Saturday, April 16, 2016

A Multi-Variable Regression Model for GDP Growth Rate Prediction in India

Abstract:  This paper attempts to build a multi variable regression model to predict the GDP growth rate in India using key macroeconomic indicators such as CPI inflation, manufacturing and services purchasing manager’s index, interest rates and the price of crude oil. The relationships between GDP and these parameters, as well as their inter-relationships are studied in this paper using linear regression models. An attempt is made to understand the relationships and understand the key driving factors for growth.

Keywords: GDP Growth Rate, Crude Oil Price, Inflation, CPI, Interest Rates, Rupee Exchange Rate,
Regression Model, Multi Variable Regression, Macroeconomics

Tuesday, April 12, 2016

Why India Needs The Presidential System

I came across this book recently and since the title sounded so interesting, I decided to buy it. In his book "Why India Needs The Presidential System" author Bhanu Dhamija writes about what's wrong with the present Parliamentary System of Democracy in India and how and why the Presidential System can solve this problem.

The Presidential System is the US Presidential System and the Parliamentary System is the British Parliamentary System . India's governance was modelled around the British Parliamentary System which is quite unlike the US Presidential System. The author believes that the US Presidential System can solve this country of some systemic problems and presents a fact based analysis of his arguments.

In this and subsequent blog posts I will try to analyse what the author presents in his book. He starts with the 4 laws of power:
1. Power tends to corrupt and absolute power corrupts absolutely.
2. Power consolidates when it is more than essential
3. Power dissipates when it is less than sufficient
4. Power co-operates only when it is encroached upon

-If powers are properly assigned, government serves the people, otherwise, it becomes their master.

-The author believes these laws are confirmed in the US Constitution. James Madison had found that governments failed to serve not only when they were too powerful, but also when they were too weak. Madison had also stated that "Unless these government departments be so far connected and blended as to give to each a constitutional control over the others, the degree of separation.. essential to a free government, can never in practise be duly maintained."

This is how the above 4 laws were addressed in the US Constitution:
1. To deal with powers tendency to corrupt, they separated the powers. They separated the powers in local governments, state governments and the central government - leading to a Federal System of Governance. In India, the GST Bill, which has been stalled in the Rajya Sabha, aims to give the states the power to levy a tax and collect a tax. The Constitutional Amendment required for passage of GST Bill requires a 2/3 majority and not a simple majority.

2. In order to ensure that the Federal Government did not become too strong and tyrannical, they set up a system of powerful state governments. Each government, national and state, was assigned only limited and essential powers.

3. To solve the problem of co-operation, they created a system of 'co-ordinated' departments through checks and balances. This gave each department certain constitutional rights over the others.

Indira Gandhi, who came to power with less than 44% of the votes, instituted a state of Emergency in this country in mid-1970s, giving her unfettered powers and converting the Parliamentary system into a dictatorship. She amended the Constitution with retroactive effect and replaced the Chief Justice of India. The forty-second amendment by Indira Gandhi still stands which states that "There shall be no limitation whatever on the constituent power of Parliament." In six months of the Emergency, Indira Gandhi drafted a massive amendment to the Constitution which was 20 pages long. It added 59 clauses and 9 new articles to the Constitution and amended 50. One of her amendments gave Directive Principles precedence over Fundamental Rights, providing the government the right to deny individual rights for state purposes. The courts could no longer handle election disputes. They were not allowed any jurisdiction over tribunals. The Supreme Court was barred from considering the constitutionality of a state law, the high courts from those of Central Laws.

There was now a complete lack of any oversight on the Government. Corruption became endemic in the system. Transparency International's Corruption Index dropped India 11 places in 2011, ranking her 59th in the world.  The practice of establishing commissions of inquiry to scrutinize specific government activities was also downright impractical. A government was expected to start an inquiry against itself, and then to reprimand itself.

[All facts in this blog post are quoted from the book "Why India Needs The Presidential System" by Bhanu Dhamija.]