The de-digitisation of India Jayati Ghosh

So it’s official: cash use is back in almost full force in the Indian economy. Cash withdrawals from ATM machines – a reasonable if incomplete proxy for the use of cash in the economy – are nearly back to the level of just before the demonetisation shock of 8 November 2016. RBI data on use of debit and credit cards to withdraw money from ATMs show that such withdrawals, which had collapsed to only Rs 850 billion in December 2016 largely because of the sheer unavailability of cash with such machines, amounted to Rs 2.27 trillion in July 2017, only…

Strangulating the Informal Economy Prabhat Patnaik

The fact that there has been a slowdown of late in the rate of growth of the Indian economy is accepted by all, including even Narendra Modi in his all-over-the-place diatribe against critics on October 4. The government however sees it as remediable since the economy, it believes, “is on the right track”. The first question to ask however is: why should it matter if the year-on-year quarterly GDP growth-rate has been slowing down for the last six consecutive quarters and is now down to 5.7 percent in the first quarter of 2017-18 (which is the lowest for any quarter…

Create a crisis and make it worse C. P. Chandrasekhar

On August 10, the government tabled a new bill in Parliament, with the aim of using its majority to push through a desperate policy initiative in the form of the Financial Resolution and Deposit Insurance (FRDI) Act. The Act seeks to create an ostensibly ‘independent’ FRDI Corporation, which would take over the task of resolution of failing financial firms from the Reserve Bank of India and other regulators. To that end, it is to be armed with special and near draconian powers to implement its mandate, and given control of the deposit insurance framework currently managed by the Deposit Insurance…

The Class Content of the Goods and Services Tax Prabhat Patnaik

The discussion on the Goods and Services Tax (GST) until now has focused almost exclusively on the distribution of its burden across commodities, on the difficulties of meeting its stringent bureaucratic demands, and on the delays in obtaining claims for refunds. Even the view that it is pushing the economy into a recession has attributed this looming recession merely to its stringent procedural demands which supposedly have tied most sellers in knots. In all this however the class content of this new tax regime has been missed. Indeed many would even ask: if one kind of indirect tax regime which…

Downturn Blues C. P. Chandrasekhar

September did not begin well for the Narendra Modi government. As it prepared for a makeover in the form of a cabinet reshuffle with elections 2019 in sight, news came that India’s GDP growth had slowed significantly to 5.7 per cent during the quarter April-June. This deceleration comes in the wake of a fall in growth rates from close to 8 per cent a year earlier to 6.1 per cent during January to March this year. As is to be expected the government has chosen to attribute this trend to short term shocks, which will not dislodge the economy from…

Problems with Neoclassical Economics Amiya Kumar Bagchi

While there are a few examples of successive use of mathematics in forming empirically tested mainstream theorems, excessive misuse of this tool in neoclassical economics leave little coherence between its “rational being” and realism. In fact, many examples prove that it fails to observe the tenets of its own canon, and people are compelled to consume beyond their need and capacity, even in the face of mounting unemployment. Problems_Neoclassical_Economics (Download the full text in PDF format)

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…