reported anxiety symptoms, with the percentage reporting depression and stress being around similar (or, slightly lower) levels. Single respondents, members of minority groups, those less educated and those from large households were identified as the most at risk. The results also indicate a positive relationship between economic stress and mental illness. Although COVID-19 increased the psychological burden of the population, all persons reporting psychological disorders may not require clinical attention.

Pages: 28

In this chapter, the author examines the implications a merger has for the quality of new and existing innovations. The chapter notes that two important considerations dominate the cost implications of mergers. First, for new innovations, the sunk cost of innovation is what is of paramount importance. Once a product is innovated and developed, the marginal cost of producing the innovated product is usually low and invariant with respect to the scale of production. Second, for the choice of qualities (or products) from the set of existing innovations, what is relevant is the cost of production that increases with the choice of the quality level itself. So, does this distinction between the nature of costs – sunk development cost versus variable production cost – matter for the post-merger quality level? Another useful dimension of the analysis is the role of cost synergy – both for sunk development and marginal production costs. Apart from the quality of innovations by a merged firm, another relevant issue is the post-merger market coverage. Does a merger reduce the extent of the market coverage? These issues hold useful implications for critical industries such as pharmaceuticals.

Pages: 15

In this chapter, the authors focus on the wealth disparities in India. Relatedly, they also focus on the adequacy of fiscal policies to address this issue. The authors trace wealth disparity in India from 1983 to 2021. A preliminary analysis highlights a widening of the wealth gap since 1992. In this regard, they assess the relevance of various fiscal interventions within an empirical setup. The results underscore the inadequacy of tax revenues and the absence of redistributive effects and have important policy recommendations. Given the paucity of fiscal space, the findings also call for innovative financing mechanisms other than tax revenues like crowdfunding, private investments, corporate social responsibility initiatives, and self-help groups, along with urban employment guarantee schemes to tackle this issue in a comprehensive manner.

Pages: 24

This chapter attempts to present an overview of the literature on game theory applied in the context of management puzzles. Game theory, having its genesis in the womb of mathematical sciences, seeks to mathematically identify the best strategic response of the players, who, in general, are assumed rational and to have complete information about the context and circumstances, as well as the outcomes of different strategies played (although they may have incomplete or imperfect information about the rival players). On the contrary, the business world does not enjoy the benefit of full information or the perfectly predictable outcome of any competition. Therefore, it is justifiable to see that the literature on business strategies, which is otherwise rich, has not attached much reference to game theory and vice versa. Since the early part of this century, some attempts have been made to identify possible synergy in these two specialised domains of research thereby creating an interesting literature on application of game theory in addressing business problems in various management functionalities like marketing, finance, operations, strategy and human resources. Based on a bibliometric analysis, this chapter explores areas of research addressed in the literature, quantify the research trends, presents overview of research outcomes and scope for further research in which game theory could be utilized in solving management puzzles.

Pages: 20

Using annual data on domestic Indian banks, the article examines the impact of internationalization on risk-taking. The findings suggest that internationalization leads to an increase in bank risk-taking, measured in terms of either accounting or market-based measures. The analysis also examines the channels through which such internationalization impacts bank riskiness and, relatedly, the effect of their expansion strategies. It is found that greater operational complexity and, likewise, simultaneous expansion into multiple markets are key factors that adversely affect their riskiness. From a policy standpoint, the analysis suggests a thorough analytical assessment of the potential gains versus the consequences of alternate expansion strategies in order to ensure the long-term viability of these banks.

Pages: 27

This chapter examines the role of information asymmetry in capital structure decisions made in public and private security markets. Specifically, the chapter tests the contention that firms from countries with higher information premia circumvent the challenges arising from information asymmetries by choosing securities and market types with less information sensitivity. Consistent with the arguments of information-based models, the empirical findings for India suggest that firms with less information asymmetry make public issues. However, the twist in the tale comes from the private security markets, where they report the reversal of the pecking order behaviour. In contrast to the conventional wisdom, they find that firms with higher information asymmetry issue equity over debt in the private security market. The authors conclude with some policy discussions of the findings and correlate them with the Indian experience.

Pages: 25

Using an extended sample of Indian manufacturing firms covering the 2000–2020 period, this chapter examines the effect of financial constraints on the extensive and intensive margins of exports. By employing two multivariate indices of financing constraints—the Whited and Wu Index (WWI) and the Hadlock and Pierce Index (HPI)—alongside conventional measures such as liquidity and leverage, the authors examine whether changes in firms’ financial health influence the decision to export as well as the level of exports. Relatedly, they also test the learning-by-exporting hypothesis. Finally, they examine whether implementing the Insolvency and Bankruptcy Code (IBC) in 2016 helped reduce firms’ financial constraints. Their findings also show that after the implementation of the IBC-2016, financial constraints have declined. They correlate these findings with recent evidence, suggesting that exporting manufacturing firms have benefitted from the bankruptcy reform law.

Pages: 156

No chapter abstract available.

Pages: 35

This chapter discusses the contours of fiscal policy, focusing particularly on the developments in the post-liberalization period. Describing the philosophy of expenditure and revenue management and various policy reforms, the analysis underscores the development of fiscal discipline frameworks and the move toward fiscal consolidation. In doing so, the authors emphasize and analyze the issues of persistent fiscal deficit, the role of the political economy and, relatedly, fiscal populism. Towards the end, the study traces the role of fiscal policy during the COVID-19 pandemic and its role in the post-pandemic recovery of the Indian economy. The chapter concludes by outlining key imperatives for fiscal policy in India.

