Archive for February 11th, 2019

History and evolution of RBI’s different reserves

February 11, 2019

The question of Government demanding part of RBI Reserves was again one of the main questions in Fev-2018 policy.

However, when you look at RBI balance sheet, you see many types of reserves:

  • Reserve Fund
  • Other Reserves
    • This includes National Industrial Credit (Long Term Operations) Fund and National Housing Credit (Long Term Operations) Fund.
    • a) National Industrial Credit (Long Term Operations) Fund
    • b) National Housing Credit (Long Term Operations) Fund
  • Other Liabilities and Provisions
    • Contingency Fund
    • Asset Development Fund (ADF)
    • Currency and Gold Revaluation Account (CGRA)
    • Investment Revaluation Account (IRA) – Rupee Securities
    • Investment Revaluation Account (IRA) – Foreign Securities
    • Foreign Exchange Forward Contracts Valuation Account (FCVA)
    • Provision for Forward Contracts Valuation Account (PFCVA)

What is the origin of these reserves and what do they mean? My article in moneycontrol explains the history and evolution of these reserves.

Why India needs an independent fiscal council?

February 11, 2019

Pramit Bhattacharya of MInt argues for an independent fiscal council in India.

More interestingly, he points to this study which shows how interim budgets since 1991 (barring 2014 one) underestimate deficits and overestimate revenues:

Historically, interim budgets in India have consistently overestimated revenue growth and underestimated expenditure growth. An analysis of the projected, revised, and actual budget figures since 1991 by Deepa Vaidya and K. Kangasabapathy of the EPW Research Foundation showed that deviations from budget estimates tend to be extraordinarily high for budget estimates presented in interim budgets .

With the exception of the 2014 interim budget presented by P. Chidambaram, these estimates undergo sharp revisions in the next budget (when revised estimates are presented) and the deviation from budget estimates persists in the actual (and final) figures.

Hmm..This time is never really different when it comes to interim budgets…

 

Interview of PC Mohanan member National Statistics Commission: On Controversies around India’s unemployment data..

February 11, 2019

PC Mohanan gives a no holds barred interview on Indian unemployment report and many other things:

India’s statistics minister Sadananda Gowda told Parliament last week that reports of the unemployment rate touching 6.1% in the NSSO survey is fake. Having headed the survey, how do you react?

I personally cannot agree. The NITI Aayog (a government think tank) was the first to say that it’s a draft report. Once I approve it, how is it a draft report? The NITI Aayog CEO (Amitabh Kant) gave some reason why this is not comparable, which is also misleading. When we approve a report, I am not going to give a figure which is not comparable with the other ones. Second, the concept of employment and unemployment are universally accepted. International Labour Organization prescribes the standards, we all follow it.

The government also keeps talking about collecting and processing the quarterly data from July to December 2018. Do you expect this to be much different from the annual survey’s findings?

I don’t expect much variation between the annual data and the quarterly data. All Western countries produce quarterly employment data. We have quarterly data on GDP, but no employment data. So, under a new system, we thought we will make an attempt to produce quarterly employment data. But in rural areas, quarter-to-quarter changes will hardly be any. So we thought, let’s try for the urban area at first. It is kind of a trial, for one or two years we will see. The annual reports are based on a first visit, the quarterly will depend on the second or third visit. They are two different surveys—in the sense that the quarterly reports you are readying are only for urban areas, whereas this 2017-18 NSSO survey is rural plus urban. In India, you don’t expect too many changes in annual employment from the quarter. Here we don’t give people unemployment allowance or security. And many of the people employed are in the government sector. So, quarter to quarter changes may not be that much and the annual data will have no relation with the quarterly.

He shares some wisdom on unemployment numbers. It is not as bad as we think:

(more…)

Charting a course for the Financial Stability Board

February 11, 2019

Randal Quarles, Vice Chairman for Supervision at Federal Reserve gives a useful speech:

Let me begin with the principle of engagement, and let me lay the groundwork for this discussion by reviewing the way the FSB was established and its mandate, to see how we can continue to fulfill that mandate going forward. As we all know, the FSB was born out of the crucible of the 2007-09 Global Financial Crisis–a crisis that demonstrated in the starkest possible way the importance of global financial stability to the well-being of families and businesses around the world. In the months following the peak of the crisis, the world was struggling with financial market turmoil, and the resultant macroeconomic effects were felt by people everywhere around the world. It was clear that the response to this crisis needed to be global, and the G7 and G10, without any emerging market representation, were not the right bodies to organize a global response.

As such, the Heads of State and Government of the G20 called for the Financial Stability Forum (FSF), a relatively small and unmuscular group, to expand its membership and to strengthen its institutional framework. The result was the Financial Stability Board, which was designed as a mechanism for national authorities, global standards-setting bodies, and international authorities to identify and address vulnerabilities in the global financial system and to develop stronger regulatory and supervisory policies to create a more resilient global financial system. This new group is more representative of the interconnected global economy and financial system and can more effectively mobilize to promote global financial stability than anything that existed before. Whereas the FSF included only 11 jurisdictions (all of which were advanced economies), the FSB includes 24 jurisdictions and 73 representatives, which include all the members of the G20 and of which 10 are emerging market economies.

In fostering global financial stability, the actions of the FSB have the potential to affect the global economy and financial system in important ways. Success in promoting global financial stability should benefit everybody, through more sustainable and stronger economic growth. At the same time, financial stability policy will also affect institutions and markets beyond the FSB’s membership. Recognizing the wide-reaching effects of its work, the FSB must seek input from a broad range of stakeholders, each of whom brings a different perspective to the issues under consideration. While we are directly accountable to the G20, we are, through the G20, accountable to all of the people affected by our actions. In my view, that means we must engage in genuine, substantial dialogue with all of these stakeholders, to a greater and more effective degree than we have in the past.

He is also the chair of FSB now.

Narratives about Technology-Induced Job Degradations: Then and Now

February 11, 2019

Prof Robert Shiller is making this whole idea of building narratives in economics as an important thing.

In his new paper, he writes on how people have reacted to technology impacting their work over the years:

Concerns that technological progress degrades job opportunities have been expressed over much of the last two centuries by both professional economists and the general public. These concerns  can be seen in narratives both in scholarly publications and in the news media. Part of the expressed concern about jobs has been about the potential for increased economic inequality. But another part of the concern has been about a perceived decline in job quality in terms of its effects on monotony vs creativity of work, individual sense of identity, power to act independently, and meaning of life.

Public policy should take account of both of these concerns, inequality and job quality.

Superb bit.

Why narratives?

(more…)


%d bloggers like this: