Archive for the ‘Indian Economy/Financial Markets’ Category

Demographic changes and their macroeconomic ramifications in India

July 16, 2019

Nice short paper in RBI’s Monthly Bulletin of July-2019. It is written by Atri Mukherjee, Priyanka Bajaj and Sarthak Gulati:

This study examines the influence of demographic changes on macroeconomic outcomes in India using generalized method of moments. The estimation results show that population growth and age dependency ratio have inverse relation with the growth in real GDP and
per capita income, and positive relation with inflation. Increase in working age population, on the other hand, contributes to higher economic growth. An aging population is deflationary in nature though improves the current account balance. While the declining age dependency ratio offers a demographic dividend for India, the realisation of the same would require an environment empowering the labour force with right skills and enabling their gainful employment in productive uses.




Corporate Governance in Banks in India: Designing a new benchmark index

July 16, 2019

Rekha Mishra and Anwesha Das of RBI in this new EPW paper:

While several committees have examined and suggested ways to improve corporate governance in banks in India, this study makes an attempt to prepare a benchmark index for the board composition aspect of corporate governance. A comparison between the indices for public sector banks with private sector banks reveals that differences in governance structures cannot be explained fully in terms of ownership only. This is a welcome feature, as with some efforts on the part of the majority shareholder, corporate governance in all the banks can be brought on par with the best-performing bank, by ensuring greater compliance with corporate governance benchmarks.

50 years of Bank Nationalisaton: Why Indira Gandhi Nationalised India’s Banks

July 12, 2019

It was 50 years ago on July 19, 1969 that then PM Indira Gandhi nationalised 14 of the largest private sector banks.

Bloomberg Quint is doing a series on 50 years of bank nationalisation. Mr DN Ghosh, one of the main persons who wrote the nationalisation legislation wrote the first piece saying: Bank Nationalisation the original sin?

In the second article,  yours truly explores the political economy of several factors which led to nationalisation.


SEBI employees oppose government’s involvement in its finances

July 10, 2019

I wrote about how the Budget has proposed that SEBI should transfer 75% of its surplus each year to the Government.

Hindu Business Line reports that SEBI’s employees are opposing the move:

SEBI employees are up in the arms against Finance Minister Nirmala Sitharaman. In a strongly worded letter to FM, the association of SEBI employees have opposed a proposal in the Budget that seeks to transfer 75 per cent of the regulator’s surplus funds to government coffers by terming it as additional tax on market participants.

Also, the letter calls FM’s proposal to subject Securities and Exchange Board of India (SEBI) to seek government approval for its annual expenditure as regressive. BusinessLine has the copy of the letter.


SEBI’s transfer of surplus to government raises more questions than answers

July 9, 2019

My new article in Moneycontrol.

I had pointed earlier that the SEBI is being asked by the government to transfer its surplus to latter.

Apparently, the Government has gone ahead with the proposal in the recent Budget. The article discusses this new proposal.

It has proposed an amendment in SEBI Act (1992) in the Finance Bill under which SEBI will now transfer 75% of its surplus to the Government. In a way this is not new, as SEC also transfers funds to the government.

Based on SEBI’s numbers, the transfer amount is too small and may not matter. But that is not the point. Ideally, government should have discussed this in the speech or bring to notice in some other way. It is buried in fineprint of Finance Bill which is again a case of using Money Bill for important policy changes.

The move opens up familiar questions which we ask when such actions are taken in case of central bank.

Much more in the piece.

Budget has lived its life, and deserves rebirth

July 9, 2019

Ashok Desai, former Chief Economic Advisor in this article says we need to revamp the budget and give it a new life.

It has stopped being a budget and more about just pleasing the Parliamentarians….

Dubai airports allow using Indian Rupee: History revisits itself..

July 9, 2019

It is interesting to get such stories:

The Indian Rupee will now be accepted for transaction at all airports in Dubai, according to a leading newspaper in the United Arab Emirates.

The acceptance of Indian currency is good news for tourists from that country as earlier they lost a sizeable amount due to exchange rates, sources said.

