MINISTRY OF FINANCE

GOVERNMENT OF INDIA

Demonetisation
Module 13.1
Contemporary Themes in India’s
Economic Development and the Economic Survey

1
Overview
• Objective and Background

• Costs and Benefits

• Markers of Success

2
Source: NDTV, DD
17/06/17 Demone-sa-on and other Metachallenges (Module 14) 3
Demonetization – The Beginning
1.  On 8th November 2016 Prime Minister Narendra Modi
announced that two of India’s largest notes INR 500 and INR
1000 will cease to be legal tender except for a few purposes

2.  86 percent of cash in circulation (17.7 lakh crores) was

rendered invalid, and these notes had to be deposited in banks
by the 30th of December 2016 (Go to Chart)

3.  International example: only sudden demonetization under

normal circumstances
4
 0
5
10
15
20
25

1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Growth in average currency with public (%, yoy)

2010
2012
2014
2016

2017
Go back
5
Cash shortages for some time

6
 Objectives of demonetization
To prevent/curb:
•  Accumulation of ‘black money’ generated through income that was not
declared to the tax authorities

•  Corruption

•  Currency counterfeiting

•  Use of high denomination currency for terrorist activities

•  Perhaps, most important was to signal a regime shift on tolerance for

illicit activities and tax-noncompliance 7
Black money rendered useless

8
What is black money?
Origin vs Function
Origin/nature
White Black
Function
Company pays employee salary Small enterprise pays for
Transactions in cash; payment and receipt are input in cash; neither
declared to tax authorities declares the transaction to
tax authorities
Store of value Household keeps savings in cash Businessman hoards
for emergencies undeclared cash, with a view
to distributing it to his
candidate during elections

9
 Cash-to-GDP ratio in India is quite high and
higher than that for comparable countries
.25
Currency in Circulation as proportion of GDP

.2
.15

India
.1
.05
0

6 8 10 12
Log of GNIpc PPP*(Atlast Method Current $ 2015)

Source: World Development Indicator; International Financial Statistics 10

Consumer transactions in India are
predominantly carried out in cash
Consumer Transactions Carried Out in Cash
Volume Value
100% 98% 96%
100% 94% 90% 86% 85%
80% 69% 68%
57% 55%
60% 47% 45% 48%
43% 38%
40%
20% 14% 11%

0%
Indonesia

Mexico

South Africa

China

Japan

Brazil

United States

United Kingdom
India

Source: PricewaterhouseCoopers 2015. 11

Cash-to-GDP steadily rising over time,
including high denomination notes

12
 HDN used mostly for transactions
purposes?
Highest Denomina.on as propor.on of GDP per capita (2015)

1,000
0.045

1,000
Lower Middle Upper Middle
0.040

5,000
High Income

5,000
Income Income

0.035
0.030

500
0.025

500
5,00,000

1,000
0.020

500
5,00,000

1,000

500
1,000

5,000
0.015
1,000

1,000
5,000
1,000
1,00,000

1,000

10,000
20,000

20 1,000

1,000

100
100
1,000
1,000

0.010
200
100
1,00,000

100

500

10,000
100 100
100
100 100

20,000
20

1,000

1,000

100
1,000

200
100
100

500
100
0.005
0.000

Note: Numbers above bars are high denomination notes in Local Currency Units
13
Estimates of black money
•  Estimates based on soil rates

•  On one assumption: Rs. 7.3 lakh crores

•  On another assumption: Rs. 3 lakh crore (~2 % of

GDP)

14
 Broader analytics of demonetization

• A money supply contraction but only of one type of “money”—

cash Go to chart

• A tax on unaccounted private wealth maintained in the form of

cash – black money

• A tax on savings outside the formal financial system 15

Growth in Average Currency with Public and Demand
Deposits (%)

