Mid exam update

Exams done : Corporate Finance, India And World Economy.

The India and WE paper was interesting. There were just three questions that decided the credit for the entire course. It was an open book / laptop exam. I was ready with my searchable/pdf copy of the Oxford Companion to Economics in India a very fine publication (and strategically useful since our prof contributed to it!).

Anyway the three questions were:

1. The prof had listed 7 measures that the Indian government has employed in the fiscal stimulus plans it has announced. We were asked to rate them from 1 to 7 and give a reason for why we chose the best and the worst measure. I chose the plan for the 100,000 crore PPP infrastructure grants above the 4% reduction in CENVAT. I’d presented in class a model to evaluate these plans, and in that model what is important is the efficiency of the expenditure and the percentage of “idle resources” the plan is able to draw into the economy. In my opinion there is no guarantee that the CENVAT savings will be spent on consumption to scale up demand. And PPP projects have a good track record as far as efficiency is considered.

2. This question asked us to list parameters in decreasing order of importance to measure an economy’s performance. We were then asked to state figures for these parameters pre and post liberalization and comment on how well liberalization did on these counts. The point that the prof wanted to make probably was that if you considered employment and poverty as being more important than GDP and Fiscal Deficit, Current Account deficit then the reforms haven’t really done that well.

3. This question was trying to bring out a correlation between GFCF (Gross Fixed Capital Formation) and Industry growth. I didn’t particularly like this question, but that was probably because I still haven’t gotten the point. The point that everyone ended up making is that there is a lag – and a point that the course brought out was that your fiscal borrowings have to go into these sort of investments (which lead to GFCF) and not into financing the revenue deficit.

And that was it! 3 questions will decide the credit. To be frank, I didn’t particularly enjoy the prof’s teaching and the class – it was too muddled and confusing. But the readings (as I found out too late!) were interesting and the exam, I must concede was well set.

March 3rd, 2009 / 3 Comments / Tags: iimc, eco / Trackback