Trade Finance: Effects Of The Basel Capital Framework and Other Regulatory Developments Andrew Cornford

The impact of the Basel III capital adequacy framework requires detailed analysis. Have the rules relating to trade finance slowed down world trade? What are the implications for money laundering, and changes in banks' operations in response to global environmental challenges? Trade_Finance (Download the full text in PDF format)

The Truth About Demonetization Prabhat Patnaik

After months of dilly-dallying the Reserve Bank of India has finally come out with the figure that nearly 99 percent of the currency notes demonetized in November 2016, came back to the banking system. The total value of demonetized currency, in the form of Rs.500 and Rs.1000 notes, was Rs. 15.44 lakh crores, of which Rs.15.28 lakh crores came back to the banking system, which is 98.96 percent. Since a few small windows are still open for the return of demonetized currency, the final figure will certainly exceed 99 percent, which puts paid to the government’s claim that demonetization would…

UN Role in Reforming International Finance for Development Jomo Kwame Sundaram

Growing global interdependence poses greater challenges to policy makers on a wide range of issues and for countries at all levels of development. Yet, the new mechanisms and arrangements put in place over the past four decades have not been adequate to the growing challenges of coherence and coordination of global economic policy making. Recent financial crises have exposed some such gaps and weaknesses. Multilateral UN inclusive Although sometimes seemingly slow, the United Nations (UN) has long had a clear advantage in driving legitimate discussion on reform because of its more inclusive and open governance. Lop-sided influence in the current…

Economy Plunging Headlong into Recession Prabhat Patnaik

Volume II of the Economic Survey which was brought out by the Ministry of Finance a few days ago paints an extremely grim picture of the Indian economy. The growth rate of real Gross Value Added (GVA which is the appropriate thing to look at, since the GDP measure includes net indirect taxes and hence does not truly reflect output trends), was 6.6 percent for 2016-17 as a whole, compared to 7.9 percent for 2015-16. More importantly, the quarterly growth rate (i.e. the growth rate of GVA in a particular quarter over the corresponding quarter of the preceding year) kept…

‘Riskless Capitalism’ in India: Bank credit and economic activity Rohit Azad, Prasenjit Bose and Zico Dasgupta

The Indian growth story of the 2000s’ cannot be over-simplistically explained as a result of “market-oriented” reforms. Public sector bank credit-financed investments, particularly in the infrastructure sector, played a significant role in sustaining growth, most crucially after the global economic crisis. Such a growth trajectory, however, proved to be unsustainable with the expansionary phase coming to an end in 2011–12 and bad loans piling up in the banking system. Riskless_Capitalism  (Download the full text in PDF format) This article was originally posted in Economic & Political Weekly on August 5, 2017.

Twenty Years after The Asian Financial Crisis Prabhat Patnaik

Exactly twenty years ago, a major financial crisis had hit the countries of East and South East Asia in July 1997. This crisis was a watershed in the history of third world development, in the sense that these “tiger economies” which had seen extraordinarily high growth rates until that time, remained permanently crippled thereafter. Just around the time that they were shaking off the effects of the 1997 crisis on their respective economies, the collapse of the “housing bubble” in the United States plunged the entire world capitalist system into a crisis which also affected them, so that they could…

NPAs: All talk and no action C. P. Chandrasekhar

The media are full of it. Viral Acharya, a recently inducted Deputy Governor of the Reserve Bank of India (RBI), has declared publicly that resolving the problem of bank stress resulting from large non-performing assets (NPAs) on their balance sheets is the RBI’s priority, taking precedence over measures such as interest rate reduction to spur growth. The issue here is not just one of preventing bank insolvency, but of keeping the credit pipe open. Banks burdened with NPAs are likely to be less willing to expand their loan books, and if interest rates are too low, banks may be unwilling…

Growth in the Time of a Credit Squeeze C.P. Chandrasekhar and Jayati Ghosh

GDP growth figures for the last few years have camouflaged a deceleration in credit growth that has affected all but the retail loans segment quite adversely. Credit_Squeeze (Download the full text in PDF format) (This article was originally published in the Business Line on July 31, 2017.)

Debts that cannot be paid will not be Sabri Oncu

Total global debt has increased, growth has been slowing down since the onset of the global financial crisis in 2007 and has been rapidly decelerating after 2012. This may be a sign that the world has arrived at its debt carrying capacity or has even crossed it, meaning that capitalism is probably already insolvent. Debts_that_cannot_be_paid (Download the full text in PDF format) (This article was originally posted in the Economic & Political Weekly on July 15, 2017.)

Justice in the Age of Finance C. P. Chandrasekhar

The big news late in June 2017 was that the Serious Fraud Office (SFO) in the UK had charged four former senior executives of Barclays bank, including its former chief executive, John Varley, with fraud committed almost a decade earlier, during the global financial crisis of 2008. This is the first chief of an institution embroiled in the 2008 financial crisis who faces criminal (as opposed to civil) proceedings. How long the investigation will take and what the punishment will be is yet to be seen. But being the first criminal prosecution of a small number of the large group…