Go back

16
Costs and Benefits – Expected Effects
(1/2)
Sector Short-Run
Cash has declined sharply
Bank deposits have increased
sharply
RBI's currency liabilities have
fallen, liabilities to commercial
Money/ interest rate banks have increased
Broad money essentially
unchanged
Interest rates on cash will rise but
other interest rates will decline
Financial System Savings Increase
Unaccounted income/black Stock of black money will fall as
money holders get caught in the tax net
Digital transactions have
Formalization/digitalization
increased sharply
Long-Run
Cash will recover but settle at a lower
level
Moderate increase in bank deposits
RBI's balance sheet will shrink, if it
declares outstanding notes will no
longer be redeemed
Money multiplier will rise as bank
lending increases; broad money
effects will depend on RBI response
Loan rates should fall, as the durable
increase in deposits creates new
lending capacity
Increase
Flow should decrease because of
formalization
Further increases
17
Costs and Benefits – Expected Effects
(2/2)
Sector Short-Run Long-Run
Private sector wealth will decline, to the
extent that high denomination notes are not
returned, while real estate prices fall
Wealth
Government/RBI's wealth will increase
because unreturned cash will reduce
liabilities
Prices will decline, as wealth declines and Prices could rise if evasion of stamp
Real estate
cash shortages impede transactions duty/capital gains tax becomes difficult
Will decline, as demand (cash, private
Could be beneficial in the long run:
wealth) and supply (reduced liquidity and
greater formalization, less corruption
working capital) fall
GDP
Informal output could decline but
Cash-intensive sectors (agriculture, real
recorded GDP would increase as
estate, jewelry) likely to be affected more
economy is more formalized
Will decline as growth slows, partially offset Increase, as formalization expands
Tax collections
as tax net snares black money and compliance improves
Will be strengthened if demonetization
is accompanied by complementary
Credibility measures. Will be undermined if re-
monetization is slow and if tax
18
arbitrariness and harassment increase
Digitalization – upward trend in digital transactions
across all three types of consumers
Digitally Excluded Affluent Customers

AEPS Total and Approved Transactions (Rs. Credit Card + Debit Card + PPI (Rs. thousand
Crore) crore)
6 70
65
4
60
2 55
0 50
45
40

Total Transaction Approved Transactions

Less Affluent Customers

300 50
Rupay POS (Approved amount in crore) Rupay E-Com (Approved amount in crore)
250 40
200
30
150
20
100
10
50

0 0

02-Nov-16
07-Nov-16
12-Nov-16
17-Nov-16
22-Nov-16
27-Nov-16
02-Dec-16
07-Dec-16
12-Dec-16
17-Dec-16
22-Dec-16
27-Dec-16
01-Jan-17
06-Jan-17
11-Jan-17
16-Jan-17
02-Nov-16
07-Nov-16
12-Nov-16
17-Nov-16
22-Nov-16
27-Nov-16
02-Dec-16
07-Dec-16
12-Dec-16
17-Dec-16
22-Dec-16
27-Dec-16
01-Jan-17
06-Jan-17
11-Jan-17
16-Jan-17

Source: National Payments Corporation of India 19

Real estate prices fell as black money
transactions reduce
•  As black money in the economy Real Estate Price
14
reduces illicit transactions in the
real estate sector, which used to

Year-on-Year Quarterly Growth Rate

12

be the key sector to evade taxes 10

on property sales, prices fell
8

6
•  Early signs are evident as
weighted average of real estate 4

prices in eight major cities shows 2

a decline 0

-2

2014 Q1

2014 Q2

2014 Q3

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 Q2

2016 Q3

2016 Q4
Source: Knight Frank data and Survey calculations

20
 Assessing the short-term macro-economic Impact
•  Demonetisation is:

•  An aggregate demand shock because it reduces the supply of

money and private wealth

•  An aggregate supply shockto the extent that cash is an input to

production (for example, agriculture)

•  An uncertainty shock for investors and consumers

•  Impact on informal sector difficult to measure 21

What are the indicators?
10
32 Rabi Sowing for Wheat Rabi Sowing for Gram
28
8
24
20 6
16
4
12 2014-15 15 Real Credit Growth (YoY, %)
2014-15
8 2015-16
2015-16 2
2016-17 2016-17 10
4
Avg 5 yrs Avg 5 yrs
0 0 5
30th 4th 11th 18th 27th 4th 11th 18th 30th 8th 15th 30th 4th 11th 18th 27th 4th 11th 18th 30th 8th 15th
Oct Nov Nov Nov Nov Dec Dec Dec Dec Jan Jan Oct Nov Nov Nov Nov Dec Dec Dec Dec Jan Jan
0