As per a report in the Gulf News, the Indian currency is now acceptable at all three terminals of Dubai International Airportand at Al Maktoum Airport. “Yes, we have started accepting the Indian rupee,” a Dubai duty free staff told the newspaper.

Nearly 90 million passengers passed through Dubai aiports last year, 12.2 million were Indians, the report quoted. Indian travellers had to earlier convert the rupee into Dollar, Dirham or Euro before they could shop at Dubai’s duty free shops.

The Indian rupee is the 16th currency to be accepted for transaction at Dubai Duty-Free since its opening in December 1983, said the report.

Obviously, it is fashionable to call any such thing as a first time. We forget that there is a long history of Indian Rupee being widely accepted in the region:


Did Shanmukham Chetty, India’s first FM, meddle with tax investigations?

July 8, 2019

Interesting bit of history (lost though) on Madras Courier. How and why Shanmukham Chetty was appointed as the first FM despite not the first choice. There were pending tax investigations against top corporates and it was felt the first choice John Mathai might not be willing to drop names against some Gujarat based firms. What followed was the usual political economy of all such appointments.

We barely move beyond naming India’s First Finance Minister (James Wilson) and First Finance Minister of Independent India (Shanmukham Chettty). We need much more than hust a little bit of trivia here and there and encourage biographies of these guys…

What budget means for NBFC and Banking sector

July 6, 2019

My piece on Moneycontrol.

I list and explain the measures the Budget has taken to strengthen the NBFC and banking sector.

Why crisis in Syria forced Catholic Syrian bank to change its name

July 5, 2019

What is in a name? Lot, ask Banks (read my earlier article on how bank names have changed in India with time)

Shenoy Karun reports in Times of India how people linked Catholic Syrian Bank to Syria. It has Kerala customers who send remittances from abroad to their relatives. The moment foreign banks see Syria, they would raise concerns. Exporters and Importers also suffered as Letters of Credit were not given.

This has led the bank to change its name from Catholic Syrian Bank to its acronym CSB.

The bank was named Catholic Syrian Bank as it started to cater to the Catholic Syrian community. The bank has grown ever since and does not represent the community alone. But interestingly, it ended up changing its name for its connections to Syria..

India $5 trillion-economy goal (reminds of BRIC report)

July 5, 2019

Suddenly, there is lot of talk about making India a $5 trillion economy. The focus of Economic Survey 2018-19 was around this theme.

Here is a Mint piece which says why this goal is a dangerous distraction. First, most people do not understand what 5 triliion means. Second, it is a much better idea to say you wish to improve lives of people.

a bevy of economists and analysts have started a “debate” on how best to achieve this target. Unfortunately, this is, in our judgement, an entirely misguided and problematic exercise.

The crux is this: The IMF’s projection and Modi’s goal for GDP is stated in terms of nominal US dollars. In other words, the size of India’s economy as measured by the value of the dollar that will prevail in 2024. While statistically valid, this is an economically meaningless construct, at three removes from what average Indians care about—real rupee GDP per capita. Ask: In 2024, will an ordinary middle-class Indian be revelling in the fact that his country’s economy is worth close to $5 trillion, or will he be asking what is the purchasing power of his own income in rupees? Clearly, the latter affects his and his family’s life prospects, not the former.

So, who gains from a $5 trillion economy? Evidently, large Indian multinational firms, or high net-worth individuals looking to invest abroad, or deep-pocketed foreigners looking to invest in India may benefit from India’s larger aggregate dollar footprint. None of this is of any concern to the well-being of the average Indian.

Not sure about the last para. If India becomes $ 5 trllion, people will benefit though the gains will be unequal.

Then they point how GDP calculations are problematic while looking at Dollar values.

In a way, the $ 5 trillion target reminds one of Goldman Sachs’ BRICS report released in early 2000s. The report argued how the BRIC economies (Brazil, Russia, India and China) will become leading economies of the world in terms of aggregate GDP. However, it one saw per capita GDP, the BRIC lagged way behind the developed world.

