Archive for February 20th, 2018

Chit funds to be called as Fraternity funds..

February 20, 2018

The Cabinet recently approved a new bill to ban Unregulated Deposit Schemes and amend Chit Funds Act 1982. The Chit Funds Act is here.

So what does the amendment propose?


Where and why Central Banks choose to keep their gold reserves? Sweden edition..

February 20, 2018

Came across this press release from Riksbank (Sweden’s central bank).


Prof. Mahalanobis and Soviet influence

February 20, 2018

David C Engerman of Brandeis University writes in EPW:

Prasanta Chandra Mahalanobis has long been accused of maintaining close ties with the Soviet Union. However, his communist links are mostly asserted without documentary evidence. Using new archival material, especially from the archives of Soviet institutions, this article discusses Mahalanobis’s desire for Indo–Soviet ties, especially in the economic realm, as well as the Soviet response to such alliances. 

 What is interesting to note is how Soviets tried to distance themselves from the Mahalonobis plans:

Western, and especially American, observers nervously watched these growing connections which bolstered their view of Mahalanobis as the eminence grise—perhaps the eminence rouge—of Indian economic policy. Starting in the early 1950s, United States (US) State Department records amassed an impressive catalogue of Mahalanobis’s supposed political trespasses: he was “extremely sympathetic to Communist Doctrine,” “far along the road to Communist theory,” “emotionally and intellectually very close to Moscow,” and hewed close to the Soviet line on matters both economic and political.17

Yet, for all the opponents Mahalanobis managed to attract, and for the criticism that he faced at home and in Washington, Soviet officials remained wary. Even as the Soviet Academy of Sciences agreed to send a delegation to consult with the ISI for formulating the Second Five Year Plan in 1955, Soviet bureaucrats issued clear warnings. “The task of Soviet economists,” Central Committee apparatchiks demanded, “should be limited to consultations, [and to] communicating our experience. We should not take responsibility for the formulation of a perspective ‘plan’ or become official advisors and experts working out this ‘plan.’” This order suggests a real determination to distance visiting Soviet economists from Mahalanobis’s activities in shaping the Second Plan.18 They likewise expressed their doubts about working with Mahalanobis; for all of his Soviet enthusiasms, one Soviet report noted, Mahalanobis exhibited “bourgeois limitations” in his “approach to socio-economic problems.”19

By the 1960s, as the Soviet economy slowed down and the excitement of India’s Second Five-Year Plan (1956–61) gave way to a troubled Third Plan (1961–66), Soviet observers evinced even more concerns about Indian planning, highlighting the differences between the Soviet version and what was happening in India. Purists in the Academy of Sciences denounced Indian planning as a crutch keeping Indian capitalism alive; others distanced themselves from the Indian Planning Commission by employing phrases like “so-called planning” (Clarkson 1978: 72–74; Lozovaia 1966: 104). Soviet observers, in sum, recognised that Mahalanobis’s aspirations (and his claims of Soviet inspiration) did not in and of themselves create central planning along Soviet lines; later on, it would come to be termed as the “administrative-command economy.”

Thus, even as Mahalanobis sought closer economic ties with the Soviet Union, his entreaties fell upon sceptical ears. While Soviet officials hoped to use Mahalanobis to expand their influence in Indian intellectual life, and expressed guarded hopes for Indian economic policy, they steered clear of any deeper connection with Mahalanobis. Their reasoning may have had as much to do with Mahalalanobis’s personality as his economic ideas or his politics; one official at the Soviet Academy of Sciences praised The Professor’s intellect but cast doubt on his motives: “Mahalanobis gave the impression of a very intelligent and cunning (khitrogo) person, his external frankness and good nature hiding his true intentions.”20

Energetic and ambitious, Mahalanobis sought Soviet support of all kinds to promote his vision of rapid industrialisation and central planning, willing to provoke fierce denunciations along the way. His fervent efforts, however, prompted a cautious Soviet response, both in the policy realm and in their dealings with him at a personal level. Ultimately, then, the more Mahalanobis invoked the Soviet Union (and provoked his critics), the less likely he was to win lasting Soviet support.


The History: This Is not The Punjab National Bank of pre-partition India

February 20, 2018

I so wish had written this piece. The founder of both the banks, Bank of Baroda and Punjab National Bank must be feeling miserable in their heavenly abodes.

This piece in Outlook goes to history of PNB (PNB’s website has some bit as well) and how it came from Pakistan to India (see this more general piece).  How the bank was a pride of Punjabis for much of its initial history:


India’s elite institutions are facing a credibility crisis

February 20, 2018

Milan Vaishnav has a worrying piece:


European Central Bank members have a fixed, non-renewable contract..

February 20, 2018

European Council nominated Luis de Guindos (of Spain) as the vice-chairman of ECB.

The press release said:

The Eurogroup today gave its support to the candidacy of Luis de Guindos for the position of Vice President of the European Central Bank (ECB).

The recommendation to the European Council, composed of the heads of state and government, should be formally adopted by the Council on 20 February. On this basis, the European Council will request opinions from both the European Parliament and the Governing Council of the ECB. It is then expected to adopt its final decision at its meeting of 22-23 March.

The new Vice President will replace Vítor Constâncio as of 1 June 2018. He will serve a non-renewable 8-year term.

Interesting to note that there is a fixed non-renewable term. Not sure how many central banks have this arrangement. This ensures there are no political favors are sought to get reappointed. But still the problems of them joining the private sector, post their retirement remains.

ECB Act says all members to get similar term:

The Executive Board comprises the President, the Vice-President and four other members. They are appointed by the European Council by qualified majority on a recommendation from the Council after it has consulted the European Parliament and the Governing Council. The members’ term of office is eight years and is not renewable (Article 283(2) TFEU and Articles 11.1 and 11.2 of the ECB Statute). 

RBI’s Act on the other hand allows renewal of contract across positions:

8. Composition of the Central Board, and term of office of Directors.
(4) The Governor and a Deputy Governor shall hold office for such term not exceeding five years as the 5[Central Government] may fix when appointing them, and shall be eligible for re-appointment.

[A Director nominated under clause (c) of sub-section (1) shall  hold office for a period of four years and [shall be eligible for reappointment:

Provided that any such Director shall not be appointed for more than two terms, that is, for a maximum period of eight years either continuously or intermittently.]

7) A retiring Director shall be eligible for re-nomination.]

[9. Local Boards, their constitution and functions.
[(3) Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment.]

Provided that any such Director shall not be appointed for more than two terms, that is, for a maximum period of eight years either continuously or intermittently.

(1) Not less than two auditors shall be appointed, and their remuneration fixed, by the Central Government.
(2) The auditors shall hold office for such term not exceeding one year as the Central Government may fix while appointing them, and shall be eligible for re-ppointment.

Only in case of MPC members the contract is non-renewable:

45ZD. Terms and conditions of appointment of Members of Monetary Policy Committee.
(1) The Members of the Monetary Policy Committee appointed under clause (d) of subsection
(2) of section 45ZB shall hold office for a period of four years and shall not be eligible for re-appointment.

Need to figure the terms of appointments for other central banks too…

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