The Indian Economic Journal

The study investigates long-run and short-run cointegrating relationship between stock market returns, fear index (VIX), brent crude oil prices and growth in deaths due to the COVID-19 pandemic for BRIC countries using daily data from 23 January 2020 to 24 August 2020 using Autoregressive Distributed Lag (ARDL) model. CUSUM test and serial correlation test estimates point towards the robustness of the model used. The evidence reveals that for India and Brazil, with the outbreak of COVID-19, decrease in crude oil prices and increase in volatility index, the stock returns started declining in the short run, but the impact has declined and the stock returns have regained in the long run. For China, due to the outbreak of COVID-19 and increase in fear index, stock returns declined in the short run, but the Chinese economy has recovered well due to a strong industrial and services sector. For Russia, increase in deaths due to COVID and decline in oil prices has impacted the stock returns in the long- and short run. Due to a decline of 53% for crude oil prices from January 2020 to May 2020, the Russian economy would face the consequences in the long run as well. The results suggest that though BRIC countries were impacted by growth in COVID-19 deaths, but the recovery trajectory and stability has resumed for all countries except Russia. Results of Granger Causality indicate a bidirectional causality between VIX and stock returns for the Indian market.

Micro, small and medium enterprises (MSMEs) are crucial for the overall development of the country. Realising the same, there are various policy support measures introduced by the government. This paper attempts to study the gaps in the present policies available for the MSMEs with respect to the textile sector MSMEs. Through a systematic approach, based on secondary literature and stakeholder engagement, the study attempts to come up with a decision matrix based on the identified key growth determinants of MSMEs. A questionnaire was developed for collecting the responses from expert stakeholders to rank the identified list of determinants influencing the growth of MSMEs. A mix of top-down and bottom-up methodology has been adopted to identify the key determinants of MSMEs having the major influence on the sector’s growth. It was found that the top 10 determinants influencing the growth of MSMEs are profitability, quality of product, entrepreneurial behaviour, legal structure, product differentiation strategy, new/improved products produced, industry friendly policies, employee sensitiveness, ability to fund enterprise growth from profits generated. It is argued that in order to make MSMEs sustainable, policymakers should take a targeted approach focusing on these key growth determinants so as to create a conducive ecosystem for MSMEs.

JEL Codes: O100, L210, L250

This article investigates the relationship between remittance inflows and financial development in India from 1980 to 2018. The study employed Autoregressive Distributed Lag (ARDL) and Vector Error Correction (VEC) models to capture the short and long-run dynamics. In addition, the impulse response function (IRF) and forecast error variance decomposition (FEVD) analysis were utilised to understand the dynamic reaction of financial development to a given shock to remittance inflows and other variables. The results of the ARDL model reveal that remittances negatively influence financial development in the short run, while they positively influence it in the long run. The IRF analysis shows that financial development responds positively to one standard positive shock to remittance inflows. The FEVD analysis further reveals that shocks to remittance inflows explain around 30% to 32% of the total variation in financial development. From a policy standpoint, the findings suggest that well-framed policies should be formulated and implemented to encourage more remittance flows through formal channels. It will boost financial development, economic growth and also increase the other developmental effects of remittances on the economy.

JEL Codes: C32, F22, F37

The call for inclusive growth has been unanimously declared by policymakers across the world. With India’s rapid economic growth rate, Indian policymakers also set its economy on the track of inclusive growth while formulating the 11th Five Year Plan. Despite, India’s fast-growing and vibrant economy, it fails poorly in Human Development Index ranked 131 in 2016. An unfortunate aspect of the current phase of high growth of the Indian economy has been its ‘non-inclusive’ nature. The distribution of income has been highly iniquitous. The richest 1% in India cornered 73% of the wealth generated in 2017, presenting a worrying picture of rising income inequality. In this regard, the study attempts to identify the determinants of inclusive growth in India by using annual data from 1981 to 2015. The study employs the autoregressive distributed lag (ARDL) model and the error correction method (ECM) to investigate the long-run and short-run relationship between inclusive growth and its determinants. The bounds test findings confirm the cointegrating relationship among variables. The ARDL estimates suggest that growth in initial income, government expenditure, human development, investment and financial development fosters inclusive growth; while inflation and population growth dampens it. The results also imply that increasing trade openness and foreign direct investment would not be beneficial for India in terms of growth inclusiveness. Based on these findings, the study recommends that the Government of India should take appropriate steps to increase per capita income and social spending with particular attention to macroeconomic stability while they work at improving the quality of population in order to achieve sustainable and robust inclusive growth.

