List of Figures es xi
List of Tables xiii
List of Boxes xv
List of Case Studies xvii
Preface xix
Chapter 1: Introducing Macroeconomics 1
• Why Economics 1
• Demand Management Policies 2
• Supply Management Policies 4
• Reconciling Demand and Supply Management 5
• Controlling Output Gap: An Economist's Perspective 7
• Examining GDP 13
• Demand-Side Components of GDP 14
• Supply-Side Components of GDP 21
• How We Measure GDP 27
• Factors Affecting GDP 29
Chapter 2: Growth, Development, and Income Distribution 30
• Growth and Development 30
• Growth and Inequality 31
• Understanding Inequality 33
• Measuring Inequality 35
• Inequality in India 40
• Regional Income Inequality 45
• Why Is Inequality Bad? 53
• Policy Recommendations 57
Chapter 3: Demand Management Policies 59
• Fiscal Policy 59
• Understanding the Indian Budget 60
• Reading the Budget 68
• A Closer Look at Tax Rates 69
• Application Laffer's Principle in India 72
• Fiscal Deficits and Other Macroeconomic Variables 77
THE INDIAN ECONOMY
• Monetary Policy 84
• Money Market Multiplier and Money Supply 87
• Liquidity Adjustment Facility (LAF) 89
• The Monetary Side 90
• Application Friedman's Concept in India 92
• Taylor's Rule and Monetary Policy 95
• On Independence of the Central Bank 95
• Relationship between Real and Financial Sectors
Chapter 4: Inflation and Unemployment
• Types of Inflation 99
• Measurement of Inflation 100
• How Is Inflation Calculated? 104
• Inflation in India 105
• Causes of Food Price Inflation in India 106
• Supply-Side and Demand-Side Shocks 113
• Why Is Inflation Bad? 114
• Limitation of the Indexes 115
• Measuring Unemployment 116
• Data on Unemployment 118
• Unemployment Rate in India 118
Chapter 5: Reforms in India
• Explaining Reforms 123
• The Pre-1991 Reform Phase 123
• The 1991 Reform Era 127
• Bugs in the Present 1991 Reform Era 13 7
• Looking Ahead: Scope for Future Reforms 144
• Policy Prescriptions 150
Chapter 6: Trade
• Why Do Countries Trade? 157
• Factors Affecting Trade 160
• The Indian Case 160
• Factors Affecting Exports 162
• Procedures 177
Chapter 7: External Account and Exchange Rates
• India's External Sector 181
• Exchange Rate 184
• Determining the Value of Exchange Rates 186
Contents ix
• Currency Crises and Its Possible Explanations 192
• International Coordination to Mitigate Crisis: A Note on G-20 193
• Multilateral Aid and Voting Power 195
• Sustaining Growth 196
• Shadow Banking and Financial Crisis 196
• The Uninvited 197
Chapter 8: India and the WTO 201
• GATT and WTO 201
• WTO Structure 203
• WTO Rules 204
• Negotiations at GATT/WTO 205
• Trade Costs 214
• An Alternative: North-South Negotiation, and India's Stance at WTO 221