Neoliberalism in the Emerging Economy of India: The Political Economy of International Trade, Investment and Finance

265 Pages·2021·7.969 MB·English

by  Byasdeb Dasgupta, Archita Ghosh, Bishakha Ghosh

NEOLIBERALISM IN THE EMERGING
ECONOMY OF INDIA
Neoliberal economic reforms over the last four decades have altered the economic
cartography of emerging market economies such as India, particularly in the con-
text of international trade, investment and finance, and in terms of their effects on
the real economy.
This book examines the issues of financialization, investment climate and the
impact of trade liberalization. By analyzing these three features of neoliberal
reform the book is unique, since it accommodates both a mainstream neoclassical
approach and a non-mainstream political economy approach. The major questions
answered by this book, cover three basic lines of enquiry pertaining to neoliberal
reforms. They are (a) how financialization as a new process affects the real eco-
nomic health of emerging market economies characterized by globalization; (b)
how the changing form of international trade in the new regime impacts upon the
informal economy, and employment and trade potential in the home country; and
(c) how global investment has shaped the real economy in emerging countries
like India.
The book will be extremely useful for postgraduate students of international
economics, particularly development economics and political economy, including
researchers with a keen interest in India.
Byasdeb Dasgupta is a Professor of Economics at the University of Kalyani of
West Bengal, India. He did his PhD in Economics at the Centre for Economic
Studies and Planning of Jawaharlal Nehru University, Delhi. He has published
widely in international journals and books on issues pertaining to international
economics, finance and development, the political economy of labour in a Marxian
perspective, gender studies and development.
Archita Ghosh is a Professor of Economics at the University of Kalyani of West
Bengal, India. She has published widely in journals and books pertaining to issues
on development economics and international economics.
Bishakha Ghosh is an Associate Professor of Economics and Head of the
Department of Economics at the University of Kalyani of West Bengal, India.
ROUTLEDGE STUDIES IN THE MODERN WORLD
ECONOMY
EMERGING BOND MARKETS
Shedding Light on Trends and Patterns
Tamara Teplova, Tatiana V. Sokolova and Qaiser Munir
DESIGNING INTEGRATED INDUSTRIAL POLICIES
VOLUME I
For Inclusive Development in Asia
Edited by Shigeru Thomas Otsubo and Christian Samen Otchia
DESIGNING INTEGRATED INDUSTRIAL POLICIES
VOLUME II
For Inclusive Development in Africa and Asia
Edited by Shigeru Thomas Otsubo and Christian Samen Otchia
THE ECONOMIC DEVELOPMENT OF BANGLADESH IN THE
ASIAN CENTURY
Prospects and Perspectives
Edited by Quamrul Alam, Atiur Rahman and Shibli Rubayat Ul Islam
REGIONALISM IN LATIN AMERICA
Agents, Systems and Resilience
Edited by José Briceño-Ruiz and Andrés Rivarola Puntigliano
ECONOMIC GROWTH AND CONVERGENCE
Global Analysis Through Econometric and Hidden Markov Models
Michał Bernardelli, Mariusz Próchniak and Bartosz Witkowski
NEOLIBERALISM IN THE EMERGING ECONOMY OF INDIA
The Political Economy of International Trade, Investment and Finance
Edited by Byasdeb Dasgupta, Archita Ghosh and Bishakha Ghosh
For more information about this series, please visit: www .routledge .com /
Routledge- Studies -in -the -Modern -World -Economy/ book -series /SE0432
NEOLIBERALISM IN THE
EMERGING ECONOMY
OF INDIA
The Political Economy of International Trade,
Investment and Finance
Edited by
Byasdeb Dasgupta, Archita Ghosh and
Bishakha Ghosh
First published 2021
by Routledge
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© 2021 selection and editorial matter, Byasdeb Dasgupta, Archita Ghosh
and Bishakha Ghosh; individual chapters, the contributors
The right of Byasdeb Dasgupta, Archita Ghosh and Bishakha Ghosh to
be identified as the authors of the editorial material, and of the authors for
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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Dasgupta, Byasdeb, editor. | Ghosh, Archita, editor. |
Ghosh, Bishakha, editor.
Title: Neoliberalism in the emerging economy of India: the political
economy of international trade, investment and finance / edited by
Byasdeb Dasgupta, Archita Ghosh and Bishakha Ghosh.
Description: 1 Edition. | New York: Routledge, 2021. | Series: Routledge
studies in the modern world economy | Includes bibliographical
references and index.
Identifiers: LCCN 2021001607 (print) | LCCN 2021001608 (ebook)
Subjects: LCSH: Financialization–India. | India–Economic policy–21st
century. | Free trade–India. | Informal sector (Economics)–India. |
Unemployment–India.
Classification: LCC HG187.I4 N46 2021 (print) | LCC HG187.I4 (ebook) |
DDC 330.954–dc23
LC record available at https://lccn.loc.gov/2021001607
LC ebook record available at https://lccn.loc.gov/2021001608
ISBN: 978-0-367-67553-0 (hbk)
ISBN: 978-0-367-67554-7 (pbk)
ISBN: 978-1-003-13176-2 (ebk)
Typeset in Times New Roman
by Deanta Global Publishing Services, Chennai, India
CONTENTS
List of figures vii
List of tables x
Editors xii
Contributors xiii
Acknowledgements xvi
Introduction 1
BYASDEB DASGUPTA, ARCHITA GHOSH AND BISHAKHA GHOSH
PART 1
Finance 17
1 Finance and the real economy: The evolving distance in the
context of India 19
SUNANDA SEN
2 Capital accumulation and finance capital in the age of finance 29
BYASDEB DASGUPTA
3 Revisiting “fictitious capital” and the autonomy of finance in
the circuit of global capital 48
SATYAKI ROY
4 The financial sector in the Indian economy: Some reflections
using Hyman Minsky’s lens 67
SUKANYA BOSE
v
CONTENTS
5 Is priority sector lending responsible for higher NPA in the
banking industry? 89
SAUMITA PAUL AND MALABIKA ROY
6 An empirical exploration of the Indian stock market:
Investigating the interface of return, sentiment and exchange rate 103
KUNTAL CHAKRABORTY
PART 2
Investment 111
7 The dynamics of global demand, investment and trade deficit:
A model of India’s external dependence 113
ZICO DASGUPTA
8 India’s recent slowdown and neoliberal regime of
accumulation: Is there a link? 140
SASWATA GUHA THAKURATA AND RAJENDRA N. PARAMANIK
9 Foreign direct investment and productivity spillovers:
Evidence from the Indian pharmaceutical industry 173
LABANYA PAL
PART 3
International Trade 193
10 Reformatory policies and factor prices in a developing
economy with an informal sector 195
BISWAJIT MANDAL, SUJATA GHOSH AND SASWATI CHAUDHURI
11 Impact of trade liberalization on informal employment:
A theoretical approach 214
DEBABRATA ROY
12 Trade potential and WTO issues for West Bengal 225
DEBOTTAM CHAKRABORTY
Index 247