JEL Codes: Q4, F1, H7, D31, O43

The present article draws on the banker’s perspective and extracts some practical insights about the factors behind specific NPAs resolution strategies. Based on the thorough review of the perspective, conceptual and empirical literature, and using exploratory factor analysis (EFA), the study has identified 21 dimensions for ‘management of NPAs’. The empirical analysis of these dimensions has extracted 7 factors for management to be significant. A structured questionnaire has been developed and data has been collected from officers in different banks in India, especially working in the credit department. The questionnaire has been empirically tested for reliability and validity using confirmatory factor analysis (CFA) and also Z-test for checking the significance of the explored and confirmed factors. The present research work offers pragmatic suggestions for banking regulators, on improving the asset quality of banks in India and also throws new insights on effective credit management in banks.

JEL Codes: G01, G21, G32, E44

We address the strategic interdependence among capital structure, firm-level (process) innovation, and subsequent output decisions. In the backdrop of the limited liability effect, the interlinkage among financial and real variables is established through a three-stage game. The levered duopolist produces higher output and earns a larger profit than its unlevered counterpart. Even the industry output is higher when one of the duopolists is levered. However, if the levered duopolist undertakes investment in (process) innovation, then the debt-financed innovation induced output is larger than the innovation-led output of a completely equity financed firm. The levered innovative firm eventually becomes a monopolist by driving out the unlevered innovative duopolist.

JEL Codes: D21, G32, L13, O31

In order to revive the agricultural sector under the neoliberal regime, contract farming has been emerging as a new agricultural technology in India and in the state of West Bengal, in particular. The present paper is a micro-level comparative study of West Bengal, dominated mainly by small and marginal farmers, which serves as an interesting case for highlighting on the pattern of cropping changes over time. The study highlights on the contract farming models prevailing in the study area, the specific implications of the nature of contracts followed by a detailed discussion on the characteristics of the crop under contract and the structure of contract farming in the study area. The article also attempts to investigate the factors inducing contract farming by different size classes of farmers as well as contract farming through individual agents vis-a-vis cooperatives using a logistic regression model. The study reflects that the success of contract farming as an emerging alternative institution that may alter the existing farm practices as suggested by the recent Farm Bill, 2020, depends much on the nature of the product as well as the contract.

JEL Codes: Q12; Q13; Q15; Y10.

The bulk of the world trade in commodities now a days consist of intermediate goods, which play an essential role in production and creation of value-added. As a consequence, the global production process is getting much more integrated today than ever before. To understand and examine this internationalisation in Indian manufacturing industries, using World Input–Output Database (WIOD), we have estimated the foreign and domestic value-added contents in export and output of Indian manufacturing for the period 2000 to 2014. Further, to complement this analysis, we have also performed regression estimations to identify the relationship between export, imported inputs use, and output growth of Indian manufacturing industries. Our study reveals low usage of domestic inputs use and more usage of imported inputs. These indicate stronger backward linkages in production and weak forward linkages in global consumption and production networks. Regression analysis also strengthens the finding of higher backward participation of the manufacturing sector. We have employed panel vector error correction model, fully modified ordinary least square and dynamic OLS models. Our results reveal a robust long-run causality between imported inputs usage and export-growth of the sector.

JEL Codes: C33, C67, F14, F15

The research uses data from a multi-stage survey performed in 2019 to evaluate short-term migrants’ characteristics and sectoral transitions in Kashmir. After locating in-migrants in the selected clusters, we randomly selected 253 samples in a 70:30 urban–rural ratio. The IV-Probit is used to identify the features of short-term migration to the valley. Results reveal that short-term migrants are primarily absorbed in construction. In addition, most in-migrants are unskilled and come from marginalised communities. This study contributes to the knowledge on migration in a developing nation like India, particularly in Kashmir. In addition to temporarily increasing the urban inflow, short-term labour migration may assist the family left behind by remitting revenue. Hence, these results are critical for policymaking regarding mobility, urban development and the expanding construction sector.

JEL Codes: J6; C2