Showing posts from March, 2018

Rethinking Export promotion in the era of trade wars

(This article was first published few days ago on Swarajya Online Magazine with the heading "Export promotion in the era of trade wars" at this link ) The newspapers are awash with analysis of President Donald Trump’s tariff hikes and the subsequent threat by United States Trade Representative (USTR) to pull India to World Trade Organization (WTO) dispute panel for maintaining export subsidies to the tune of $7 billion. The current popular narrative revolves around how the US’s tariff move is bad for the world trade, and why India should stick to the stand of promoting multilateralism in international trade. The arguments are usually sound and include the fact that there is ultimately no winner in a long drawn trade-war. However, it is important to understand and analyse the matter in more depth, as the stand we take now would affect the direction of our industry and trade policies in future. In addition, it is also important that we understand and account for the emergin

GST long term positive for tax collection - More evidence

GST effect on tax compliance Yesterday, Bibek Debroy commented that it might take around 10 years for the GST to settle down . That might be so, but some effects might start showing quite early. One of the effects I am very keen to see is the effect of computerised invoice matching between suppliers and recipients.  This matching should ideally eliminate mis/under invoicing over a period of time as the participants in the value chain realise that compliance is better than the efforts required to maintain informal accounts, and is not commensurate with the risks associated. This effect, I felt all these days, should not take more than two years. Two years should be the rough time period when a new system rolled out at a scale of our country emerges out of the teething troubles. Or so was my hunch.  Looks like the period indeed is around that much as per this NBER working paper by Fan, Liu et al .   It is  a study of effect of  computerisation  of VAT in China during early 20

Gigabattery factories - Engine of the renewables future

When we talk about electric vehicles, the battery technology that drives it cannot be left out. The success of Tesla stems from the ability to stack rows of Li ions batteries in dense modules that deliver sufficient power to run the car and system auxiliaries. The ability to pack rechargeable dense modules of Li ion will play out in the area of home energy too . The way we envision national grids and power distribution may undergo a paradigm shift with efficient solar modules generating and storing sufficient power in such batteries at individual home and even industrial units. This will accelerate as massive investments bring economies of scale in battery manufacturing consequently making them affordable, and viable alternative to fossil fuels as store of power. If that be so, any national policy that dreams of promotion of electric vehicle and renewables future cannot ignore battery manufacturing sector.  Battery manufacturing capacity across the world - Bloomberg data

The cooperative dairy sector of Gujarat - A case study in trade protectionism

This blog usually advocates free trade. However, a cautious approach is advised when it comes to sensitive sectors. Free trade doesn't mean zero tariffs everywhere. The costs and benefits needs to be balanced carefully. For example, when the dairy sector is protected, the milk and milk products might be sold costlier in domestic markets, leading to less consumption of an important source of nourishment in an otherwise poor low protein Indian diet. So it is important to understand the argument from both producers and consumers points of view.  India sells milk at a price that is around 1.5 times the price in USA in absolute terms. So when we factor in the affordability (PPP) the figures become worse. Therefore the consumers are at a disadvantage in terms of price at which milk is sold in our country. India maintains steep import barriers to milk and the question is whether it is justifiable in light of the argument in previous paragraph.  Gujarat and few other states in In