The real confusion over MSP C.P. Chandrasekhar

Speaking at the Krishi Unnati Mela 2018, Prime Minister Modi reportedly complained that confusion is being spread about the announcement on minimum support prices (MSPs) made in the Finance Minister’s 2018 budget speech. The speech had assured farmers that they would in future be able to sell the output of notified crops to the official procurement agencies at prices to be set at a minimum of 1.5 times the cost of production. The confusion being created according to the Prime Minister relates to how costs of production would be calculated. In an attempt to clarify, he stated that beside costs…

State or Market? : India’s telecom wars C.P. Chandrasekhar

As the shakeout in the Indian mobile telephony market continues, price wars are being complemented by verbal wars. The most recent spat involves the Telecom Regulatory Authority of India as well. Its latest revised tariff order has been attacked by Airtel and Vodafone (and by the Cellular Operators Association of India, or COAI) for favouring Reliance Jio, the aggressive new entrant that is seeking to get ahead of the other two, in what is clearly becoming a three-horse race in the industry. The “split” within the COAI, with long-time members and a new entrant on opposite sides, is indicative of…

Market Fever and its Aftermath C. P. Chandrasekhar and Jayati Ghosh

Globally, equity and bond markets are turning bearish. Analysts seem to be unanimous in their explanation: the era of cheap and abundant money, that was leveraged for investments in capital markets, is over. Governments and central banks are tiring of the long spell over which, having abandoned the initial post-crisis fiscal stimulus, they have resorted to interest rate cuts and infusion of liquidity (through ‘quantitative easing) to drive a depressed economy to recovery. One consequence of the resulting environment of cheap and abundant liquidity was that versions of the carry trade flourished. Investors borrowed money cheap and invested in asset…

When Business Turns ‘Easy’ C.P. Chandrasekhar

Its once again a time for exposés of big ticket scams. The headline hogger currently is the alleged huge Rs. 11,400 crore ‘scam’ unearthed in transactions through the Punjab National Bank (PNB) involving diamond merchants Nirav Modi and Mehul Choksi. That this is not an isolated occurrence is established by news of another Rs. 3,700 crore alleged fraud involving Vikram Kothari of Rotomac Pens being reported almost simultaneously. The full details of the possible fraud in either of these cases is yet to emerge. But underlying them is the suspicion that loans or guarantees of huge magnitudes were offered to…

Budget 2018-19: No money where the mouth is C.P. Chandrasekhar

Billed as the last full budget of this second NDA government, Budget 2018 was not expected to surprise. The leadership of that government may be pleased with having played, during its nearly 4-year tenure, with programmes varying from “Make in India” to Swach Bharat Abhiyan, experimented with demonetisation, and launched the Goods and Services tax regime. But while none of these immediately benefited the “common man”, some of them like demonetisation hit the vulnerable, and the GST disrupted production and damaged the operations of the micro, small and medium enterprises (MSMEs). There was also evidence that agriculture had been neglected…

The Aging of a Growth Engine C.P. Chandrasekhar and Jayati Ghosh

With the dollar value of exports declining, India’s software sector faces a historical crisis which may worsen, given the protectionist trends in the US and other uncertainties. Aging_Growth_Engine  (Download the full text in PDF format) (This article was originally published in the Business Line on February 13, 2018)

The Financialization of Finance? Demonetization and the Dubious Push to Cashlessness in India C.P. Chandrasekhar and Jayati Ghosh

This Debate contribution describes the promotion of digital rather than cash payments as a form of the financialization of finance, in its role as a payments system, with reference to recent Indian experience. The obsession with digital transactions as a marker of social and material progress is misplaced; it may become yet another means by which finance extracts rentier incomes out of relatively poor populations. Financialisation_Finance (Download the full text in PDF format) (This article was originally posted in the Wiley Online Library)

Window Dressing Budgetary Figures C.P. Chandrasekhar

The tendency of the current government to misinform and conceal is well known. Yet its periodic resort to such practices does not fail to surprise. The most recent example is the decision to sell its shareholding in Hindustan Petroleum Corporation Limited (HPCL) to the Oil and Natural Gas Commission (ONGC), which it owns, ostensibly to strengthen the latter. The decision comes at a time when low oil prices have hurt the ONGC. Yet, the ONGC board has cleared the proposal to buy 778,845,375 equity shares in HPCL for cash at a price of Rs. 473.97 per share. This acquisition of…

Public Banks: Dressing up for the market C. P. Chandrasekhar

When the government presented its third supplementary demand for grants to the winter session of parliament, the list of expenditures included Rs. 80,000 crore for a first tranche investment in equity of the public sector banks to recapitalize them. This was a clear declaration that the government intended to go through with its plan to provide as much Rs. 1.35 lakh crore from its budget to recapitalize banks that are recording losses, as they recognize and provide for non-performing assets accumulated substantially from debt provided to a few large corporates. The recapitalisation plan announced in October 2017 promises to infuse…

The other face of Private Banking C.P. Chandrasekhar and Jayati Ghosh

Private banks, especially foreign ones have relied on off-balance sheet liabilities to earn revenues and profits, courting risk and leaving the business of banking proper largely to the public sector banks. Other_Face_Private_Banking  (Download the full text in PDF format) (This article was originally published in the Business Line on January 15, 2018)