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Working Papers | 1997

Revitalizing the State 4. Reinventing the Democratic State

Khandwalla P N

1407 Although democracy evolved in the West, in this century it has been adopted by scores of developing societies, with several relapses to despotism and recoveries from it. The most common form of democracy is liberal democracy, with several distinguishing characteristics. However, there are several variants of liberal democracy. The more sustainable forms may be those that incorporate elements of associations, deliberative, and direct democracy. In poor countries, democracy may be sustainable if there is also reasonable macro-economic stability, welfare measures for the poor and the insecure, and effective strategy of rapid economic development whose fruits increasingly go to the poor and the under-privileged, and administrative effectiveness. Empirical research suggests that democratization, in conjunction with civil liberties and social empowerment though investment in education, health, etc. of the masses, enhances rather than inhibits economic growth. A number of mechanisms are available to make the democratic state and its organs more innovative and effective. These include innovations for fairer representation of the people in the legislature, for a more stable tenure of elected government, for improving the quality of people's representatives in the legislature, and for improving the competence and quality of political executives. It is argues that democracy has many advantages and some disadvantages also vis-à-vis competing forms of the state, but it can be made sustainable, and the emerging world values are more in consonance with it than with the other forms.

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Working Papers | 1997

Futures Trading in India - Are We Ready

Gupta Ramesh

The article examines the nature of futures market and its development abroad. It provides a theoretical framework reviewing behaviour of future prices and a need for an effective arbitrage between spot and futures market to ensure competitive and fair pricing for hedge seekers. In the Indian context, it examines the hedging needs of Indian investors and probes the robustness of cash markets. Major deficiencies in out cash markets are absence of facilities for margin trading, short sale, dematerialised settlements and electronic funds transfer among participants. Efficient arbitrage is the key to functioning of the futures market. In India arbitrage can be done only in one direction which is to buy in spot and sell in futures market when basis (that is difference between spot and futures prices) after adjusting for carry cost is at premium. If basis is at discount arbitrage would involve sell in spot and buy in future, but this would not be possible in the absence of short sale. This skewness in arbitrage would delink the two markets and futures market would turn into a casino. The article also critically examines the empirical work of Shah and Thomas and questions the validity of their estimates of 'impact cost' and other 'event studies' in support of futures market. The article ends asking the regulators what is the hurry? Derivative trading requires a critical mass of sophisticated investors, supported by credit and stock analysts, serviced by market-makers prodding a modicum of liquidity and protected by keen regulators. If SEBI is finding it hard to manage system for carry-over business (that is, badla which is akin to a weekly forward market), how is it going to regulate risk in a futures market where transactions would remain outstanding for 6 months and more. Regulators are cautioned to avoid economically unjust demands of a few vested interests and let 'public interest' of several million shareholders take precedence over a few 'interest groups' which are know for peddling hot money.

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Working Papers | 1997

A Comment on the Diamantaras - Thomson No-Envy concept

Lahiri Somdeb

This paper is really a technical remark on a paper by Diamantaras and Thomas (1990). In that paper, the no-envy concept due to Foley (1967) was refined to accommodate some kind of a radial no-envy comparison, inspired by Chaudhurai (1986). Simply put, each person compares his/her own consumption bundle with all possible radial expansions and contractions of every other person's consumption bundle. A Pareto Optimal allocation which is envy free against such a maximal expansion is the one selected by Diamantaras and Thomson (1990). Our framework differs from the Diamantaras and Thomson (1990) framework in that we consider only the pure exchange situation. Thus, since such technical issues with regard to existence of envy free allocation in the sense of Foley (1967) are somewhat secondary (though present) in our framework, we view this no-envy concept as a new equity criterion. In this framework, we prove the Diamantaras and Thomson (1990) result regarding the existence of an envy free allocation on a somewhat larger domain of preferences. We also feel that our existence proof is much simpler than the one due to the two authors, although it is difficult to say whether our proof would extend to the economies with production as studied by them.

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Working Papers | 1997

Using CEA to Evaluate 29 Canadian Textile Companies-Considering Returns-to-Scale

Pankaj Chandra, Cooper William W, Li Shanling, and Rahman Atiqur

In this paper we analyse the performance of some Canadian textile firms by using Data Envelopment Analysis (DEA). Using DEA we develop efficiency scores, efficiency frontiers and returns-to-scale for three segments of the sector, i.e., spinning, weaving and dyeing. Finally we develop models to solve optimal expansion or vertical integration related problems for firms with increasing and decreasing returns respectively.

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Working Papers | 1997

Initiatives in Rural Credit Policies under New Economic Environment

Desai B M

Initiatives in rural credit policies pertain to two instruments. These are institutional development and interest rates. Some of these initiatives are right for both these instruments, while some others are not. Former for the institutional development includes new equity, prudential norms, reorganization of loss-making branches, MOUs and DAPs, hi-tech branches, enlarged scope of indirect agricultural credit, RRBs becoming full-fledged banks, SHGs, and entry of private local area banks. And the latter includes RBI's discontinued financial support, RIDF, and closing loss-making branches. Right initiative on interest rates is their simplified structure that is linked to amount of loans only though this needs to be more consistent with the rural realities. And wrong initiatives include increases in (minimum) interest rates on loans and a hotchpotch of partially and fully deregulated interest rates. Logic and/or empirical evidence are the basis for identifying initiatives that are wrong.