The report’s forecast obviously lost its way post-2008 crisis. Brazil and Russia ran into all kinds of political and governance problems. China after recovering from the 2008 crisis is seeing slowdown and a potential financial crisis. India is the loner here which has muddled its way out of the several crises though the brewing banking and non-banking crisis is testing the potential.

A better goal would be in terms of per capita and that too in national currency (in Rupees here) as people understand it much better.

When policymakers look at sky for clues: India’s “blue skies” vs World’s “no clear skies”..

July 5, 2019

The economic policymakers are increasingly looking up to the sky for guiding economic policy.

The Economic Survey for 2018-19 was all around the colour blue. The Survey points to Blue Sky thinking and even kept the colour of the survey as blue. The Preface explains:


Rest in Peace: Mr. B.K. Birla, doyen of Birla empire

July 4, 2019

Mr. Basant Kumar Birla of Birla group passed away. He was 98 years old.

The name of Birla (along with Tata) is synonymous with Business history of India. BK was youngest son of GD Birla, who set up the Birla empire. The Birla empire was subsequently broken up into several Birla groups due to fights and factions. Some of them are doing badly. Though, Aditya Birla group continues to remain relevant despite all these years.

Rest in Peace Sir.

Before Thaler and Economic Survey, there was TMA Pai/Syndicate Bank

July 4, 2019

In the Economic Survey 2018-19 tabled today, there is a chapter on how Indian government is using behavioral economics/nudging to improve public policy.

Replugging (yet again) an old piece to show how How Dr T.M.A Pai nudged many decades before via Syndicate Bank, the bank he owed and developed over the years. Dr. Pai designed a savings product named Pigmy Deposits in 1928 which was nudged people into savings. It was based on similar principles developed much later by Prof Richard Thaler in 1990s.

The Economic Survey chapter discusses savings products designed elsewhere which resemble today’s Pigmy deposits but miss including Pigmy deposits in the list.

Is Delhi lobby stalling the airport in Agra?

July 1, 2019

It is never clear why Agra does not have a functional airport yet.

One hears the role of Delhi lobby as the main reason. A story in ET talks about obstacles surrounding the airport.

125 years of Punjab National Bank!

June 28, 2019

Missed this anniversary and important milestone for any organisation particularly a bank.

Punjab National bank was found on May 19, 1894 and opened for business on  April 12, 1895.


Indian public refusing certain coins as legal tender: Demonetisation fears keep lurking..

June 27, 2019

I recently learnt that people are not accepting certain coins of Rs 10 denominations.

RBI released yet another circular saying all coins are legal tender (see previous appeals as well):


Recent Trends in the Business History of India

June 26, 2019

Prof Chinmay Tumbe of IIMA writes this nice encouraging short paper on Indian business history:

The past decade has seen a resurgence of interest in understanding Indian business history. A number of business history books have been published in the academic and nonacademic press. Special issues on India have appeared in leading field journals, more management schools in India and outside are engaging with the field, internship and fellowship opportunities have been initiated, and business archives have sprung up. This article documents these recent trends, examines the emerging scholarship, and identifies gaps that need to be addressed in the future.

A lot of this recent initiative has come from the author himself!

N.R. Pillai: the ICS who was appointed to succeed RBI Governor Rama Rau, but did not take up the office!

June 25, 2019

Buried in the RBI’s History ( Second Volume 1951-67, pg 710,) is this interesting trivia as a footnote:

K.G. Ambegaokar, who was Governor for a few weeks between Rama Rau’s exit  and Iengar’s coming to the Bank, also belonged to the Indian Civil Service. So did N.R. Pillai, who was appointed to succeed Rama Rau, but did not take up the office.

Fascinating. Have not seen anything written on this episode and RBI history also does not discuss anything barring this footnote. Did he not take up the position seeing what happened to Rama Rau or something else? Also, not sure how many others turned down RBI Governorship offer.

NR Pillai’s wiki profile is here. Appinted ICS in 1922, he was the first cabinet secretary of independent India.



List and Professions of RBI Deputy Governors (1935-present)

June 24, 2019

The list of RBI DGs and their Professions is as follows:


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