Archive for the ‘Indian Economy/Financial Markets’ Category

Conversation with Dr. Nachiket Mor: Do we need a new approach to health systems design in India?

June 18, 2020

Ahmedabad University’s Conversation Series next event is on 20th Jun 2020.

The topic this time is public health and speaker is Dr. Nachiket Mor. He will be in conversation with Prof Darshini of Ahmedabad University. Those Interested could register here.  I request to pass on the word to interested folks.

India’s first climate change assessment report

June 18, 2020

Ministry of Earth Sciences released its “first-ever climate change assessment report for India”: Assessment of Climate Change over the Indian Region.

This open access book discusses the impact of human-induced global climate change on the Indian subcontinent and regional monsoon, the adjoining Indian Ocean and the Himalayas. It also examines the regional climate change projections based on the climate models used by the IPCC Fifth Assessment Report (AR5) and national climate change modeling studies using the IITM Earth System Model (ESM) and CORDEX South Asia datasets.
The IPCC assessment reports, published every 6–7 years, provide important reference material for major policy decisions on climate change, adaptation, and mitigation. While the IPCC assessment reports largely provide a global perspective on climate change, they offer limited information on the regional aspects of climate change.
Regional climate change effects over the Indian subcontinent, especially relating to the Indian monsoon, are unique to the region, and in particular, the climate in this region is shaped by the Himalayas, Western Ghats, the Tibetan Plateau, the Indian Ocean, Arabian Sea, and Bay of Bengal. Climatic variations in this region are influenced by (a) regional-scale interactions between the atmosphere, ocean, land surface, cryosphere and biosphere on different time scales, (b) remote effects from natural phenomena such as the El Nino / Southern Oscillation, North Atlantic Oscillation, Indian Ocean Dipole, and Madden Julian Oscillation, and (c) human-induced climate change.
This book presents policy-relevant information based on robust scientific analysis and assessments of the observed and projected future climate change over the Indian region.
Shailendra Yashwant Senior adviser, Climate Action Network South Asia (CANSA) reviews the report in Moneycontrol:
new report by the Government of India reveals that local climate change is influenced not only by the increase in greenhouse gases but also by the increase in air pollution and the local changes in the land-use pattern. The report goes on to warn that the rapid changes in India’s climate will place increasing stress on the country’s natural ecosystems, agricultural output, and fresh water resources, while also causing escalating damage to infrastructure and economy.
India needs to wake up seriously to the challenges of climate change. This has to be addressed and fought on war footing.

Podast: How India’s COVID‑19 Jobs Crisis Will Impact Women in the Workforce?

June 18, 2020

Prof Jeemol Unni of Ahmedabad University discusses the topic in this podcast.

India’s Forex Reserves cross USD 500 billion: Long history since 1861

June 17, 2020

On June 5, 2020 India crossed the barrier of USD 500 billion in forex reserves. In Rupee terms it is approx 37.9 lakh crore. This is quite an achievement. Ira Dugal has a fine piece in BQ tracking the journey from 1991 onwards when it was USD 5 billion.

There is a long history behind these numbers before 1991 as well.


Rest in Peace: Prof A Vaidyanathan

June 17, 2020

I should have blogged this a few days ago. But there is so much chaos and such news all around.

Prof Vaidyanathan passed away. Nice to see few people paying homage to the great agricultural economist:

Data on history of Indian banking..

June 16, 2020

I had earlier blogged about RBI putting up its annual reports from 1936 onwards.

There is some more stuff available on the website which researchers might have ignored:



India’s first natural gas exchange: what it is, and how it will work

June 16, 2020

Amidst all the crisis, we are still trying to move ahead.

India launched IGX, the first natural gas exchange. Karunjit Singh explains the mechanics in Indian Express:

How will this exchange work?

The IGX is a digital trading platform that will allow buyers and sellers of natural gas to trade both in the spot market and in the forward market for imported natural gas across three hubs —Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.

