No. 325

OCTOBER 2001

Vol LXXXII

ISSN 0019-5170

 

The Indian Journal of
Economics
 

University of Allahabad

Contents


 

 Financial Development and Economic Growth in South Korea: A Note on Testing Demand-following or Supply-leading Hypothesis

 TSANGY AO CHANG AND YUAN-HONG Ho

In this note we empirically test two competing hypotheses, namely those of the demand-following and supply-leading, using multivariate VAR models for South Korea over the period 1953 to 1999. Our Johansen co integration results indicate that there exist one co-integrating vector among real GDP per capita, financial development, and the degree of openness these three variables. The results from Granger causality tests based on multivariate error-correction models (ECM) suggest unidirectional causality running from financial development to economic growth. This empirical result supports the supply-leading hypothesis for South Korea. The major finding of this study has important implication for the conduct of economic policy regarding the role of financial development in South Korea over this sample period.

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 Youth Unemployment Problem in Punjab: An Appraisal

M.S. SIDHU
 

The major objective of the Indian planning is the improvement of the level of living of the people. This cannot be equated with a mere increase in production. There must also be an increase in employment, as it is only through an increase in employment that a large number of people get the benefit of increased production. Again, a mere increase in employment is not enough, it has to be accompanied by an increase in productivity. Thus, economic development should mean both increase in employment and increase in earnings if it is to result in increase in welfare and not merely increase in overall national production.

The progress made by the farm sector in the state of Punjab is so well-known that one need not cite any statistics to prove this point. A number of factors have made this possible. However, the future may not hold the production possibilities realized earlier (Rangi and Sidhu, 1998). The agriculture, which was growing fast, has now reached a sort of plateau in terms of productivity and production. In the wake of a declining land man ratio, it is not able to generate gainful employment and sufficient income for the growing population (Grewal and Sidhu, 1988). These economic factors along with other social, religious and political factors created the Punjab problem in the 1980's and early 1990's. The state had to pay a very high price for that decade of turmoil. The unemployed youth of Punjab was mainly responsible for that era of militancy. As already mentioned, other factors had played an important role, but the root cause of unemployment particularly among the rural youth could not be totally ignored. Therefore, the present study has been undertaken specifically:

(i) to examine the nature and extent of youth unemployment in Punjab;
(ii) to examine the causes of youth unemployment, and
(iii) to examine the consequences of youth unemployment.

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   Building a National Food Security System: The Challenge and the Strategy

 AKRAM A. KHAN & FARHAD SHIRANI BIDABADI
 

Improving food security for all is a widely debated and much confused issue, but one of supreme importance to many million of people worldwide. Ensuring that all tile world's population has enough food for a healthy and productive life is among the most fundamental challenges we face. Ensuring food security for all is the challenge with many dimensions. In the short-run reducing hunger must focus at the household level with enabling actions by the nations. Globally, only adequate supplies and food aid can help. In the medium-term, the emphasis must be more at the national and individual levels, focusing on reducing poverty and generating sustained economic development for all. Central to that vision are concerned national and international efforts to appropriate agricultural technology to improve productivity and profitability of millions of farmers in developing countries. In long-term, global food supplies must increase in sustainable production systems to feed more than 9 billion people, and a fair trading system is vital.

Now question is that how difficult is challenges of food security ? There is considerable disagreement about how easy or difficult it will be to meet the challenge. Views range from "there is no problem" to "the Malthusian nightmare is imminent". among these competing views, we believe that food security for all is achievable in the medium and long run if individual and families, nations and the international community take the necessary action but there can be absolutely no complacency about the need for action, now. What we need to do is adopt more urgent, targeted measures, quickly.

The successful effects of green revolution, which helped to avoid death and famine in India, are beginning to fade with agriculture output reaching a plateau with India's population is expected to reach approximately 1.5 billion people by 2050, agriculture production needs to increase 100 percent. Shortage of irrigation water, increasing salinity levels, and water logging of soil, further add to the problem of food security. According to a report by the World Watch Institute, global food supply will be reduced by an additional 10 percent on account of spreading water shortages. Therefore, if these concerns food security are left unaddressed, it will lead to widespread hunger and civil unrest.

In this paper an attempt have been made to gauge the problem of food insecurity in India. The paper presents the issues and reviews policies and programs to improve food security. Food security problem has multiple dimensions that range from ensuring the food supply at global, country and local levels to ensuring sufficient effective demand for adequate food consumption. The ultimate goal of an effective food security policy is to provide for individuals, adequate dietary intake through availability and accessibility of food, which are necessary conditions for nutritional well being. To improve the food security situation, the specific nature of a population's food security problem must be well understood. In this paper, our endeavor is to understand it. This paper begins by defining food security with the objective of clarifying and conceptualizing the key issues. The dimensions of the food security problem at different levels are then described and food insecure people in different economic contracts are identified. The paper concludes with a synthesis of recommendations for priority policy actions.

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   Tax Deferral and the Efficiency of Private Constant Annuities

CHU-SHIU LI, CHWEN-CHI LIU & HSIAO-WEN HUNG
 

This paper examines the dynamic behavior of the effect of tax deferral on consumption and the demand for annuities. By using a continuous model, we find that the introduction of deferred tax increases lifetime wealth. In response to the expectation for the reduction of wage income in the future, individuals tend to decrease instantaneous consumption and to increase assets accumulation during the working period.

