Nilanjan Banik

Socioeconomic Impacts of Cross-Border Transport Infrastructure Development in South Asia

Although the overall economic performance of economies in South Asia in recent years has been impressive, there is concern that an aging and increasingly inadequate infrastructure may limit the potential for further growth and economic development. A critical infrastructure component is the transportation network, and there are currently several transportation infrastructure projects in the South Asia Subregional Economic Cooperation (SASEC) region, connecting Nepal, eastern India, Bangladesh, and Bhutan. This paper uses computable general equilibrium (CGE) methods to address how these infrastructure developments might affect the broader economy in SASEC, and in particular impact on income distribution and poverty. The paper describes a new CGE model for South Asia, covering India, Sri Lanka, Bangladesh, Nepal, and Pakistan, which incorporates modifications to household structure in order to capture the implications of reform for changes in intra-household income. The scenarios that are considered reflect proposed investments in land transport infrastructure in the SASEC region. These should result in reductions in the land transport component of international transport margins, which vary bilaterally by commodity. We found that all SASEC economies would benefit from the reductions in terms of aggregate welfare, with the largest gains accruing to India in absolute terms, but the largest relative gains to Nepal, followed by Bangladesh and Sri Lanka when the margin reduction is prorated to intra-South Asian trade rather than just SASEC. In terms of household level distribution, the picture was mixed, with clearly pro-poor outcomes in some countries, such as Nepal, but more ambiguous impacts in others. In terms of potential adjustment costs, examination of the extent of predicted structural changes suggests that these would be minor, although somewhat more significant for the smaller economies in the region.

Trade as an Answer to Sustainable Economic Growth—The ECOWAS Story

We consider the case of Economic Community of West African States (ECOWAS) which is one of the largest free trade areas in Africa. We examine whether the ECOWAS member countries have favourable economic characteristics to undertake a deeper economic integration, moving towards an economic union status. Under favourable condition, policymakers in the ECOWAS region can be persuaded to implement deeper economic integration. An increase in trade, resulting from deeper economic integration in the ECOWAS region, can compensate for fall in trade between ECOWAS, and rest of the world. Because of the global economic crisis, trade flow in the ECOWAS region has fallen besides adversely affecting regional macroeconomic variables: trade balance, current account balance, fiscal balance, investment and domestic credit. The poor state of macroeconomic variables has a direct impact in reducing mean income of the region, and indirectly might affect income distribution. Increase in trade in the ECOWAS is expected to generate resources to increase aggregate demand, and to meet regional development expenditures.

The Dynamics of Income Growth and Poverty: Evidence from Districts in India

In this paper we examine the dynamics of income distribution pattern in India during post-1991 economic reforms. We consider district-level per-capita income data spreading across agriculture, manufacturing, services, and various constituent subsectors. We find evidence in favour of uniform growth process across sectors and regions, and this has helped to reduce poverty. In particular we find that growth in agricultural income and access to finance are important for reducing poverty.

Is India Shining

The popular perception about economic reforms having benefitted only the richer districts of India between 1999/2000 and 2004/2005 is investigated. Using the spatial dynamics of district-level per-capita income it was found that income distribution did not change between the years examined. It is argued that this is because of per-capita income across districts being spatially positively correlated. Physical infrastructure, human capital, and factories are identified as factors responsible for increase in income for both the rich as well as the poor districts. Infrastructure, physical or social, is a key component of growth in India. A policy impact analysis shows development of better drainage and potable water systems has a large impact on income. For the year 2001/02, it was found that for every 1% increase in closed drainage system and potable water, district-level median income increases by 1.39% and 0.21%, respectively.

The Location Substitution Effect: Does it Apply for China?

The notion that China is the factory of the world is now changing. Factories in China are shifting their production base to neighbouring Asia, primarily because of higher input costs in China, a volatile Chinese exchange rate and protectionist measures targeted against Chinese exports. In this article, we examine the location substitution effect for China: Chinese firms are exporting primary, intermediate and machinery items, meant for producing final output in the Greater Mekong Subregion (GMS), which include Laos, Thailand, Vietnam, Cambodia and Myanmar. Results suggest that GMS countries are exporting finished items to China, that are increasingly getting manufactured using primary and intermediate inputs imported from China.