Imported Liquified Natural Gas (LNG) will be regassified and sold to buyers through the exchange, removing the requirement for buyers and sellers to find each other.

“This will mean that buyers do not have to contact multiple dealers to ensure they find a fair price,” Rajesh Kumar Mediratta, director of IGX, said.

The exchange also allows much shorter contracts – for delivery on the next day, and up to a month – while ordinarily contracts for natural gas supply are as long as six months to a year. This, experts say, will allow buyers and sellers greater flexibility.

Will domestically produced natural gas also be bought and sold on the exchange?

No. The price of domestically produced natural gas is decided by the government. It will not be sold on the gas exchange.

However, following appeals by domestic producers that the prices set by the government are not viable given the cost of exploration and production in India, Petroleum Minister Dharmendra Pradhan has indicated that a new gas policy will include reforms in domestic gas pricing, and will move towards more market-oriented pricing.

IGX officials said that a highly liquid gas exchange, which prices gas fairly may lead to the government stepping away from pricing domestically produced gas.

Such initiatives are great ways to observe how markets are designed. The design of the market plays a crucial role in in its success..

Top 100 economics blogs of 2020

June 16, 2020

Intelligent Economist has released its 2020 list of top 100 blogs.

Welcome, and thank you for joining us for the 5th annual Top Economics Blogs list! We are happy, once again, to introduce you to a freshly updated list of economics blogs for 2020. As always, our winners list provides blogs for many different audiences, ranging from the budding economic enthusiast to the seasoned academic. The list also covers a variety of economics topics, whether it be traditional economic theory or the application of economics to current events and issues. In this meticulously curated list, we’ve condensed the most unique elements of each blog into short descriptions, so that you can see which ones catch your eye.

For 2020, a few newcomers have emerged, while many mainstays from 2019 and years before are present as well. Like previous years, we’ve done our best to capture the blogs which stand out for their quality rather than their popularity. As such, the list is an eclectic group that represents a wide range of tastes and perspectives. Regardless of your school of thought or political affiliation, you can find valuable new content in this list of engaging, high-quality economics blogs.

Blogs Added in 2020:

    • Critical Macro Finance
    • The Demand Side
    • Byte Size Story
    • The one-handed economist
    • the Blog Papers of Dr. Michael Sakbani

Special Mention: Over the past year, two Economics bloggers have retired – Professor Dave Giles of Econometrics Beat and Professor Mark Thoma of Economist’s View.

So, without further ado, here are our top 100 economics blogs for 2020, in no particular order.

It is great to see Mostly Economics continue to be a part of the list.  Thanks to all the visitors and well-wishers of this blog.

75 years of World War II and India’s deficit financing

June 15, 2020

My new piece in Moneycontrol.

The piece analyses how the British Government pushed RBI into financing the WWII.


Preventing run on debt mutual funds in India..

June 11, 2020

Yaswant Bitra, Manish Meena and Anubhav Agarwal of RBI in  this June-2020 MB article reflect on the recent closure of FT India debt mutual funds.

They propose that with rise in AUMs, the share of government securities in the funds should increase.

Vulnerabilities of the open-ended debt mutual fund model in India get accentuated by the shallow secondary corporate debt markets. After the recent
instance of suspension of withdrawal from a specific scheme of an AMC, the Reserve Bank of India had stepped in with a Special Liquidity Facility for Mutual
funds amounting to `50,000 crore to address the possible spillovers to other parts of the financial market and to safeguard financial stability. This
decision has helped to reduce the liquidity stress and restore confidence in the financial markets.

Sound policy frameworks should be supported by credible and effective financial safety nets, reinforced by short-term liquidity support from central banks.
However, any amount of liquidity support cannot address solvency issues, weaknesses in investment design and incentives thereof for fund managers, and
a widespread risk aversion.