-5
Growth in Indirect Taxes (YoY Growth in Automobile Sales (YoY,
25
monthly & cumulative, %) %) -10
Excise
Service 15
Non-Customs Indirect Tax -15

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16
Excise w/o ARM
Service tax w/o ARM 5

-5
Two wheelers
-15
Medium & Heavy Commercial Vehicles (RHS)

-25 Passenger Cars (RHS)

-10
Jan-15
Mar-15
May-15

Jan-16
Jul-15
Sep-15
Nov-15

Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

22
 The Quantity Theory of Money – Theory
MV = PY, where

‒  M refers to the money supply

‒  V is velocity, the rate at which money turns over
‒  P is the price level
‒  Y is real GDP
•  If M , V either or, the nominal GDP (a negative impact on both price &
real activity)

•  For example, a reduction in cash in circulation (or cash in hand) implies that
across the value chain of goods and services production, transactions that
were in cash will either have to be on credit or not occur

23
 Quantity Theory of Money – Operationalization
Two conceptual issues to be considered to operationalize this equation:

•  Definition of money supply

•  restricted convertibility between cash and bank deposits,

•  separate analysis of the two needed

•  Formal and informal economy had different effects

•  we assume only the informal part of the economy affected by cash crunch

•  however there are second-round effects on the formal economy

•  workers in the informal economy may reduce their consumption in response to
being laid off. 24
Assumptions for projecting currency with
public
•  Unreturned cash (assumed to be 10 percent of cash in circulation as of
8th November) doesn’t need to be replaced

•  75 percent of outstanding old high denomination notes continue to be

used as legal tender till end-December

•  Liquidity of Rs. 2000 notes increases over time from 75 percent in

November to 85 percent in December and 100 percent January
onwards

•  Velocity of small denomination notes unchanged

25
 Assumptions for projecting currency with public
Replenishment Cycle:
November:
•  Rs. 3.2 lakh crore replenished by 30th November (72 percent Rs. 2000 notes, 6
percent Rs. 500 and rest in small denominations

December
•  Rs. 2 lakh crore available in stock for disbursal in December (75 percent Rs.
2000 notes and 25 percent Rs. 500)
•  Rs. 0.5 lakh crore injected from RBI’s reserve stock of money in December
•  Rs. 1.4 lakh crore printed and injected in addition

January onwards: Rs. 1.4 lakh crore printed and injected every month starting
January (for December this is in addition to above figures) 26
Re-monetization timeline
Effective Currency in Circulation as a proportion of Estimated Transactions Demand
120%

110% 110%
Historic velocity change
95% confidence intervals
103%
101%
100% 100%
99%
95%
93%
90% 91%
88% 88%
84% 84%
82%
80% 81%
79% 78%
75% 76%
73% 72%
70% 70%
68%
65% 65%
62%
60%
8-Nov-16 End-Nov 2016 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17

27
Real GDP Growth Forecasts (y-o-y %)
8

7 7.9 7.5 7.6

7 7.1
6 6.1
5

0
Q1 Q2 Q3 Q4 2016-17 2017-18

28
Excess liquidity increased sharply after demonetization
but has not been eliminated even after 7 months……...
400
Liquidity (Daily LAF)
300
Liquidity Shortage
200
Demonetisation
Demonetisation
100
overly tight liquidity
Rs thousand crore

0
-100
overly tight liquidity
Excess Liquidity
-200
-300
-400
-500
-600
01-Jan-15
05-Feb-15
12-Mar-15
16-Apr-15

08-Oct-15

21-Jan-16
25-Feb-16
31-Mar-16

27-Oct-16
21-May-15
25-Jun-15
30-Jul-15
03-Sep-15

12-Nov-15
17-Dec-15

05-May-16
09-Jun-16
14-Jul-16
18-Aug-16
22-Sep-16

01-Dec-16

16-Mar-17

25-May-17
20-Apr-17
05-Jan-17
09-Feb-17
..so that short-term rates still below policy rates
7.00
Call below repo
6.50

6.00

5.50
Demonetisation
5.00

WACR Repo Rate Reverse Repo Rate

4.50

4.00

10 Feb 2017
1 Apr 2016

6 May 2016

10 Jun 2016

15 Jul 2016

19 Aug 2016

23 Sep 2016

28 Oct 2016

2 Dec 2016

6 Jan 2017

17 Mar 2017

21 Apr 2017
Markers of Success
•  Increased digitalization or a decrease in prominence of
cash as a means of transactions