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  A Study on Production and Marketing of Wheat in Punjab

P. S. RANG! AND M. S. SIDHU
 

The U. S. A., Canada, Argentina and India are the important durum wheat producing countries of the world. With the development of rust free semi-dwarf durum wheat varieties in the beginning of 1980' s, its cultivation was again revived in north India particularly in the Punjab State. The area under durum wheat remained stagnant around 65 to 67 thousand hectares for four years from 1993-94 to 1996-97 but declined to about 33 thousand hectares Gust half) during 1997-98. At present, the cultivation of durum wheat is concentrated around mainly Khanna area. The cost of cultivation of the crop was about Rs. 7759 per acre during the year 1998-99. The operational and fixed costs were about 52 and 48 per cent respectively. The gross returns were Rs. 1261 I and net returns were estimated at Rs. 4852 per acre. The returns over variable cost were about Rs. 8557 per acre. The study revealed that farmer's sale price was Rs. 625 per qtl. which worked out to be about 76 per cent of the miller's purchase price at Hyderabad in July, 1999. The wholesaler's sale price was Rs. 825 per qtl. at the premises of the miller at Hyderabad in July, 1999. Hence, the wholesaler had to bear a loss of Rs. 22 per qtl. which was about three per cent of the miller's purchase price. Regarding the processing of durum wheat, the net returns to the miller at Hyderabad was Rs. 10 per qtl. The average international price of durum wheat (F. O. B. Gulf) was Rs. 5198 per ton from January to June, 1999. Against this, the approximate price of durum wheat produced in Punjab (F. O. B. Mumbai) was estimated at Rs. 9000 per ton in July, 1999. Under this scenario, the Indian exporters are not in a position to complete with the bulk suppliers of U. S. A., Canada, etc. in the international market for durum wheat.

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  Innovation and Technological Resilience Need of the Hour Handlooms

B. REVATHY
 

The customers are more cost conscious. An attempt is made in this paper, to analyze the various elements of cost of production of handlooms and power loom weavers co-operative societies in Erode District, TamilNadu. The study provides a comparative picture of the cost of production of hand loom weavers co-operative societies with that of the powerloom weavers co-operative societies. The paper identifies the reasons for high raw material and in comparable labour cost in the handloom societies. The study calls for the promotion of handlooms through the up-gradation of looms. The study concludes that the handlooms are to imbibe the sprit of innovation and technological resilience.

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 Explaining Inter-state Differentials in Total Factor Productivity Growth in Indian Manufacturing Sector

 SUNIL KUMAR
 

This paper explores the effect of various socio-economic variables in explaining the inter-state differentials in total factor productivity (TFP) growth of Indian manufacturing sector. The results reveal considerable inter-state differences in TFP growth in Indian manufacturing sector. The industrially developed states experienced either a decline or low growth in TFP during 1969-95. The 'deregulatory policy regime' imparted a positive effect on the TFP growth of Indian manufacturing sector at national and state levels during 1980s. The most recent phase of liberalization since 1991 failed to mark any significant dent on TFP growth pattern of Indian manufacturing sector. The multivariate regression analysis determining the factors responsible for inter-state differentials in TFP growth highlights that TFP growth is positively associated with the degree of urbanization and growth of infrastructural facilities. Also, the higher bureaucratic control and worsening industrial relations due to increase in man-day lost per employee hampered the TFP growth.

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 Stock Market Volatility & Household's Consumption: The Indian Experience 75-76: 1998-99

N. K. TANEJA & J. C. SHARMA
 

Paper argues that the temporary uncertainty about future income created due to the extreme stock market gyrations affect the consumption behaviour of the households' in such a way that they tend to forego purchases of durable assets. Given the fact that stock markets witnessed large fluctuations particularly after initiation of economic reforms in June 1991, this paper tests empirically the following propositions: first, under the assumption of rational expectations only lagged consumption is enough to predict the current of future levels of consumption as predicted by the modified version of the Permanent Income Hypothesis / Life Cycle Hypothesis; second, only unanticipated policy changes or surprises have explanatory value for predicting consumption to the extent that they affect the permanent income of the households and only when their effects are permanent and not transitory; third, the uncertainty or surprises created by the extreme movements in share prices influences the consumption decisions of the households in such a way that they tend to depress their expenditure in durable/semi-durable goods and may increase the consumption of non-durable or perishable goods. The first proposition does not hold empirically in Indian economy as lagged consumption is not found to have much explanatory value and even in the presence of its non-zero coefficient, the current and past values real per capita income levels partially explains the consumer's behaviour. Because of this income sensitivity of consumption, it is observed that the uncertainty or the surprises created by the extreme stock market fluctuations also affect the consumption decisions of households via changing their perceptions about the estimates of permanent income. The empirical results also reveal that consumer also structure their consumption expenditure almost in accordance of the hypothesis summarized in the third proposition.

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Economics of Dryland Farming: A Study in Manapparai Taluk Tiruchirapalli District in Tamilnadu.

K. REVATHI
 

Dryland farming occupies a unique position in the agricultural scenario of the country and plays an important role in the food system of India. In Tamilnadu state also dry land farming is important and widely practiced. But dry land farmers face many problems. They have to work with much risk and uncertainty. The only solution to the problems of dry land is a new dry farming technology. If the technology are transferred to and successfully adopted by the dry land farmers, it may be possible to increase productivity of and income from dry lands substantially.

In order to study these problems in Tamilnadu and to provide solutions, a typical dry farming area in Trichirapalli district viz., Manapparai taluk, is studied.

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