Economic Environment of India
Contents: Part I. The Regulatory Era: 1. The Regulatory Era. 2. On The Reform Path. 3. The Future of Reform. 4. The Worrying Areas. 5. Regulation of Reform. 6. Issues of Governance. 7. The Corporate Perspective: The Colour of Money. 8. A Corporate Agenda for Poverty Alleviation. 9. The Real Test of Global Competition. 10. Winding Up. Part II: By Way of an Introduction. 11. By Way of an Introduction. 12. Being Led by the Environment. 13. Poverty Alleviation: The Theory. 14. A Growing Basket. Part III. The Core Areas: 15. The Core Areas. 16. The Monetary Scenario. 17. The Securities Market. 18. Specific Issues. Part IV. The Statistical Base. Part V — Case Studies. 19. A Mountain and a Hillock: Little Common Ground. 20. Company Law Matters. 21. What of the Doha Round. 22. The Dutch Disease. 23. Beyond the Wisdom of Phillip and Phelps. 24. Does Economics Matter to Managers. 25. Union Budget 2006-07: Do Pluses Outscore Minuses. 26. Indian Railways: A Market Player. 27. Economic Survey 2005-06—Core Aspects. 28. Indian Railways as a Market Player: a Plan for Corporatisation. 29. Theory of Poverty alleviation: Depend on the Market to Serve the Poor. 30. Unspent Surplus: Piercing the Veil. 31. Inequality: Irrelevant Rhetoric. 32. Economic Freedom Reports of Rajiv Gandhi Foundation 2005. 33. Suggested Indices of Economic Efficiency With a Human Face An Alternative to the Economic Freedom Indices. 34. Wanted: A Level Playing Field for Issues. 35. Who Dictates on Reform: The Politician or the Expert. 36. No Room for Dialectics or Compromise. 37. Equilibrium versus Disequilibrium. Part. VI. Capturing the Key Areas: 38. Public Finance. 39. External Sector. 40. Industry. 41. Agriculture. 42. Infrastructure.
When Peter Drucker dictated to the US auto industry in the seventies and the latter followed suit with impressive gains for its constituents that costs must be price driven he not merely repudiated the well established principle of marginal cost determining the price but also sent the strong message across that the economics that mattered to managers was what ruled over the market and not what academic theory laid down. The Ford Company priced its luxury limousine Mustang at $1995 on the basis of Druckers diktat and made a huge profit. Indeed it emerges that several US manufacturers acted on that very basis and made themselves largely competitive. The record of the eighties tells us that American industry paid a heavy price for its retreat after a decade or so to the regime of cost-based pricing.
Drucker seemed to entertain a personal dislike for Keynes and had several harsh things to say about The General Theory. But he generally accepted Keynes demand side economics. Both Drucker and Tom Peters sought to dovetail economic theory to the compulsions of the market place. The key message that aspiring and practising managers alike get from these titans is that a good part of conventional economic theory is irrelevant to the demands that managerial functions make on their expertise and professionalism. Price-based costing, for instance is the first step towards managerial excellence. Companies which perform well could have achieved a high level of competitiveness on that basis. The toppers in the corporate arena globally and in the limited Indian context could hardly be prospering with the backward looking cost-based pricing strategy. True management lies in managing costs so as to offer products and services at prices that the market can bear. Globally the best working strategy is often differential costing and pricing for diverse markets but excellence is identified only with competitive costing that is price determined. In the early sixties, the joke one heard about the pioneering research institutions in the country was that the bigwigs there were still stuck with the classical economics of Alfred Marshall, but obviously this was quite unfair and the economic academia generally was well versed in Keynesianism. The Indian economist Dr. V.K.R.V. Raos celebrated rejection in 1949 of Keynesian theory as inappropriate to developing economies in fact underlines this aspect.
Finally is there any scope for transplantation of the indifference curves theory which dictates that the consumer is indifferent in regard to the choice of market baskets Yes we can do this in regard to all petro goods subsidised or otherwise although we should remember that differential State duties on these goods as much as the rates of excise overall contest the assumption of indifference. Generally where subsidies are uniformly available to all consumers this theory can be said to retain its validity. A uniform system of VAT which is the ultimate goal should uphold the theory. I would close this paper with this. I suppose economics should be re written on the basis of what happens in the market place by how the market behaves as much as how policymakers and administrators as well as regulators play their game.
