Friday, October 10, 2008

Does economics support the smoking bans?

……looking through the lens of an econometrician
Econometric studies undertaken by smoke free advocates, on the effect of smoking bans on restaurant industry in several locations in California and Massachusetts shows that smoking bans have not harmed the restaurant industry. Some have even shown an increase in overall restaurant business. Their findings are however based on restaurant sales-tax receipts or other aggregate data.

Does this mean smoking bans are really a “win-win situation for restaurant owners”? Also is it justifiable for the authorities to tell property owners that they can’t allow smoking on their premises?

Not necessarily as the studies supporting smoking bans are based on aggregated restaurant sales data; that is, they look at the “restaurant industry” in the smoke-free communities. Also from the economic perspective, it largely ignores the concept of private property rights acting as an essential prerequisite and a fundamental linchpin of wealth creation in a market economy.

However the following are sufficient reasons for smoke free advocates to remain undeterred on their stand-
1) Environmental tobacco smoke “is responsible for approximately 3,000 lung cancer deaths each year in nonsmoking adults”
2) It harms the “respiratory health of hundreds of thousands of children”

Richa Shukla
Globsyn Business School

Wednesday, October 1, 2008

Indian growth not immune to International slow down

The Indian march towards becoming a economic super-power just hit a road block in recent times. In light of the tight credit condition and the governments struggle to control the record high inflation accounted for the Indian economy to grow at slowest rate in three years. Annual growth slowed to 7.9 per cent in the first fiscal quarter of 2008 ended on June 30, significantly lower than the 8.8 per cent rate reported in March.

The growth momentum slowed down as a result of multiple factors including tighter monetary policy, adverse global environment, higher interest rates, slow bank credit growth and ever raising crude and commodity prices.

This is in contrast to China’s economic growth. It has remained strong and shows signs of resilience in the face of the global economic slowdown. China's economic growth in the second quarter grew 10.1 per cent, down from 10.6 per cent.

In the opinion of several analysts the RBI is expected to maintain a tight policy stance with an aim to curb inflation to single digits. However, economists expect it to grow further in the later part of the year.

However the growth in the services sector, showed great resilience and remained strong at around 10 per cent. The sector which was hampered the most is the manufacturing sector as it suffered the sharpest fall and grew only 5.8 per cent compared to 10.9 per cent in the same period in 2007.

Contributed By:
Mr. Param Shah
(Assistant Registrar)
Globsyn Business School - Ahmedabad