The larger crisis that NPAs signal C. P. Chandrasekhar

Having overcome a legacy of extreme shortage of supply, India’s power sector is in the midst of a crisis with ramifications of a wholly different kind. The crisis arises because firms accounting for significant proportion of power sector assets have defaulted on their debt servicing commitments, and banks are not able to find ways of restructuring that debt or recouping their money. So the RBI’s guidelines requires that the assets should be liquidated to recover whatever is possible and compensate banks from which these firms had taken loans and then defaulted. But the assessment is that liquidation would yield the…

Pakistan: Who needs a crisis? C.P. Chandrasekhar

With Imran Khan’s Pakistan Tehreek-e-Insaaf (PTI) or “Movement for Justice” winning 116 of the 272 seats filled through election in Pakistan’s National Assembly, the former cricketer is set to be installed as his country’s next Prime Minister. So attention has now shifted to how he would address the  ‘crisis’ the country faces. That crisis is not a crisis of growth. Pakistan has registered year-on-year growth rates exceeding 5.4 per cent in the three consecutive years ending financial year 2017-18, a record matched this century only in the globally-synchronised, high growth years 2003-2007. Nor could it be identified as a crisis…

Crop Insurance: Another dressed up scheme C. P. Chandrasekhar

Among the pro-farmer policies that the NDA government claims to have initiated, one often flagged is the modified crop insurance scheme titled Pradhan Mantri Fasal Bima Yojana (PMFBY). Effective as of kharif season 2016, this scheme is supplemented with the Restructured Weather Based Crop Insurance Scheme (RWBCIS). While in the former crop loss is computed by comparing actual yield in a season based on crop cutting experiments by state government agencies with an indicator of expected or ‘threshold’ yield, in the latter it is computed using leading weather indicators. Together, the schemes promise enhanced and more reliable crop insurance for…

Institutional Investors and Indian Markets C. P. Chandrasekhar and Jayati Ghosh

These are uncertain times for emerging market economies (EMEs) like India. They have been important destinations for investments financed by the cheap liquidity that was pushed into the financial system by developed country central banks attempting to address the financial crisis of 2008 and after. The result has been the accumulation of large sums of portfolio investments in their equity and debt markets. This has generated fears that, as central banks in the US, EU and elsewhere unwind their easy money policies and raise interest rates from their historic lows, this capital will exit the emerging markets. Once access to…

Empty Promises C. P. Chandrasekhar

The timing of the Modi government’s announcement of a hike in the minimum support prices for kharif crops suggests that this may be another of its tall claims not backed by the financial allocations needed to deliver on them. According to a recent Cabinet decision of the National Democratic Alliance (NDA) government, a large proportion of India’s farmers are to be offered the opportunity to sell their crops to the government at a minimum support price (MSP) that covers costs and provides for a margin of 50 per cent, starting with this kharif season. Together with measures like loan write-offs…

A Legacy of Vulnerability C. P. Chandrasekhar and Jayati Ghosh

Recent months have been marked by an exit of foreign investors from India’s financial markets, triggered by the end of quantitative easing in the US and Europe and hikes in policy interest rates in the former. This has resulted over the last few weeks in a sharp depreciation of the rupee relative to the dollar, which not only raises the rupee costs of imports, but also the rupee equivalent of payments made to service foreign debt. That has meant that India is now paying the price for a legacy of debt built up during the years when the Federal Reserve…

The Indiscreet Aggression of the Bourgeoisie C. P. Chandrasekhar

Neoliberal economic policy—the framework of measures that preaches market fundamentalism but uses the state to engineer a redistribution of income and assets in favour of finance capital and big business—has lost its legitimacy. A huge financial crisis and a decade of recession or low growth, that have hurt most sections except the elite 1 per cent, have convinced the majority in many countries that neoliberalism is no alternative. That change in mood was revealed by the Brexit vote and the Trump victory among other developments. However, this has not setback but unleashed a new aggression on the part of the…

Walmart’s gamble and what it means for India C. P. Chandrasekhar

Much of the writing on Walmart’s purchase of a dominant 77 per cent stake in Flipkart, touted for long as India’s answer to Amazon, is focused on its size. At $16 billion, of which $14 billion goes to buy up the stakes of investors such as SoftBank from Japan and Naspers from South Africa, it is reportedly the biggest acquisition in the global e-commerce area, and way larger than $3.3 billion that Walmart paid for US web retailer Jet.com in a deal considered the largest purchase of a US e-commerce startup. With some existing shareholders exiting, Walmart now shares ownership…

The Banking Conundrum: Non-performing assets and neo-liberal reform C.P. Chandrasekhar and Jayati Ghosh

As fiscal year 2017–18 drew to a close, the Government of India decided to bite the bullet and implement a proposal to “resolve” what was being presented as one of the leading challenges then facing the Indian economy: large non-performing assets (NPAs) on the books of the banks, especially the public sector banks (PSBs).The Recapitalisation plan, first announced in October 2017, involved infusing ‘2.11 lakh crore of new equity into the PSBs, of which ‘1,35,000 crore would be new money from the government, financed with recapitalisation bonds. Another ‘18,139 crore was the balance due under the ‘70,000 crore Indradhanush plan…