Dr. Ajay Shah is the Research Professor of Business at Jindal Global Business School


  • B.Tech. in Aeronautical Engineering, IIT, Mumbai
  • Ph.D. in Economics, University of Southern California, Los Angeles

Prof. Shah comes with rich experience in the field of Economics before he joined JGBS. 

  • Professor, National Institute for Public Finance and Policy  
  • Consultant, Department of Economic Affairs, Ministry of Finance 
  • Associate Professor, Indira Gandhi Institute for Development Research
  • President, Centre for Monitoring Indian Economy
  • Consultant, Rand Corporation, Santa Monica

Prof. Shah has co-authored books on Economics:

  • In Service of the Republic: The Art and Science of Economic Policy
  • Indian Financial Markets: An Insider’s Guide to How the Market
  • Demonetisation: The Economists Speak
  • Foreign Investors Under Stress: Evidence from India

Many publications have recognized Dr. Shah’s prowess and honored his work: 

  •  The Most Powerful Indians in 2010: The Indian Express, January 2010 
  •  Best South Asian Blog, December 2009: BH Economics Blog Awards, 2009
  • Experts who wield enormous influence in their fields: Business Standard, January 2009
  • Best South Asian Blog: BH Economics Blog Awards 2008
  • The Investment Technology of Foreign and Domestic Institution

Bloomberg’s global list of the best books of 2020 featured Dr. Shah’s book that he co-authored with Vijay Kelkar, “In service of the republic: The art and science of economic policy“.

An excerpt from Prf. Ajay’s critique on the Finance Minister’s 2021-2022 budget in Business Standard:

The country is reeling under the coming year’s fiscal policies and schemes of the Union Government. The Finance Minister’s budget for the oncoming fiscal year is a rollercoaster of kudos and censure. 

What ticks

Today’s economic policy is challenged by the snail’s pace of private investment. The FM has addressed the economic policy’s conundrum to a large extent. 

The FM has dared to enter areas hitherto sacrosanct. The proposal to privatize Public Sector Banks and boosting the limit on Foreign Direct Investment in Insurance show promise towards progress. Displaying transparency on fiscal policies and pausing policies of the welfare state is commendable. 

What falls flat

Hiking custom duties will hurt the economy. The push for banks, a new Development Finance Institution (DFI), or bond market liquidity will do little to iron out the financial system’s dilemma. 

When the private sector or people of the state invest their equity capital and emotional energy into creating business corporations, they contribute to growth in both Gross domestic product (GDP) and job production. India has not witnessed much diligence in private investment since 2011.

How the state functions

The Rule of law supports the equality of all citizens before the law, secures a nonarbitrary form of government, and more prevents the arbitrary use of power. 

Centrally planned economies are different from market economies, in which businesses and consumers traditionally make market decisions. India has adopted a centrally planned economy, also known as a command economy. The economic system works with the government as the central authority makes economic decisions regarding the manufacturing and the distribution of products. 

The resolution problem (financial and non-financial firms with stressed balance sheets), and the loss of confidence showed India as a steadily evolving mature market economy.

The establishment has considered this construct in the weeks leading up to the budget. We now weigh in our impressions of the changing economy as the upshot of the budget announcement, as regards this construct. 

The financial sector

Both FDI in insurance and the privatization issue of PSU banks have drained the government for quite a while. We welcome the FM’s step in unleashing this leviathan.  The finance minister has made history in using the word privatization.  We welcome this step. 

Do we reserve the cheer on this? Flashbacks of the lukewarm reception of the Air India dissolution or the LIC listing loom fresh. Trading of PSU banks could prove more rigorous than selling Air India. 

We are hardly looking at rich dividends from the FM’s reforms. Hiked FDI in insurance is a boon, but not enough to offset the problem of private investment. The need of the hour is the long-awaited insurance regulatory reform setup.

Mounting on the blockades to economic progress is the non-starter on reforms. Government-owned enterprise in the banking sector is by itself not an issue. Banks are in the soup thanks to the inherent flaws in financial law and regulation besides poor regulation. The government must modify the laws and revamp the incentives and processes of financial regulators. This exercise will yield the desired outcomes in reforming the banking sector in India. 

Augmenting Sustainable infrastructure

The FM’s assurances on boosting Sustainable infrastructure sounded like music to the ears. The government would develop assets and get them running before trading them with private operators. The state has the funds to build new assets. Liquidating the assets through securities, thus recycling the funds will bring the expected windfalls. 

The union government had compromised its fiscal transparency since 2007. The Comptroller and Auditor General had found the documents the government laid in Parliament misleading. The government has taken positive steps to clean up the act since last year.

Food subsidy coming up in the budget is gratifying. 

The proactive stress on health and health care, tilting to public health is gladdening too. Underscoring the adage Prevention is better than cure is just what the doctor ordered regarding health policy. 

The FM spared us the anathema of tax raises and subsidies in the new budget. We listened to a refreshing and calculated effort made towards economic progress. 

Treating the insurance and PSU banks as an aside, we detect a definite ideological shift in policies. The state is accountable for delivering on progress in employment, including the jobs that emerge from the private sector. Taxes and subsidies do little towards this end. 

The two behemoths 

  • Large number of increase in custom duties
  • Absence of financial reforms. 

We can attribute the halcyon days of 1991 to 2011 to the steady process of trimming customs duties. Hiking custom duties acts adversely by:

  • Turning resource allocation inferior.
  • Hampering exporting firms. 
  • Creating the wrong incentives for firms.

Solving India’s financial crisis requires addressing the failures of law and regulation. We have hardly recovered from such setbacks as underperforming banks, DFI (Development Finance Institution), incipient government bodies making liquidity for corporate bonds. The budget has not addressed the stumbling blocks of the 1970s and 1980s. 

Circa 1990s and 2000s. Growth happened despite the demons of PSU banks and the rest. But we have not learned our lessons in resolving the financial and non-financial crunch. 

The FM has sown much hope in this budget. Coming forward with increasing FDI in insurance and privatizing PSU banks is a daunting step. Not to forget sparing us the subsidies and income tax hikes. 

We now await future budgets to break through the intellectual blockades in

  • addressing the central planning 
  • the rule of law
  • balance sheet

Do we witness the clincher in private investment in 2021-22? Do not give up on the establishment to deliver the elusive economic progress. 

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