Agri finance: Another year, another panel. Will things change?

RBI released a report on Agricultural credit over the last weekend. I review the report in moneycontrol.

RBI’s report on developing secondary market for loans

RBI recently released a report on the need to develop a secondary market for corporate loans.

In this moneycontrol article, I review the main findings of the report.

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

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:

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Report on Currency and Finance 2009-12: Fiscal-Monetary Co-ordination

RBI’s very useful publication – Currency and Finance 2009-12 is out. It used to ab annual publication earlier. And don’t know why they have taken more than 2.5 years since the last edition was released in 2010.

It is a theme based report with some great write-ups on the theme. This time the theme is: Fiscal-Monetary Co-ordination. Pretty appropriate as well given issues on central bank independence.

Very interesting chapters especially on cash management and RBI Balance sheet etc.

I should be posting more on this after reading the chapters…

 

FinMin’s Economic Survey is fine with teaser home loan products

Indian Ministry  of Finance (MoF) tabled Economic Survey in 2010-11 on Friday (25-Feb-11). The survey is an annual update by MoF on Indian economy just ahead of its budget.

Much of the document is just a repeat on various updates on Indian economy we get from various sources – RBI, PM’s Economic Advisory Council, IMF and various private sector sources. Still, it is a nice decent read.

However, Just like we saw in previous survey, this year’s survey has two interesting chapters. First is titled – Micro-Foundations of Macroeconomic Developement and second is Human Development, Equity and Environment. The first chapter talks about some microeconomic aspects which could help improve macro performance. Second chapter shows details our socio-economic profile which is really worrisome. I will just cover both the chapters in brief.

Micro-Foundations of Macroeconomic Developement is a strange report. It gives some interesting insights on some issues but disappoints on others.

Some interesting insights first:

Demographics problem – not just limited to developed economies

It was a matter of time before demographics again come to mainstream economics discussions. It was such an important area and then came the global financial crisis. Now, slowly people are again beginning to look at this issue.  

I posted on this superb speech from BoJ chief who shows why this recession could be different because of demographics.

World Bank has done two studies which point to a different idea. The two studies are – Some Consequences of Global Aging,  and case studies on in New EU Member States and Croatia: Challenges and Opportunities.

The studies say ageing problem is not limited to developed economies but is going to strike developing and middle income economies as well. What is worse is that unlike developed economies who are rich and some have buffers (though crisis has done a lot of damage), developing economies do not have any such things. They are likely to fall in this trap before reaching prosperity levels.

UK’s “nudge unit” releases first report on healthcare

UK govt. set up a nudge unit (called Behavioural Insight Team) to use behavioral economics findings to improve things in UK.

The team released its first report (HT: Nudges blog) – Applying behavioural insight to health.

RBI releases its second financial stability report

RBI released its second FSR. This one is a must read for its excellent analysis and graphs.

Here is a broad summary:

Understanding India’s Balance of Payments data

RBI has released this super manual on the subject. Press release is here.

Though the report is on improving the present compilation procedure as well as presentation of  BoP statistics, it explains how the current data is prepared and meaning of each term.

It should help people understand BoP better.

RBI’s currency and finance report released

RBI’s excellent currency and finance has been released. The theme is global financial crisis. Will try and blog about it later.

Recession over? NBER says not yet….

Jeff Frankel NBER Recession dating committee member declared in his blog that recession is over in US on 5 Apr 2010. As expected, there was a huge build up that NBER would soon declare recession is over. Robert Hall, Chairman of the committee also declared recession is over in this interview on the same day.

However, NBER in its recent statement said not yet. It is early days still:

A snapshot on causes of the Financial Crisis

I had posted about this rich reading list on financial crisis compiled by Menzie Chinn.

In Chinn’s reading list, I would suggest one shoulld see this short note by Mark Jickling. It is a nice summary of most of the the causes of the financial crisis. It lists the causes, their explanations, rebuttals for the explained causes and references.

Very useful. Can be used by students for presentations on the crisis.

Financial Crisis Inquiry Commission

Though I knew it was coming but was not aware that it has already been set up. John Taylor in his blog points that first public hearing of the commission is slated to be held on 13 January 2010.

