A Market gone awry C. P. Chandrasekhar and Jayati Ghosh
It defies all logic. As expected, once the implications of the Covid-19 contagion began to be absorbed, the BSE Sensex lost 37 per cent in value, falling from a level just above 41,000 on February 19, 2020, to just below 26,000 on 23 March 2000 (Chart 1). That was the day when the nationwide lockdown was declared and three days before the first of the government’s stimulus packages was unveiled. The lockdown triggered the severe contraction that overwhelmed the economy over the next two quarters. Yet, starting March 23, the Sensex got off its trajectory of decline, and set itself…
Changing the Speculative Game C. P. Chandrasekhar
January proved to be an unusual month in the US equity market. The shares of GameStop, a brick-and-mortar retailer of gaming consoles and video games, had in the course of that month risen by close to 2000 per cent. The price of the share rose from around $5 in August 2020 to $350 in late January 2021, with much of the rise occurring towards the end of that period. Besides the fact that no set of fundamentals can justify that rise, this was intriguing because of the recent record of the company. GameStop shares had been losing value for a…
Hype in the Midst of a Crisis C. P. Chandrasekhar
In an attempt to persuade listeners into believing that Budget 2021 will complete the conquest of disease and unleash an era of post-Covid expansion, Finance Minister Nirmala Sitharaman placed special emphasis in her budget speech on two sets of initiatives. The first was a claim that the budget marks a new beginning for the Indian state’s engagement with peoples’ health, riding on an unprecedented 137 per cent hike in allocations for the health sector, from a mere Rs 94,452 crore allocated in Budget 2020-21 to Rs 2,23,846 crore in Budget 2021-22. And the second was a declaration that, rising above…
Carrying over Fiscal Conservatism: On union budget 2021 C. P. Chandrasekhar
Buised by the COVID-19 pandemic, Indians, like their counterparts elsewhere in the world, are looking for renewal. So, even granting that an annual budget is not a corrective for all ills, evidence of a change in course was expected in Budget 2021. Change also seemed possible. With the worst of COVID-19 and the lockdown-triggered contraction behind it, the government could intensify efforts to not just accelerate recovery but also turn its attention to the neglected health sector and redress the damage inflicted on the poor by the novel coronavirus pandemic. Conflicting signals Official signals were, however, conflicting. Coming at the…
Budget 2021 appears to be a Return to Business as Usual C. P. Chandrasekhar
Budget presentations have turned tiresome for some years now, and for many reasons. Their length, which tends to be way beyond that warranted by substance. The tendency to drone on about off-budget policy initiatives in Part A, most of which tends to be mere hype, while the actual budget in Part B is given cursory attention. The absence of adequate allocations to back budgetary proposals to expand existing schemes or introduce new ones. And, finally, window dressing to claim receipts to finance even limited expenditure increases without upsetting the government’s wholly imaginary fiscal deficit trajectory. Though finance minister Nirmala Sitharaman…
Fussing over a Non-budget C. P. Chandrasekhar
Budgets over the years have become a tiresome spectacle. Much print space and airtime are devoted to the exercise, which on each occasion is presented as an event that would alter the nation’s economic course. Governments and Finance Ministers back that narrative, not least by shrouding the exercise in secrecy till the budget speech is read. But in recent years, with the government adopting measures that erode its own revenues, and having, with the passing of the Fiscal Responsibility and Budget Management Act in 2003, limited its right to borrow, there is not much the budget as an instrument of…
Prepare for a Surge in Global Inequality C.P. Chandrasekhar and Jayati Ghosh
The United States prepares for moving out of the Trump era with the incoming President promising more rounds of stimulus spending to revive an economy ravaged by Covid-19. Other members of the Organisation of Economic Cooperation and Development, a predominantly rich nation’s club, have also been generous with their spending and signalled that they are willing to keep their wallets open to spend more if necessary. The evidence clearly is that the Covid-crisis has upended the fiscal conservatism that has been the hallmark of the neoliberal era since the 1980s. However, not all nations seem to display this ability to…
Misleading Economic Signals C. P. Chandrasekhar
It’s a paradox that has periodically recurred in recent times. Financial indicators are hugely favourable from the point of view of those who benefit from them, even when the performance of the real economy is poor or dismal. In this Covid-afflicted year, that paradox has manifested itself with greater intensity. And with a difference. Even while the real economy remains in contractionary mode, not only have stock market returns exploded, but India’s stock of foreign exchange reserves, considered a measure of the country’s economic health from Independence to the balance of payments of crisis of 1991, have registered record-breaking increases.…
Little value from Global Chains C. P. Chandrasekhar
On December 12, in an outburst of suppressed anger, workers employed at a factory assembling iPhones in Narasapura near Bengaluru ransacked its premises and damaged parked vehicles. The facility is a unit of Wistron, a Taiwanese vendor engaged in assembly of Apple iPhones, that had begun commercial operations only recently. This made the worker action surprising to say the least. Workers recently employed in a known foreign-invested firm are not likely to turn against the management in a matter of months. Something was clearly amiss. The initial response of the administration was to arrest the workers involved for criminal violation…
Bilateral Swaps in China’s Global presence C. P. Chandrasekhar and Jayati Ghosh
Discussions of China’s growing global presence normally refer to its large investments overseas and lending by the state-owned China Development Bank and China sponsored multilateral institutions like the Asian Infrastructure Investment Bank and New Development Bank. But there has been a less highlighted instrument that has contributed to China’s growing global influence in developing countries worldwide—bilateral currency swaps between China’s central bank, the People’s Bank of China (PBoC), and the central banks in these countries. These bilateral swap arrangements (BSAs), denominated in RMB and the currency of the relevant partner central bank, allow the latter to access RMB liquidity for…