Tuesday, July 04, 2006

More Bad laws..

What does it take to learn a lesson in economics in India? The idea of giving tax breaks and creating special economic zones seems to be eternally ripe. It is justified under the grounds that Indian entrepreneurs want it. Of course they want it, it is a means for them to reduce costs, and profit motivated entrepreneurs will try to reduce operating costs as much as possible. Its a simple cost minimization lagrangian solved by every first year economics graduate student.
It is inefficient to give businessmen land at less than market prices. Basic law of economics, when anything is priced below its market value there will be shortages. PM Manmohan Singh is hailed as a famous reformer and FM Chidambaram states that financial reforms are of utmost importance. I think the PM is confused . On the one hand he lashes out against Mumbai's archaic land laws and on the other he promotes the idea of land subsidies for businessmen. The ideas don't add up. To catch up with China India does not need more laws and subsidies, it just needs to ease regulation in every sector of the economy.

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