That public hearings are about to start is excellent news. Without such an investigation, followed by a clear explanation to the American people of what went wrong, the Congress is unlikely to enact financial reforms that actually fix the problem. To repeat a phrase from the Chairman of the Brady Commission on the 1987 crash (their report took only 4 months to complete), “You cannot fix what you cannot explain.”

Though not part of its Congressional mandate, I recommend that the FCIC follow the approach of the Brady Commission and the 911 Commission and make some recommendations. It could then even issue a report card on how the recommendations are implemented. Such a Report Card was issued by the 911 Commission and it proved quite useful.

Wikipedia informs :

The Commission was created by section 5 of the Fraud Enforcement and Recovery Act of 2009 (Public Law 111-21), signed into law by President Barack Obama on May 20, 2009

It also has the objectives of the Commission and has 26 of them. The 10 members names are:

Speaker of the House Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada each made three appointments, while House Minority Leader John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky each made two appointments:

• Phil Angelides (chairman) – Pelosi (jointly chosen as chair by Pelosi and Reid)
• Bill Thomas (vice chairman) – Boehner (jointly chosen as vice chair by Boehner and McConnell)
• Brooksley Born (Pelosi)
• Byron Georgiou (Reid)
• Bob Graham (Reid)
• Keith Hennessey (McConnell)
• Douglas Holtz-Eakin (McConnell)
• Heather Murren (Reid)
• John W. Thompson (Pelosi)
• Peter Wallison (Boehner)

The resumes of 10 members of the commission are here.

Let’s see if the commission throws some more exciting insights of the crisis.

Two e-books on financial reform and trade in this crisis

NYU Stern econs have prepared a e-book on financial reform. The chapter summaries are here.

November 2008 saw the global financial system on the brink of collapse; the crisis – which began in 2007 – had entered a new and dangerous phase. That time we responded by gathering a group of world-renown financial market experts to evaluate:

• The roots of the crisis and where things stood,
• The measures needed to prevent future crises, and
• How the key policies – the massive creation of liquidity, the TARP, the auto bailouts, the financial bailouts – were being used to address the crisis.

The result was a collection of 18 “white papers” that were bound, reproduced and circulated before the end of December and subsequently published in March 2009 by John Wiley and Son, entitled Restoring Financial Stability: How to Repair a Failed System

There is another e-book on trade in this crisis:

A new VoxEU.org Ebook aims to inform the world trade ministers what the economists know about the trade collapse.

I have read parts of the trade e-book. Very good stuff on how trade fared in this crisis.

There is just so much to read…Thinking about the huge volume of things pending to read alone is enough to stress. The reading has still not begun…

Finmin committee on Foreign Investment in India

Finance Ministry has floated a new committee to study foreign investment in India.

• To review the existing policy on foreign inflows, other than Foreign Direct Investment (FDI), such as foreign portfolio investments by Foreign institutional investors (FIIs)/ Non Resident Indians (NRIs) and other foreign investments like Foreign Venture Capital Investor (FVCI) and Private equity entities and suggesting rationalisation of the same with a view to encourage foreign investment and reducing policy hurdles in this regard while maintaining the Know Your Customer (KYC) requirements. 
• To identify challenges in meeting the financing needs of the lndian economy through the foreign investment. Foreign investment for this purpose to be understood broadly and can include investment in listed and unlisted equity, derivatives and debt including the markets for government bonds, corporate bonds and external commercial borrowings. 
• To study the arrangements relating to the use of Participatory Notes and suggest any change in the policy if required from KYC and other point of view. 
• To reexamine the rationale of taxation of transactions through the STT and stamp duty. 
• To review the legal and regulatory framework of foreign investment in order to identify specific bottlenecks impeding the servicing of these financing needs. 
• To suggest specific short, medium and long term legal, regulatory and other policy change; in respect to foreign investment keeping in view of the suggestions expert committee reports such as the Committee on Fuller Capital Account Convertibility, the Committee on Financial Sector Reforms and the High Powered Expert Committee on Making Mumbai an lnternational Financial Centre.

