Country Session 12: India Central

Chaired by Dilip Mookherjee (IGC; Boston Univ.), the first part of the session began with Sheetal Sekhri (Virginia Univ.) presenting her IGC project which finds that public college graduates earn more because of connections formed, and not academic value added, at colleges. Anjini Kochar (Stanford) remarked that the findings are relevant given the increasing share of the private sector in the number of higher education institutions and student enrolments in India, and concerns regarding quality of higher education.

Karthik Muralidharan (UCSD) presented ongoing work that analyses a ‘Smartcard programme’ in Andhra Pradesh involving electronic transfers to beneficiaries of key welfare programmes, and use of biometric authentication. Increased efficiency in transfers and reduced corruption are found. Sandip Mitra (ISI) said the study is timely as the government is planning to link beneficiary transfers to unique IDs across India. Targeting issues and availability of appropriate technology are key problems.

Michael Greenstone (MIT) presented his IGC project that tests the impact of a modified audit scheme in Gujarat wherein independent environmental auditors are assigned to firms. This leads to more truthful reporting of pollution levels. Hardik Shah (Gujarat Pollution Control Board) said that Gujarat has a strong foothold in polluting manufacturing such as chemicals and environmental regulation is crucial. The findings have been incorporated in the policy framework.

Dilip Mookherjee briefly talked about ‘Ideas for India’ – an economics and policy portal launched in July 2012.

Finally, Vijay Joshi (Oxford) chaired a discussion on ‘Monetary management of the growth-inflation trade off with fiscal constraints’. Joshi posed three questions – with low growth, high inflation and flexible fiscal policy, should fiscal and monetary policy move in the same direction, what monetary policy should be if fiscal policy is inflexible, and how the objective of keeping current account deficit reasonable will affect policy. Sitikantha Pattanaik (RBI) said that key challenges are assessing potential growth rate and a consistent threshold inflation rate. Inflation expectations and output gap affect inflation, and these cannot be managed by monetary policy in the presence of fiscal dominance. Transmission of monetary policy can be improved without a huge growth sacrifice if there is fiscal consolidation. Rathin Roy (NIPFP) said it will not be politically possible for any government to being down fiscal deficit below 7% in the current situation; although quality of deficit can be improved. The RBI’s focus should be maintaining a stable inflation rate, not growth or exchange rate volatility.