Political Economy of Resources and Infrastructure in India

Abstract This chapter examines the political dimensions of strategic resource challenges in India. Natural resource endowments (i.e. land, oil, gas and minerals) can serve as potent drivers of development. For better or worse energy, transport, mineral and land markets in India are shaped by national interest and do not behave as traditional goods markets, especially because of the lack of well-defined property rights. Therefore while markets are an essential part of any response to tighter resource supplies, governments also play a key role as a preeminent domain in this incomplete market setup. This has led to challenges concerning how local resource users are subject to exclusion and dispossession in the national interest of economic growth. For example, there has been an increase in the number of legal contests regarding land, water and mining rights which has increased inequality and local insecurities. Thus a ‘paradox of plenty’ exists in resource-rich countries such as India, where recent history has demonstrated that extractive endowments can disappoint if they are not well-managed. This chapter discusses the problems related to land acquisition and water resources and the possible solutions.

Miseries of the Red Corridor Region of India: What Do the Data Tell Us?

The fifth chapter of this volume has revealed a very interesting development-disparity landscape in India, where authors have compared some broad development indicators between the two contrasting regions of India, viz., the ‘Red Corridor’ region and its complement. While clustering these regions, they have gone beyond the state boundary and have taken districts, which are affected by the rising trend of Left-Wing Extremism and have experienced unrest and conflict for a persistent period of time. Such cluster of districts is being compared with another, which is free from such violence. This distinction has been made to explore the difference in the degree of underdevelopment of the ‘Red Corridor’ region of India vis-a-vis the rest of India (ROI). The popular notion based on mostly anecdotal evidence says that the ‘Red Corridor’ region consists of most backward areas, where socio-economic development has been abysmal since independence. Such a situation is a reflection of pro-longed feudal structure and exploitation of the natural resources of the powerful groups and marginalizing various indigenous communities. As a result, the extremists been able to win the confidence of the deprived sections of the population living here and have organized them to revolt against the state. Such anecdotal evidence lacks statistical rigour, which clearly can justify such development disparity. This chapter therefore, fills the gap in the existing literature by statistically analysing average outcomes of some key dimensions of development: access to health facilities, education, finance of the ‘Red Corridor’ region vis-a-vis other parts of India, where such extremism is absent. The results stunningly reflect that the ‘Red Corridor’ region is indeed impoverished and poor compared to the ROI in terms of average outcomes of the aforementioned development dimensions. Such detail empirical analyses is helpful for policy recommendations process and endorsing the need for voice representation to ensure justice and also to bridge the gaps between these two very contrasting regions in India.

Outbound Foreign Direct Investment from China and India The Role of Country-specific Factors

Chinese and Indian enterprises have been increasingly involved in international business thereby attracting global attention since the turn of the 21st century. This article examines outbound investment experiences of Chinese and Indian multinationals and compares and contrasts the investment development trajectory for both the countries. The comparisons and contrasts are made with respect to government policy, motivations for outbound investment, financing of investment, success rate in overseas acquisition, sectoral composition, characteristics of multinational enterprises (MNEs), and the challenges and impact of such investments in the light of differences in economic and institutional parameters between the two countries. It can be observed that there are more differences than similarities in the trajectory of outbound investments by Chinese and Indian enterprises. These differences arise due to the economic and institutional structure and the development path chosen by the two countries. Due to the differences between Chinese and Indian economic development trajectories, which are unique in many ways, it is not meaningful to make a straightforward comparison of outbound foreign direct investment (FDI) experience of the two countries. Nevertheless, the main differences with regard to outward investment by Indian and Chinese enterprises can be observed in areas such as the degree of involvement of the public sector enterprises, financing of overseas investments, success rate of proposed mergers and acquisitions (M&A), sectoral composition of such investments, investment motives, and so on. Various challenges facing outward FDI from China and India are highlighted, some of which could be addressed by specific economic and institutional reforms. The tale of the two countries examined in this article taken together contains important insights for emerging country enterprises and governments on the challenges and opportunities of global business.