Offering Mutual Fund units repayable on demand where the net asset value (NAV) impact is passed through to the investor is akin to offering deposits
repayable on demand as in banks but without the cushion of high quality liquid assets (HQLAs)/ reserve requirements / lender of last resort and hence
amounts to significant regulatory advantage. The issue is particularly relevant for jurisdictions where the investor base is narrow/concentrated and secondary
debt markets are illiquid. 

Given the issues of incentive compatibility through bail-out mechanisms and attendant moral hazard issues brought in by size, there is clearly a
need to balance the growth in AUM with additional liquidity buffers to moderate risk and spillovers. One particular way to address the same may be through
stipulating that the ratio of government securities in incremental holding should increase as the size of a debt scheme increases.

EPW Podcast series

June 11, 2020

EPW has named its podcast series as Research Radio.

There have been 10 episodes so far on wide variety of topics. Podcasts are picking up bigtime as a mode of research dissemination:

RBI’s Annual reports from 1936 onwards available online

June 9, 2020

I am not sure when did this happen!! RBI should have issued a press release informing us.

All the Annual Reports of RBI since 1936 are now available online.

Needless to say, it is a treasure trove. Hope RBI develops something like the FRASER developed by St Louis Fed and puts the several reports, records etc on the platform. It is actually hightime they do it.


The above link takes you to a page which shows latest Annual Report.

So see the panel on the right which has list of years of Annual Report. Click on Archives and you will see the link to 1937-1999.


Pune’s Gokhale Institute of Politics and Economics turns 90!

June 8, 2020

Gokhale Institute of Politics and Economics was established on 1930. and completes 90 years:

Gokhale Institute of Politics and Economics, Pune, established in 1930 by the Servants of India Society, is the oldest research and training institute in Economics in the country. It is dedicated to research into the socio-economic dimensions of the Indian society, and carries forward the legacy of Gopal Krishna Gokhale who founded the Servants of India Society in 1905 with a view to promote education and develop capabilities among Indians for the governance of the nation after it had attained its political independence. The Institute is registered under the Societies Registration Act, 1860, and the Bombay Public Trusts Act, 1950. Over the decades, the Institute has established strong credentials in empirical and analytical research. In recognition of its contribution to higher learning and research in Economics, the Institute was awarded the status of institution Deemed to be University, in 1993.

Many more to come.

Central banking jobs for near future: Climate economists and money futurists

June 8, 2020

My new piece in MC.

The article discusses these two recent announcements, one by Denmark Central Bank and other by RBNZ. Denmark central bank invited application from climate economists (link not available anymore) and RBNZ for a money futurist.

Most central banks will need both these jobs and really soon.  RBI should act and try recruit such profiles right away.

Meanwhile WMA declines to zero!

June 5, 2020

On 26 May 2020, the RBI announced that Government will issue Cash Management Bills worth Rs 80,000 cr on 28 May 2020. Based on this, I believed that the Government has breached the WMA limit of Rs 2 lakh crore.

However, it was not to be. The WSS released today (5-Jun-2020) shows the data for 29-May-2020. The WMA borrowing has declined to zero!


RBI MPC Minutes: One member says Reverse Repo has become the policy rate

June 5, 2020

RBI MPC Member Chetan Ghate in the minutes of the meeting held on May 20 to 22, 2020:

37. Fifth, the reverse repo rate has been cut thrice in succession to 3.35%. The idea behind the asymmetric cuts is to use the LAF corridor as an instrument of monetary policy. For all practical purposes the reverse repo rate is now the effective policy rate. I worry that the current quantum of liquidity will be difficult to unwind when things return back to normal. RBI’s liquidity policy has helped stabilize financial markets, but lender of last resort policies, as is widely recognised, are not useful outside a crisis, and thus should not be viewed as part of normal monetary policy.

Hmm. But aren’t all these policies – liquidity policy, lender of last resort and monetary policy – interconnected?