•  Reduction in cash-GDP ratio as formal savings increase

and black money falls

•  Number of new income tax payers as well as the

magnitude of reported and taxable income should go up
over time

31
Maximizing LT gains and minimizing ST costs
•  Faster remonetization will reduce the duration of currency crunch and
enable faster economic recovery

•  Re-establish internal convertibility of cash and money deposits to build

confidence in the country’s financial system

•  Continued impetus to digitalization bearing in mind the trade-off

between cash and digital transactions, and sensitive to those currently
digitally deprived

•  Eventually, digitalization should also be privately profitable to sustain

the digitalization efforts. Cyber-security is another important aspect of
this effort

32
Complement demonetization with measures
to reduce incentives for tax evasion
•  GST with broad coverage to include activities that are sources of black
money creation—land and other immovable property—should be
implemented

•  Individual income tax rates and real estate stamp duties could be reduced

•  Income tax net could be widened gradually and, consistent with

constitutional arrangements, could progressively encompass all high
incomes. (After all, black money does not make fine sectoral distinctions

•  Timetable for reducing the corporate tax rate could be accelerated

•  Tax administration could be improved to reduce discretion and improve

accountability 33
 MINISTRY OF FINANCE
GOVERNMENT OF INDIA

Exit and the Meta-challenges

Facing the Indian Economy
Module 13.2
Contemporary Themes in India’s
Economic Development and the Economic Survey.
The Chakravyuha Challenge
of the Indian Economy
(The Problem of Exit)

35
 From Socialism without Entry to
Capitalism/ Marketism without Exit
•  The Indian economy has embraced the spirit of the market,
dismantling the ‘Licence-Quota-Permit Raj’.

•  But these were mostly restrictions on entry not exit.

36
37
 The Theory
•  A market economy requires free entry of new firms, ideas, and technologies so that
factors of production are guided to most productive uses.

•  But Exit must to entice resources away from inefficient deployment: Joseph
Schumpeter: ‘the gale of creative destruction’.

•  Problem in public and private sectors, and all economic sectors: Civil aviation,
Agriculture, Welfare Schemes, Public sector banks & companies, Infrastructure,
Discoms, Regulatory bodies, Labour, Small Savings
38
Magnitude of the problem
•  Good firms don’t grow large enough over time and bad ones stick
around for too long.
•  Average 40 year plant only 1.5 times larger than a new one in India.
•  Thick tail of badly run firms.
Average employment of old & new Average employment of old &
plants in India, Mexico & US new plants in India, FY1999 & FY2010

39
Source: Hsieh and Klenow (2014).
Costs of Lack of Exit
•  Fiscal Costs: Government supports inefficient firms/banks-
explicit (bailouts) or implicit (loans).

•  Economic Costs: Misallocation of resources.

•  Hsieh and Klenow (2009) argue that when labour and capital are
hypothetically relocated within firms to equalize marginal products to the
extent observed in the US it leads to productivity gains of 40-60% in India.

•  Debt and stressed assets overhang.

•  Political costs: Perception of favouring the private sector.

40
Examples

41
1. Civil Aviation: Air India
•  The erstwhile pride of India today has a negative price.

•  Cumulative losses rising.

600
Air India Cumulative Losses since 2007-08
500
(Rs. billion) 492
454

395
400
332

300 278

202
200
133

100 78

22
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-12 2012-13 2013-14 2014-15 2015-16
42
2. Agriculture:Lack of Exit from Cereals
Change in Acreage under Important Progression of Per Capital Income
Crops (Area in ‘000 Ha) relative to 1980

600
550 Gujarat
500 Haryana
450 Maharashtra
400
Punjab
350
Tamil Nadu
300
Uttar Pradesh
250
200
150
100
50
1980-81 1990-91 2000-2001 2010-11 2013-14

43
3. Policy persistence: Government Schemes
Distribution of centrally sponsored and central sector
schemes by duration (in years)
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0 10 20 30 40 50 60 70 80 90 100
Duration of the scheme as of 2015-16

•  Vested interests create a market of their own.

