The first paper, “An Analysis of the Behavior and Composition of Savings in India” by Shradha H Budhedeo, is an analytical study of the changing trends in savings in India. It is often said that India’s savings are healthy, but many times the figure is found falling short of the desired quantum. The reasons adduced are diverse. Two most important ones are—growth of population and high capital output ratio. There is a simple calculation associated with this: suppose the population has been increasing at an average speed of 1.5% per annum and the capital output ratio has been around 4:1; this means that if the entire population is to be kept at the existing level of per capita income, the savings should amount to 6% of the GDP. And if we add to this the estimated value of depreciation at 8%, we require around 14% of GDP as current savings. This gives a clear idea as to why the savings remain short of the required amounts. Secondly, the study observes that there is a change in the preferences of saving instruments on the part of the households who are the largest contributors to the national effort to save. They are increasingly discerning between productive assets like shares and non-productive assets like idle cash. The article also discusses the institutional factors that are influencing these changes. There is a certain cyclical pattern in the growth of savings in India—from low levels immediately after independence to growth, to stagnation, followed by renewed growth.

The second paper, “Minimum Quality Standards with More Than Two Firms Under Cournot Competition” by Mario Pezzino, is an addition to the literature on non-collusive oligopoly originally initiated by Cournot in the mid-19th century. This is an interesting variation of the original model, in the sense that the impact of a constraint on the competing firms is addressed. The imposition of minimum quality standards is seen as an additional constraint, where the main assumption for a pair of firms is that each tries to maximize its profits by deciding on a level of output, believing that the other firm is not going to react to the its actions. Usually, every change made by a competitor in an oligopoly environment is met by a countering change to ensure that the first firm earns maximum profits in the changed paradigm. Now, this change is again greeted by a second change in terms of quantity of output to be produced by the second firm. The outcome to be derived under these assumptions is about the equilibrium division of the total market output among the rival firms. It is one of the oldest oligopoly models and is elementary, since each firm acts under the assumption that the rival output is given and static. The paper has made an attempt to study the behavior of the firms when a certain compliance to standards is to be ensured.

The third paper, “Green Accounting: Issues and Challenges” by Himanshu Sekhar Rout, is on green accounting issues and highlights specific examples as to why the conventional system of accounting for business and governance is proving to be inadequate in considering the damage that is being done to the environment. The paper proposes a radical approach to assessing the damage done to the environment. It is not adequate to use some static measures or estimates for the damage done to the environment in the growth process. The study pitches for a dynamic approach for including the environmental degradation where the discounting factors change with every accounting period.

The last paper, “Group Lending Scheme Operating Through Primary Agricultural Credit Society: A Critical Assessment” by Amit Kundu and Suranjana Mitra, is of contemporary relevance, since it deals with a form of rural finance that is labeled as microfinance. The study enquires into the efficacy of directing such advances through the agricultural extension service agencies. There are advantages and disadvantages. The advantages include the easy access to these services for the masses and greater control by the quasi-government bodies involved in the disbursements. The repayments are mostly on schedule, and the system seems to be sustaining itself. But the limitations are the lack of linking up with other extension services like transport and communication that ensure profitability margins for the borrowers. In other words, the projects are not self-sufficient in generating the potential returns. The business development angle is missed by these agencies of microfinance. There can be an interesting comparison between public banks and microfinance agencies like that of Vikram Akula’s SKS Microfinance. In such endeavors, the viability of the project in terms of delivering competitive returns on investments for the banking institutions is better addressed. However, the social objective is adequately served by these public agencies—the exploitation by the traditional moneylenders is avoided.

-- Syamasunder Talluri
Consulting Editor