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Working Papers | 1997

Revitalizing the State: 3. Fragmenting the State for Innovation

Khandwalla P N

Organizational research indicates that large organizations involved in many different activities can counteract the diseconomies of size and complexity, tendency to bureaucratization, and to increasing resistance to innovation by breaking up into relatively autonomous, self-contained units such as relatively autonomous, self-contained divisions, retaining mainly policy control at the centre and a powerful MIS as a monitoring device. States too can enhance their administrative capacity and innovativeness highly by decentralizing and by fragmenting themselves into relatively autonomous, self-contained units headed by professional managers with clear accountability and clear mandate. Such unbundling must, however, be in the pursuit of an integrating, shared vision of national excellence like social justice, economic growth, and improvement in the quality of life. Several case studies from a number of countries of government departments, agencies, and projects that were decentralized along the foregoing lines under a shared vision of state excellence demonstrate the efficacy of this strategy of fragmenting the state in certain effective ways. Several additional mechanisms can institutionalize the culture on innovation in governmental bodies, such as progressively higher goals, with potential conflict among goals. The operationalziation of a strong serving the “customer” commitment, an operationlized commitment to cut costs, to make increasingly technologically sophisticated offerings, to benchmarking, to entrepreneurship, to global scanning for innovations, trends, and opportunities, to periodic diagnosis of the organization's functioning, to participative decision making and brainstorming for novel but workable solutions, to periodic, exonovation, and toa daunting developmental and growth vision are powerful mechanisms to make government bodies highly innovative.

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Working Papers | 1997

Revitalizing the State: 2. Resharing the Bureaucracy

Khandwalla P N

In Virtually any king of modern state, there is a huge role for the bureaucracy. The bureaucracy is intended to be a rational system of administration. But it is prone to many bureaupathologies, and increasing size tends to aggravate these bureaupathologies. Since the state in the 20th century has grown rapidly, it has become increasingly prone to malfunctioning on account of various bureaupathologies. Various attempts at bureaucratic reform have generally failed, especially in developing countries. Several pitfalls in administrative reforms have been listed. But there are also several success stories, from developed countries, newly industrialized countries, and developing countries, and the lessons of these successes can help recharge bureaucracies elsewhere. The experience of several East Asian countries that experienced rapid growth in the sixties and onwards, suggests how bureaucracy can be made growth oriented. Malaysia's experience suggests how values like quality, productivity, innovativeness, discipline, integrity, accountability, and professionalism can be institutionalized in a bureaucracy. The experience of Britain, Australia, New Zealand, Singapore, Canada, etc. suggests numerous ways of substantially improving the performance of bureaucracy. Several conditions are discussed for supporting sustained public service reform, derived from a study of administrative practices in a number of Commonwealth countries.

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Working Papers | 1997

Revitalizing the State: 1. Models of the Modern State

Khandwalla P N

In this paper the complexity of the modern state is examined with reference to the pressures under which it operates, and the mechanisms it employs of differentiation and integration. The reasons for the very large increase in the size of the state in this century, both in the developed countries and in the developing countries, are examined, as also some differences in the patterns of growth of the state in these two sets of countries. The major forces shaping the state in the 20th century are briefly discussed, resulting in the evolution of four models of the state. These are: the democratic interventionist-welfare state, commonplace in many Western societies; the developmental state that evolved in the Soviet system, and spread with some modifications to many developing countries; the liberal, market-friendly state espoused by the World Bank which has found a footing in most developing countries that have taken structural adjustment loans from the World Bank and IMF; and the businesslike, managerial state promoted by Margaret Thatcher, Ronald Reagn and others. It is contended that innovations in any kind of state can, with suitable modifications, be adapted in any other kind of state, and that innovations in governance systems and adaptive borrowings are powerful keys to state excellence.

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Working Papers | 1997

Generalized Shapely Value for Games with a Coalition Structure

Lahiri Somdeb

In cooperative games with transferable utility, there is usually no restriction on the possible coalitions that can materialize. A significant departure from this tradition, occurs in Moulin [1995], where the concept of admissible coalitions arise. In this paper we consider cooperative games with admissible coalitions, requiring that both the grand coalition, as well as, the null coalition are always admissible. We call such games, 'games with a coalition structure'. We define the concept of a core for such games and introduce a generalization of the notion of Shapley value. We define this generalized Shapley value to be the unique value satisfying the Dummy Player Property, Anonymity and Linearity. All these properties have been adapted from the standard context to our framework in such a way, that the existence of a unique value satisfying these properties is guaranteed. We subsequently consider specific coalition structures and obtain closed form solutions for the generalized Shapley value in each case.

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Working Papers | 1997

Econometric Modelling of the Indian Cotton Sector: Disaggregate Analysis

Naik Gopal and Jain S K

Keeping in view the magnitude, importance, interlinkages among the variables and the high involvement of a large number of decision makers and the government intervention in Indian cotton sector, this study aims at understanding and quantifying the interrelationship among the important variables of this sector through an econometric simulation model. This model explains interlinkages among cotton farming, spinning and weaving sub-sectors through 27 equations. The estimated model performs satisfactorily in terms of goodness of fit, sign, significance of the coefficients and short-and long-term predictability. Forecasts were made for the period 1992-93 through 2001-2002. The trends indicate that the production of cotton would grow slightly slower growth rate than its consumption. The production of long staple cotton will increase faster than that of medium staple cotton. In the spinning sector, the export of cotton yarn will increase substantially. Therefore, the production of cotton yarn will increase at a higher growth rate than its consumption. The growth rates in the production of medium and coarse count yarn will be almost same. The demand for and production of decentralised fabric will increase at the growth rate of 3.63 per cent. However, the demand for and mill fabric will increase but the export of decentralised fabric will grow faster. The demand, production and price of khadi fabric will remain more or less stagnant. The simulation results of two different policy variables namely, export of cotton and yarn show that the promotion of export of yarn is more beneficial for the Indian cotton industry and raw cotton export does not have any impact on fabric export.

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