vi
FIGURES
1.1 Volatile finance and disparate growth. Source: Bombay
Stock Exchange 26
1.2 Market capitalization BSE. Source: Bombay Stock Exchange 26
1.3 BSE Sensex: annual averages. Source: Bombay Stock
Exchange 27
1.4 GDP growth rates. Source: Economic Survey, Government
of India 27
4.1 Worsening NPAs of SCBs. Source: RBI, Database on the
Indian Economy. Notes: As on 31 March 74
4.2 Growth in credit disbursed by SCBs (%). Source: RBI,
Database on the Indian Economy 74
4.3 The widening gap: quarterly growth rate (%). Source:
Bose and Kumar (2018). Notes: Rolling Quarterly Growth Rate 78
4.4 Net receivables (+ve)/payables (–ve) by institutions.
Source: RBI, Financial Stability Report, various
issues. Note: Urban Cooperative Banks (UCBs), Asset
Management Companies – Mutual Funds (AMC-MFs),
Non-Banking Financial Companies (NBFCs), Housing
Finance Companies (HFCs), Pension Funds (PFs) and All
India Financial Institutions (AIFIs) 80
4.5 Total debt to GDP and its composition across sectors (%).
Source: Reserve Bank of India (RBI), Central Statistics
Office (CSO), Bloomberg, NBFCs/HFCs company reports,
CEIC, MOFSL as cited in Ecoscope, Motilal Oswal Group 83
5.1 GNPA and GNPA ratio: 2005–19. Source: Statistical
Table Relating to Banks, RBI 92
5.2 Priority sector advances and priority sector advances ratio:
2005–19. Source: Statistical Table Relating to Banks, RBI 93
vii
FIGURES
7.1 Share of gross capital formation, exports and net exports in
GDP (%). Source: Linked GDP series, National Statistical
Commission and National Account Statistics, CSO 116
7.2 Nominal growth rates of merchandize imports of the rest
of the world and India’s merchandize exports (%). Source:
WITS, COMTRADE 117
7.3 Determination of the steady-state investment rate, gross
exports and net exports 127
7.4 Impact of higher global demand: (a) case 1 (m < m) and
c
(b) case 2 (m > m) 130
c
7.5 Simulation of steady-state equilibrium. Note: Simulation
made with Matplotlib 133
7.6 Simulation of comparative dynamics. Note: Simulation
made with Matplotlib 133
7.7 Actual, fitted and residual values 137
8.1 Average annual growth in pre- and post-reform period.
Note that these are growth rates of GDP at factor cost in
2004–05 prices (1980–81 to 2012–13) and gross value
added (GVA) at 2011–12 basic prices (2013–14 to 2018–
19). Source: Authors’ illustration using data from the MoSPI 145
8.2 Average annual growth during various sub-periods. Note
that these are growth rates of GDP at factor cost in 2004–
05 prices (1980–81 to 2012–13) and GVA at 2011–12
basic prices (2013–14 to 2018–19). Source: Authors’
calculation based on data collected from the MoSPI 145
8.3 Growth performance in the pre-reform era. Source:
Authors’ illustration using data from the MoSPI 146
8.4 Growth performance in the post-reform era. Source:
Authors’ illustration using data from the MoSPI 146
8.5 Recent growth deceleration. Source: Authors’ illustration
using data from the MoSPI 147
8.6 Average annual growth of spending on various private
consumption items. Source: Authors’ calculation and
illustration based on data collected from the EPWRFITS 153
8.7 Various determinants of private consumption 156
8.8 Growth–inequality nexus in India 164
8.9 Scatterplot of errors and explanatory variables 167
8.10 Scatterplot matrix 167
8.11 Kernel density test for normality of errors. The residuals
are normally distributed for both the regressions 168
viii
FIGURES
11.1 Free market commodity prices, monthly, January 1960–
May 2013. Source: UNCTADSTAT 222
12.1 NTBs facing Indian imports into the United States.
Source: Mehta, R (2005), “Non-tariff Barriers Affecting
India’s Exports”, Research and Information System for
Developing Countries, New Delhi, Discussion Paper No. 97 233
12.2 NTBs faced by Indian imports into the EU. Source:
Mehta, R (2005), “Non-tariff Barriers Affecting
India’s Exports”, Research and Information System for
Developing Countries, New Delhi, Discussion Paper No. 97 234
ix