•  Number of CS+CSS schemes increased from about 900 in 2006-07 to about 1100 in
2014-15.
•  Current government moving towards consolidation. No. of schemes in 2017-18 is around
700. 44
4. Public Sector Banks: Bad Health
•  Burdened by Non-performing Assets.
•  RoA of most banks less than the norm of 1.5 % considered reasonable
(2015-16).
•  Most of these banks with small employment.
•  Capital infusion between 2010 and 2016 above Rs. 1 lakh crore.
0.7
Return on Assets (%)

0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1 0 10 20 30 40 50 60 70

Total Employment (in 1000s) 45

5. Infrastructure
Heavily indebted firms in power and telecom sectors.

46
Why no Exit?

47
Why no Exit? Interests
•  Interests: Concentrated producer interests (farmers, trade unions)
vis-à-vis dispersed consumer interests and unrepresented (because
unborn) future interests.

•  The former will have the incentive and the financial ability to mobilize
more easily.

48
Why no Exit? Some Weak Institutions
•  Weak Institutions: They hamper or increase costs of exit.

•  Example: Debt Recovery Tribunals.

•  Banks finding it hard to exit bad loans, private firms unable to exit bad balance sheets. Hence Larger
recourse to DRTs but with dismal results.

•  But, share of settled cases small and declining.

450 Backlog of Debt Recovery Tribunals (Rs. 1000

crore)
350
Total Amount Disposed

250 Actual Amount Recovered

Pending Amount
150

50

-50

49
Why no Exit? Some Strong Institutions
•  Strong ‘Referee’ Institutions: Critical for democracy, but functioning a
difficult balancing act so as to not impede calculated risk-taking.

•  4 Cs:
•  Courts.

•  Central Vigilance Commission.

•  Central Bureau of Investigation

•  Comptroller and Auditor General (CAG).

50
Why no Exit? Ideology
•  Difficult to phase out entitlements.
•  ‘Sanctification of the Small’
•  Political difficulties: Perception of favouring the private sector.

51
 Solutions
•  Avoid exit through liberal entry: aviation and telecom.

•  Direct policy action: bankruptcy law.

•  Technology and JAM to bypass vested interests.

•  Transparency: explicitly advertise the costs of bad programs like fertilizer subsidy.

52
India’s Meta-challenges:
The Precocious,
Cleavaged Democracy

53
 Overview
•  Meta-challenges: Not about today but entire history

•  India’s Transformation-A “Washington Consensus”

Economy

•  But what are the underlying deeper challenges

54
 10
15
20
25
30
35
40
45
50
55
60
65
70
75
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Trade to GDP ratio

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
China

2011
2012
2013
India

2014
2015
Openness to Trade

Trade to GDP

0 .5 1 1.5 2
14
16
MYS

18
lnP
THA

DEU

Log Population
JPA

BRA

20
USA
Trade to GDP and Log Population

IDN IND

22
CHN

55
 0
1
2
3
4
5
6
7
8
9
10
CHL
PER
BRA
BGR
MYS
UKR
CHN
POL
MEX
IDN
IND
ROM
TUR
ARG
ZAF
THA
PHL
Capital Inflow % of GDP

RUS
(Average of 2011 to 2015)

BGD
VEN
PAK
6
8
10
12
14
16
18
20
22
24
26

2012-13:Q1
2012-13:Q2
2012-13:Q3
2012-13:Q4
2013-14:Q1
2013-14:Q2
Openness to Foreign Capital

2013-14:Q3
2013-14:Q4
2014-15:Q1
2014-15:Q2
2014-15:Q3
FDI Inflows (USD Bn, LHS)

2014-15:Q4
FDI Inflow in India

FDI inflow as a % of GDP (RHS)

2015-16:Q1
2015-16:Q2
2015-16:Q3
2015-16:Q4
2016-17:Q1
2016-17:Q2
56
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Size of Government: Macro
Expenditure to GDP Ratio and Log GDP Per Capita

