Who Should Control India’s Central Bank? Jayati Ghosh

The standoff between India's government and the Reserve Bank of India isn't problematic because of the risk of infringing on central-bank independence. It is problematic because, rather than fighting to protect the public interest, the government's goal is to revive irresponsible bank lending, protect its cronies, and win votes. For full article click here (This article was originally published in the Project Syndicate on November 12, 2018)

The Modi Government’s spat with The RBI Prabhat Patnaik

The Modi government’s spat with the Reserve Bank of India, like its sudden resurrection of the Ram temple project, indicates the desperation it feels at its dwindling electoral appeal. Having dealt a huge blow to the small-scale sector through its measures like demonetization and the GST, having aggravated through its inaction the impact on the Indian economy of the world capitalist crisis, and of Trump’s protectionism that has followed, it is now quite desperate to salvage some support for itself as the Lok Sabha elections approach. Since mere grandiose announcements such as Ayushman Bharat or doubling agricultural incomes can no…

The Government-RBI Stand-Off Prabhat Patnaik

The stand-off between the Modi government and the Reserve Bank of India has generated a false discourse on the one hand and an illusion on the other. In this discourse the RBI’s position, articulated  by its Deputy Governor, is that central bank policy has to be guided by financial markets rather than by a government headed by politicians with electoral compulsions and “populist” agendas. This is obviously an  undemocratic position, for it amounts to saying that crucial decisions affecting people’s lives should be outside their sphere of intervention through the electoral process. It is also a dangerous position, since financial…

India’s wealthy barely pay taxes C. P. Chandrasekhar and Jayati Ghosh

India is often mistakenly seen as a country with relatively low economic inequality. In fact, there were always very significant economic inequalities in India, which intersected with social and locational inequalities in complex ways. More significantly, the country’s inequalities widened after the internal and external economic liberalization measures from the early 1990s, which attracted global financial investors and boosted economic growth considerably. The estimates of low inequality are usually based on the fact that the Gini coefficients of consumption expenditure have not been so high in India (although they have increased over time). The National Sample Survey data on which…

Is “Formalisation” possible? C. P. Chandrasekhar and Jayati Ghosh

In recent times, the clamour for formalising economic activity, or shrinking its unorganised component and expanding the organised, has been heard from diverse sources. There are those who want formalisation to occur because the unorganised sector is seen as being largely outside the direct and indirect tax net, depriving the government of much needed resources. Hence, for example, one feature seen as favouring the Goods and Services Tax regime is that it is likely to force formalisation by requiring transactions to be recorded whenever those transactions are between the organised and unorganised units. Others see formalisation as the process through…

Can the RBI’s open market operations help the rupee? C. P. Chandrasekhar and Jayati Ghosh

The recent depreciation of the rupee has created consternation among those who need to buy foreign exchange. It has also caused panic in the stock markets, whose decline partly reflects the exit of foreign investors, which contributes to the rupee’s fall. It spells further trouble for companies that borrowed heavily in foreign currency, encouraged by lower interest rates abroad. It adds to domestic inflationary pressures that were already rising with higher global oil prices, which have been mostly passed on to domestic consumers. While the recent slide in the rupee’s value is particularly steep, it is part of a longer…

Ostrich-like in Peacock Nation C. P. Chandrasekhar

In the midst of a crisis reflected in a collapsing rupee, India’s BJP government is acting ostrich-like, burying its head in the ground. Nothing illustrates this better than its much-delayed response to the collapse of the rupee with a set of measures that are the opposite of what is needed. Having fallen from just below Rs.64 to the dollar to close to Rs.73 to the dollar between the beginning of 2018 and mid-September, the rupee has depreciated by about 14.3 per cent with respect to that currency. But it is not relative to the dollar alone that the rupee has…

Ayushman Bharat Prabhat Patnaik

The fraudulence of the claim made by the Modi government with regard to the “Ayushman Bharat” scheme launched recently surpasses all its previous efforts. This is hardly surprising for a government for which what matters is not what it actually does but how it creates perceptions about what it is doing. The Ayushman Bharat scheme consists of two separate parts. One is the creation of 150000 “Health and Wellness Centres” which are simply the old primary health centres given a new fancy name, and for each of which the 2018-19 Union budget allocates a mere Rs.80000. This obviously cannot even…

The Fall Of The Rupee Prabhat Patnaik

The rupee’s current tendency to fall is hardly surprising. India’s growth experience, unlike China’s, was built on the quicksand of a more or less persistent trade and current account deficit on the balance of payments. But there was always enough financial inflow not just to cover the current account deficit but even to add to our foreign exchange reserves. Initially this inflow was stimulated by the sheer fact of the economy’s being opened up to such flows: wealth-holders abroad got a chance to diversify their portfolios by buying into hitherto- unavailable Indian assets. Later, the higher interest rates in India…