Public Bank Privatisation in a Post-truth World C.P. Chandrasekhar

Narendra Modi government appears to have decided to privatise public sector banks (PSBs). Preparations are underway with arguments being marshalled that “there is no alternative” to privatisation. Privatisation (Download the full text in PDF format) (This article was originally published in the Economic & Political Weekly, Vol. 52, Issue No. 19, 13 May, 2017)

The State in Chinese Banking C. P. Chandrasekhar and Jayati Ghosh

After four decades of financial reform China’s banking sector is still dominated by publicly owned institutions. But continuity in ownership does not mean that banking behaviour does not change. Chinese_Banking (Download the full text in PDF format) (This article was originally published in the Business Line on April 10, 2017)

Once More on “The Humbug of Finance” Prabhat Patnaik

The renowned economist Joan Robinson had referred to the view that the government’s budget should always be balanced, as the “humbug of finance” (Robinson 1962), namely as a false proposition with no theoretical merit which was nonetheless promoted by finance capital. These days of course the insistence is not exactly on balancing the budget as was the case during the pre-second world war years. A certain amount of fiscal deficit relative to GDP, usually 3 percent, is considered “permissible”, though it is not clear what is so sacrosanct about the figure 3 and why 3 is better than zero. But…

Bad Bank Proposal for India T Sabri Oncu

The author’s bad bank proposal for India would be capitalised with zero coupon perpetual bonds the government would issue and would give the country some breathing time so that she can attack and tackle all her other problems. Bad_Bank_Proposal (Download the full text in PDF format) (This article was originally published in the Economic & Political Weekly, Vol. 52, Issue No. 10, 11 Mar, 2017.)

China’s Capital Flight Syndrome C.P. Chandrasekhar

China, now one of the world’s two largest nations measured by gross domestic product (GDP), is displa­ying a strange malady. A sudden and large outflow of capital from the country is resulting in a sharp fall in its reserves. Going by International Monetary Fund (IMF) statistics, between the quarter ending June 2014 and the one ending June 2016, China’s foreign exchange reserves fell by $752 billion, from $4.1 trillion to $3.3 trillion. According to recent reports, reserves had fallen further to $3.1 trillion by the end of October 2016. This collapse in reserves due to an outflow of capital is…

The Utter Failure of Demonetization: The RBI says so even as it says not Surajit Mazumdar

From the figure of the value of fresh banknotes issued by banks by 19 December, it can be concluded that we are still very far away from the full replacement of the cash withdrawn from circulation and the severe cash shortage is going to continue well beyond 30 December. Utter_Failure (Download the full text in PDF format)

New In-house Estimates of the Impact of the Basel Capital Framework Andrew Cornford

The state of play in the effort to achieve a final revised version of the Basel III capital framework for banks (now widely and understandably renamed Basel IV) is currently far from clear. The word from the Basel institutions themselves is that the goal is close to attainment. In mid-September the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision (BCBS), issued a statement endorsing the direction of Basel III. This was accompanied by a statement of the chairman of the BCBS that the long process of post-GFC reforms…

Demonetisation and Banks’ Lending Rates Prabhat Patnaik

Spokesmen of the ruling party are busy these days spreading another falsehood, namely that, because of demonetisation which has brought in huge amounts of cash to their coffers, banks would be so keen to lend that their lending rates are going to fall, and that such a fall will act as a stimulus for the economy. This is completely wrong, and banks’ lending rates can never fall for this reason. They may of course fall because the monetary policy announced by the Reserve Bank of India is so altered as to cause such a fall. But that could happen anyway;…

Demonetization as the Basis for a Fiscal Stimulus Prabhat Patnaik

A bizarre argument is doing the rounds these days. It states that the cash which gets disabled in the “black economy” because of the government’s demonetization measure, would enable the government to undertake an equivalent amount of expenditure with impunity; it can therefore spend more on infrastructure and other essential areas, or simply provide cash transfers to the people. BJP spokespersons who have been putting forward this argument, are promising transfers to everyone, in a manner reminiscent of Modi before the Lok Sabha elections, when he had promised that “black money” from Swiss Banks would be brought into the country…

Demonetization as a Means of Fighting “Black Money” Prabhat Patnaik

So many lies are being spread by the government which is currently busy wrecking the Indian economy in the manner of a bull in a china shop, so many spurious economic arguments are being trotted out by it, that one has to be extremely vigilant not to be swept away by this tide of unreason. In the current article, and the two subsequent ones to follow, I propose to examine some of the more persistent assertions that are being made by government spokesmen. The most persistent assertion of course is that demonetization is a measure against “black money”. In an…