60
Fin
Fra Den
Bel
Atr
50 Ita Swe
Hun
Gce
Por
Cro
Expenditure to GDP Ratio

Slo
Ukr IceNet Nor
Ecu MtaSpa Ger
Bol Ven
PolSRPCze UK Lux
IsrJap
Cyp
40

Bra Can
Egy Bul Rus
Arg Est Ire
TurLat Aus
US
Rom Lit Nzl
Uzb
SA Bot Uru Swi
30

Gha Geo Chn

Col
Taj Vie Mex
Ken Ind Mal
Mau Chi
Par Per Tha Kaz
Cam
20

Cos Kor
Phi Indo Dom
Ira
Ban
Nig
10

8 9 10 11 12
Log GDPlpc_gdp
Per Capita
57
Size of Government: Micro
(Public Sector Enterprise Share of GNI)
4%
24% Sales Profit
21% 3%
18%
2%
15%
12% 1%
9%
0%
6% India Malaysia China Russia Brazil South Indonesia
3% Africa
0%
China India Russia Brazil Indonesia South
Africa

150% 55%
Assets 50% Market Value
125% 45%
40%
100% 35%
30%
75% 25%
50% 20%
15%
25% 10%
5%
0% 0%
China Malaysia India Russia Brazil Indonesia South Malaysia China Russia India Brazil Indonesia South
Africa Africa

58
Solid, Remarkable Growth Performance
•  Since 1980, and especially 1991, India steadily reforming

•  Indian GDP has grown at 4.5% per capita for 35+ years, only 3
uninterrupted democracies have done better in the post war period (Japan,
Israel and Botswana)

59
1.Ambivalence about: Embracing Private
Sector and Protecting Property Rights
•  Retrospective actions

•  Twin Balance Sheet Problem

•  Civil aviation

•  Public sector fertilizer plants

•  Strategic disinvestments

•  Public sector banks

•  Agriculture: Essential Commodities Act, export restrictions

60
Attitude to Private Sector: India and
Other Countries

61
2.State Capacity/Delivering Essential Services
•  “Flailing State” with exceptions: PDS (Chattisgarh), power (Gujarat) etc.

•  Health and education outcomes poor

•  Weak regulatory effectiveness

•  Competitive federalism visible in attracting investment and easing cost of

doing business but..

•  Little evidence of competitive federalism in delivering essential services

(health and education)
62
3.Inefficient Redistribution
•  Aggregating over major subsidies and 6 major programs, about 15-25%
of central government subsidies goes to bottom 40% of population

•  JAM and DBT: Eliminating leakage and duplication but changes in

prices facing consumers limited to petroleum products

•  Fertilizer subsidy (0.7% of GDP)

•  GST experience: Few political voices for low and simple rates

63
Possible Explanations
•  Precocious, cleavaged democracy, shaking off colonial chains will
distrust private capital

•  Ambivalence about private sector instituted historically and then

reinforced by license, quota, permit raj

•  Precocious, cleavaged democracy forces early and ineffective

redistribution: Lot of poor means need to redistribute but ability to
do so effectively will be limited

64
“Precocious” India : Premature
Pressures to Spend
Income level at which country governments spent 27% of GDP
(what India spent in 2010)

65
Voting age population (million)
and ratio of tax-returns to Number of taxpayers to voting
voting population (Per cent) age population (Per cent)

66
 Few taxpayers, low tax compliance
Taxpayers to voting age population and log per-capita GDP controlling for democracy
.6

Den
Nor
Pol
Swe
Can
.4

Est
Vie
Taxpayers to voting age population

Por Hun
Net
AusSlo
Bel
Fra
.2

Taj Mta Chn

Gce Atr
Nzl US
Spa Ger
0

Ita Bul Lux

Indo
Lit Cze
Phi Tha
Kor
Fin
Ban
Cam Rom
Bra Lat Rus
Chi
Mex
-.2

Mal

Col SA Jap Arg

Tur UK
Ire
-.4

Isr
Ind Cyp

-2 -1 0 1
Log per-capita GDP controlling for democracy

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Ideas Ideas Ideas !!!
•  Ambivalence/Ineffective redistribution/ineffective state-capacity.

•  Fundamental meta-challenges—created by and/or shared across the social,

political, ideological spectrum.

•  Addressing them will require fundamental shifts in shared ideas.

•  “[T]he ideas of economists and political philosophers, both when they are
right and when they are wrong, are more powerful than is commonly
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Recommended Readings
• Chapter 1, Economic Survey, 2015-16

• Chapter 3, Economic Survey, 2016-17

• Chapter 2, Economic Survey, 2015-16

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