The Indian Economic Journal

This study analyses the impact of co-location between formal and informal manufacturing sectors on plant-level productivity. We employ a unique data obtained by merging plant-level data from Annual Survey of Industries (ASI 2011–2012) and Survey of Unorganised Manufacturing and Repairing Enterprises provided by National Sample Survey Office (NSSO 67th round). We find that formal and informal manufacturing plants gain from localisation. Further, co-location with informal enterprises has a positive impact on productivity of formal sector plants; however, we observe insignificant impact of co-location on informal sector enterprises. Additionally, we find evidence that informal sector enterprises benefit from industrially diversified regions.

JEL Codes: D24, R12, R3

Over the years, emerging economies have extensively followed a liberal trade regime and witnessed unprecedented economic growth. At the same time, global uncertainty has also reached to the pinnacle and has gripped almost every country within its ambit. Trade openness though seems to be channelising negative spillover effects of global uncertainty, yet continues to flourish. Therefore, the economic implications of uncertainty in presence of unprecedented trade openness remain a moot question which lays the basis of this study. Using autoregressive distributive lag (ARDL) approach, the empirical estimates suggest that macroeconomic effects of uncertainty are effectively mitigated by trade openness.

JEL Codes: C22, F14, C22

This article examines the structural responses of foreign exchange and equity markets to the COVID-19 pandemic in seven Asian countries over its first 4 months (31 December 2019 to 1 May 2020). Marginal effects derived from a structural vector autoregression (SVAR) model suggest that a 1% increase in incidence of COVID-19 cases significantly diminished Indonesia’s equity market returns by 4.7%, depreciated the Indian rupee against the US dollar by 4.8%, but improved equity prospects in South Korea by 4.1%. For the other financial markets, the effect of COVID-19 was found to be insignificant. Further, the impulse response analyses imply that the influence of COVID-19 on foreign exchange and equity markets is only transitory in nature. Additional SVAR analysis for India and Indonesia over recent months (2 May 2020 to 22 January 2021) showed that their financial markets remained (or became) resistant to the escalating incidence of COVID-19 inflections and deaths.

JEL Code: G15

The present study measures the role of firm-specific factors influencing the likelihood of establishing a subsidiary in tax haven countries. The panel data of Indian companies, which have business operations in foreign countries, are used for the study. The firm-level data for the period from 2007 to 2018 are analysed by using binary logistic regression model. The result shows that the intangible assets, long-term debt, number of subsidiaries and service sector dummy have significant and positive impact on tax haven operations of multinational companies, but the experience of the firm and return on equity are insignificant, and a firm’s size deters the likelihood of setting a tax haven subsidiary. The results also show that firms from high-technology manufacturing and knowledge-intensive sector have more influence on the likelihood of owning a tax haven subsidiary by Indian multinationals.

JEL Codes: F21, F23, H25, H26

The purpose of this article is to examine the relationship between foreign direct investment (FDI) and economic growth in Brazil, Russia, India, China and South Africa (BRICS) economies, which are considered to be the fastest-growing economies and dominant players in the global investment landscape. In order to assess the relationship between the dependent variable (economic growth) and explanatory variables (FDI inflows and other growth determinants), we analyse a 32-year panel data starting from 1987 to 2018 using feasible generalised least squares (FGLS) method. The article found a significant positive FDI impact on economic growth in BRICS. However, exports, human capital and inflation (macroeconomic instability) exert a negative impact on economic growth of BRICS, whereas domestic investments exert a positive impact on growth.

JEL Codes: F21, F43, C23, O47

This research study empirically examines the price linkages among oil, dollar, gold and stock markets in India over period from 1999:1 to 2019:12. We employ cointegrated vector error correction model (VECM) and Granger causality test to study the long-run and short-run relationships between commodity and financial markets before, during and after the global financial crisis. Our analysis finds the dependency on price movements in asset markets is time-varying and countercyclical in India. Findings suggest the asymmetric structure of price correlations among asset markets across three temporal periods on either side of the crisis. Our study offers useful insights into the strategic asset allocations to investors in response to economic cycles, to help optimise potential portfolio returns and provide protection towards some downside risks.

JEL Codes: C58, D53, F51

Many countries are under constant fear that environmental policies might negatively influence the international competitiveness of polluting industries. In this study, we aim to evaluate the relationship and impact of the environmental tax on comparative advantage of trade in food and food products industry, considered to be one of the highly environmentally sensitive industries. This study also investigates, whether this relationship differs among countries covered in G20, with the help of correlation analysis. We select panel autoregressive distributed lag approach for this study as it can analyse long-run as well as short-run association even when the variables are stationary at different orders of integration. Using panel data from G20 countries over the period of 21 years that is from 1994 to 2015, it is concluded that when we allow environmental taxes to interact with the revealed comparative advantage (RCA) of G20 nations, the overall impact of the environmental tax on the RCA is negative in the long period. It is therefore suggested that countries should follow Porter hypothesis to stimulate innovations resulting from strict environmental regulations that affect the environment in least possible manner.

JEL Codes: C01, C23, C33, F18, O57, Q5

This study seeks to identify the role of pandemics upon the Indian aviation industry. The main objectives of this study are threefold: First, to measure the impact of hotel sector upon the aviation market outcome of India post 2005: Second, to measure the impact of human fatality from the communicable diseases upon the Indian aviation market: Third, is to test the impact of economic uncertainty and pandemic uncertainty upon the Indian aviation market. This study has adopted the linear regression model in which total aviation market outcome is estimated as the function of movements of people in airlines, hotel industry cost and uncertainties. We utilise the quantile regression model to see the effects of various factors upon the aviation market at different quantiles. In order to study the cointegrating relation, we utilise Johansen Cointegration test. Further, we employ robustness techniques through FMOLS and DOLS to confirm our earlier findings. Results suggest that fatalities from communicable diseases have exerted negative impacts upon the Indian aviation market. Furthermore, we notice that increasing hotel cost volatility and rising uncertainty in hotel sector have impacted positively and negatively the aviation market, respectively. We also discover that economic uncertainty has impacted the aviation market more than pandemic uncertainty.

JEL Codes: G10, G11, G14

Using the PLFS 2018-19, this study intends to analyse current labour market from the perspective of COVID-19 pandemic, subsequent lockdown and the expected slowdown in the Indian economy. We explore the questions such as: What share of workers will be able to work from home? Which are the vulnerable groups of workers in the labour market, that are likely to be the most affected? We show that 18-19% of non-farm workers are engaged in work from home (WFH) occupations, with women and urban areas having larger share of these workers. We find that 32 (10) % of non-farm workers in rural (urban) areas are vulnerable and face higher risk of job loss during a lockdown.

JEL Codes: J10, J21, J63, J80, D69

This article discusses the root causes of wage disparity in the textile industry. The study argues that wage disparity arises through direct and indirect approaches. Both create pressure on suppliers and leads to low wage payment, depriving workers of social security benefits, unpaid holidays and leaves. Hyper-consumerism, free on board (FoB) price, and flexibility have created competition among suppliers and other stakeholders. Suppliers flexibilise rules and re-organise work arrangements to meet on-time production by increasing working hours, introducing wage penalty, strict supervising, and increasing surveillance.

JEL Codes: J3, J31, J41, J46, J81, J82, J83