RBI announces creation of Payments Infrastructure Development Fund

June 5, 2020

RBI has played a much broader role in Indian economy compared to other central banks. Apart from usual one of monetary policy and banking regulation, RBI also has established several monetary and banking. institutions. My earlier BQ piece on the topic.

RBI acts like a social venture capitalist. It establishes these institutions and then gradually sells them without the motive of profit. The purpose is market development, Currently, RBI owns DICGC, Bharatiya Reserve Bank Note Mudran Pvt. Ltd and Reserve Bank Information Technology Pvt. Ltd.

RBI has added a 4th entity to the list: Payments Infrastructure Development Fund

The Reserve Bank announces creation of a Payments Infrastructure Development Fund (PIDF) to encourage acquirers to deploy Points of Sale (PoS) infrastructure (both physical and digital modes) in tier-3 to tier-6 centres and north eastern states.

Over the years, payments ecosystem in the country has evolved with a wide range of options such as bank accounts, mobile phones, cards, etc. To provide further fillip to digitisation of payment systems, it is necessary to give impetus to acceptance infrastructure across the country, more so in underserved areas.

The Reserve Bank will make an initial contribution of ₹250 crores to the PIDF covering half the fund and remaining contribution will be from card issuing banks and card networks operating in the country. The PIDF will also receive recurring contributions to cover operational expenses from card issuing banks and card networks. The Reserve Bank will also contribute to yearly shortfalls, if necessary.

The PIDF will be governed through an Advisory Council and managed and administered by Reserve Bank.


States’ Loss of Fiscal Autonomy in a Centralised Federal System

June 4, 2020

Prof M. Govinda Rao has penned a piece in The IndiaForum:

The response to Covid-19 has brought out the fragility of the Indian federal system. A tendency towards extreme centralisation during the pandemic and the absence of checks and balances to correct this centralisation is a matter of concern. The process of concentration that happens when a country is at war with another comes from a patriotic zeal to empower the government to fight the war. However, the pandemic has to be fought by both the centre and the states as both have stakes in protecting lives and livelihoods­—in fact, the states more so since they are in the forefront. But they do not have the fiscal strength to do so. In such a scenario, the centre is using the states’ distress situation to force them to adopt its economic and institutional agenda.


Social Stock Exchange: Listing of social enterprise and voluntary organizations

June 3, 2020

FM Nirmala Sitharaman had proposed setting up a social stock exchange for enabling social enterprises raise funds.

SEBI had formed a committee to study the proposal. The committee has submitted the report.

Social Stock Exchange is a novel concept in India. The working group had a series of consultation with various stakeholders including voluntary organizations, social enterprises and philanthropic organizations in order to assess the difficulties faced by them in raising funds/ donating funds. Some of the key recommendations are as follows:
    • Non-profit organizations can directly list on SSE through issuance of bonds.
    • A range of funding mechanisms have been recommended including some of the existing mechanisms such as Social Venture Funds (SVFs) under the Alternative Investment Funds. 
    • A new minimum reporting standard has been proposed for organizations which would raise funds under SSE.
    • For- profit social enterprises can also list on SSE with enhanced reporting requirements.
    • To encourage “giving” culture, some tax incentives have also been recommended.

Looks interesting. Should read the report..


New Valueresearch Podcast: Everyday Economics

June 1, 2020

Puja Mehra, author of the book The Lost Decade (2008-18), has started a new podcast on valueresearch named Everyday Economics.

In the second episode, Puja speaks to Ajay Shah on India’s helathcare and public health systems. Ajay differentiates between the two terms – healthcare and public health – right at the beginning. Healthcare means one seeking medical services such as toothache, stomach ailments etc. Public Health on the other hand means efforts to improve health outcomes of public at large by programs such as vaccination, education etc.

Healthcare is a private good and public health is a public good. There are talks of nationalising healthcare in India and Ajat strongly disagrees with the idea.

Lots more in the podcast.

We have ignored healthcare for way too long in India. Now healthcare and public health is going to take a central position amidst our discussions.

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