Archive for June 11th, 2012

India might be first BRIC to lose investment rating

June 11, 2012

There is lately a lot of focus on BRIC club. And within BRIC on India.

  • Jim O Neil, its creator feels time not yet over for BRIC but thinks India the most disappointing..
  • Ruchir Sharma feels BRIC was just a clever marketing construct. Has recently added, pre 2003 of 5-6% growth will be the new normal for India
  • Finally the latest is S&P warns India could be the first BRIC to lose its investment rating.

India had all the factors to become  the most impressive member of of the  BRIC Club – demographics, diverse economy, very large market, top Indian companies etc.

However, since 2011-12  India has turned out to be the most disappointing story.

Raghu Rajan in this  article tries to connect the dots:

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The Inevitability of Shadowy Banking

June 11, 2012

Edward Kane of Boston College writes this nice paper. He shows how this whole world of shadow banking is likely to continue minus proper financial regulation.

He goes further and renames Shadow banking as Shadowy banking. It includes other activities as well:

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Questions about Income Inequality

June 11, 2012

IMF’s latest research bulletin deals with 7 Qs on inequality.

Qs are answered by Laura Feiveson.

She points to graphs showing whether income inequality has risen from mid-1980s to mid-2000s. You see both European and Anglo Saxon economies there. So you see inequality has risen in Finland, Israel, Italy, USA, Norway, UK etc. It has declined in Greece (surprise), Spain (another surprise), Ireland etc. Interesting examples there..

There is also an interesting graphs showing gini coefficient pre and post taxes and transfers. This is important as taxes and transfers help reallocate the wealth created. So if you see countries like Norway and Sweden which show rise in inequality in 2000s have a much lower inequality post taxes/transfers. Where as in US, Israel and Portugal inequality remains high both pre and post tax/transfer calculations…

Why the rise in inequality?

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