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Showing posts from May, 2014

Behind the Hype – Understanding the Economic Impact of Political Change

I have always believed that the Indian economy functions despite its political environment. Somehow, the entire economic system has learnt to function despite the endemic political chaos, political inertia and high transaction costs related to the above. And when good politics emerge for short spans, we rejoice because the costs have come down for now. I doubt any business in India assumes stability or continuity in a real sense. It’s like a pipe dream. Basically, the economic system in its entirety functions largely in auto-pilot. But there are no shortcuts. The economic system is very complex and even a hundred small things take time to have either an upward or downward cascading impact of any kind. One of the most fundamental and most often used phrases in economics is “ceteris paribus’. But in the real world, this is the most ignored aspect because frankly, nothing really stays constant so viewing one aspect of economic growth or development intrinsically impacts the other.