Pages: 22

An increase in policy rates, in order to control inflation, may lead to a credit crunch, slowdown in economic growth and spurt in non-performing loans. In this chapter, we explore the impact of policy rate shocks on the volume and cost of bank credit, in an imperfect competition framework. We examine the conditions under which credit growth may occur, both in corporate and retail segments, despite a rise in policy rates. This phenomenon is consistent with recent Indian experience. The chapter also analyzes central bank monetary policy announcements, in an extensive form game-theoretic structure, which take into account future decisions by banks and borrowers, on the quantum and cost of credit. We discuss how the central bank fixes its optimal policy rates, given its dual objectives to manage price stability and financial stability in an economy. We highlight the dilemma that it faces when it tries to manage both inflation and systemic risk, through its policy rate announcements.

Pages: 26

This chapter takes a fresh look at the issue of women's empowerment and its relationship with development. The authors address the slower pace of development in women empowerment in India by looking at two aspects: empowerment and determinants. In this regard, they construct a measure of women empowerment (WEMP) onboarding its multiple dimensions such as education, health, domestic autonomy, and access to free mobility-related indicators. Second, they analyze the association of different socioeconomic, demographic, and household-level characteristics with the women empowerment index measure. In this regard, they exploit multiple rounds of National Family Health Survey (NFHS) data – the NFHS-IV(2015–16), and the NFHSV (2019–20) at the district level. Our results show that the districts in the southern region not only perform better in terms of empowering women but also remain in the top-quintile of the distribution of the WEMP index. By comparison, poor-performing districts in the central-eastern region have made certain improvements during this period, although they remain in the lower quintiles. Our multivariate regressions for two rounds separately indicate the dominance of family-level demographics and educational and family structure variables in explaining WEMP as compared to socioeconomic and sociodemographic variables.

Pages: 16

This chapter follows the debate on loss and damage at the UN Climate Change Conference (UNFCCC COP 27 or COP 27). To date, climate change discussions, whether at the annual Conference of Parties (COP) or otherwise, have highlighted essentially two broad areas, mitigation and adaptation. While mitigation relates to ameliorating the stressors responsible for climate change, adaptation relates to building institutional and human capacity to live with climate change. These lines of discourse were adequate when climate change was considered one factor that would affect us in the (near) future. However, with climate change concerns coming to the centre of policy debate, it is imperative that the world wakes up to a third thread of deliberations and even more urgent action, namely assessing and compensating for loss and damage. The author unravels the multiple threads of discussions around it. Ahead of COP 27, the developing world is insisting that loss and damage be on the agenda for discussion. Accordingly, it is imperative that countries discuss threadbare who should fund losses and damage, how they are measured and who the beneficiaries would be.

Pages: 19

This chapter delves into the possibility of research and development (R&D)–based innovations emerging as India's next growth driver. Some of the stylized facts about R&D may be noted. First, India spends less than 1 per cent of its gross domestic product (GDP) in R&D activities, while no country spends more than 2 per cent of its GDP in R&D activities and still has a per capita GDP of less than US$10,000. Second, much of India's R&D activities are funded by the government, and she can boast of several reputed institutions of global stature. Third, Indian firms, particularly in manufacturing, have not fully realised the strategic value of formal R&D-based innovations. In this context, many still believe that their greatest advantage is to compete on cost. The degree of competition its exports face in global markets and the vital technology-based products it imports measure how innovative India is. Many educated and qualified Indians are compelled to explore employment opportunities abroad due to the insignificant opportunities in R&D and the high-end knowledge economy. In this context, the chapter explores the evolution of the manufacturing sector in modern India and argues how R&D-based innovations could drive the next round of high growth as many global factors are expected to work favourably for India in the coming years.

Pages: 16

India is increasing its economic and strategic presence in Southeast Asia. Over the past decade and more, India has signed a number of free-trade agreements with different members of the Association of Southeast Asian Nations. However, India has also withdrawn from the Regional Comprehensive Economic Partnership agreement, of which China is a participating country. In this context, this chapter finds that this recent wave of regionalism involving India and other countries in Southeast Asian countries may not immediately bring huge economic gains for India, but it can help diversify India's export destinations. There might also be advantages of diversifying sources of imports. As many Southeast Asian countries are active players in global value chains, India's integration with these countries may also benefit India from that aspect. Moreover, these agreements may be important for geopolitical reasons for India and may also prepare India for a world trade regime in which mega-trade blocs may dominate.

Pages: 20

Notwithstanding China's emergence as a focal point in global value chains, recent trade war threats, and subsequently, the COVID-19 pandemic appear to have dampened China's attractiveness. Several advanced economies are contemplating diversifying their dependence on China – a strategy known as China-Plus-One. This chapter proposes a methodology for arriving at an aggregate ranking of the major economies of emerging Asia, built on a few standard indices such as the World Bank's Logistic Performance Index, the World Bank's Ease of Doing Business Indicator, the World Economic Forum's Global Competitiveness Index, and the Economic Complexity Index of the Harvard University. In this regard, the chapter ranks seven key countries in the region, including India, as possible destinations for selecting the “plus one” destination country. The results of the findings are analyzed and discussed, along with the key implications that were gleaned.