I don’t understand but there is no member from RBI. Why should this be? I think I already know the recommendations of the committee (don’t ask me why). There would be 2 scenarios:

1. The committee would go all out on opening India’s shores to all kinds of capital, remove all restrictions, remove RBI’s supervision over financial markets, RBI should adopt inflation targeting framework, Mumbai should become an international finance centre (like Iceland, London) etc. It would be centred on how bad our financial system regulation is and we need to adopt these changes else we are doomed. It would add it is a mistake to think since we have largely avoided the financial crisis, that we don’t revamp the financial system. Let’s do it all real fast. The criticism would be mainly on RBI for keeping such a tight control on financial system.
2. The committee report is going to be cautious about the volume of capital inflows in the country. India should invite capital flows but should but with some checks in place. It would say we should learn lessons from the ongoing crisis and not think all capital flows are necessarily good. It would instead suggest incremental changes.

Some people would ask, so what is different and what is new? This is the nature of all committee reports w.r.t. capital flows. Well, nothing is new. But this is how things usually are.

If the second version goes through, it is likely to be followed by dissent notes from a few members who would vote for the first version. The dissent notes are going to be highlighted by the media as somehow most people in media feel the first version is the only model.  

So let’s see how it goes. It is going to be tabled in 4 months from now. I hope I am all  wrong about this one. And we see some progress.

First Discussion Paper on Goods and Service Tax in India

The first discussion paper on India’s GST is here. I haven’t read it so far, so no comments.

I came to know y’day that first discussion paper on India’s GST is to be released. So have been looking at all possible govt websites- Finance Ministry, Taxation websites, Prime Minister’s Office, Planning Commission etc etc. But could not find it.

After a lot of google searching managed to locate the paper finally. Thanks a ton to etaxindia.org.

EAC’s India Economic Outlook 2009-10 is out!

PM’s Economic Advisory Council has released the growth outlook for FY 2009-10. The report is here. It is end of October and we have crossed half of the FY 2009-10. It should have come earlier. But anyways, it is a useful policy document.

I will post my comments later.

Financial Access in vogue

PSD Blog points to couple of developments in the field of access to finance. Hope something useful comes out of it. And it is not just hanky-panky stuff.

First quarterly report of impact of Obama fiscal stilmulus

CEA has released the first quarterly report assessing the impact of Obama’s fiscal stimulus plan. The report was released on 10 Sep 2009 but did not get any coverage. It has interesting analysis of the Obama plan and has some tall claims. The key findings are:

Do we (Indian policymakers) deserve accolades?

The speeches of K.C.Chakrabarty the newly appointed Deputy Governor of RBI, are a fresh breather (so far atleast). Not that other RBI speeches are not, but his speeches come with a different perspective and has useful references towards the end (which means more reading). It is full of interesting tables and charts which can be used for further research as well. 

In this new speech he covers the reforms and progress in Indian economy. He divides the progress in real economy and fin economy and is a nice short read. He suggests how the reforms have got India onto a higher growth trajectory and onbe of the most sought after economies.

However, towards the end he asks –

Do We Deserve Accolades?

42.       Structural transformation of almost all the segments of the economy during past two decades has brought discernible improvement in terms of efficiency, competitiveness and productivity. This reflects in economy moving over to higher growth trajectory with far greater integration with the rest of the world in terms of diversification of goods and services as well as destinations to which exports are being made. Of course, we take pride in these achievements and we together deserve it.

But, there are enough reasons that we must not get complacent with regard to transformation process. We need to ask ourselves a few relevant questions. How far the benefits of economic progress have percolated down? Whether standard of living of the population has uniformly improved? Can we say economic transformation has brought prosperity to public at large and could we make dent in poverty?  I would like to flag and touch upon some of these areas, though do not claim to know the answer for all these questions.

He then covers our performance in Poverty, Socio-Economic Development, Health, Education with some interesting charts. Needless to say the performance is abysmal in each of these exspecially considering the high growth we have achieved. He adds we need action in 4 areas: agri investment, labour reforms, demo dividend and financial inclusion.

Clearly something has gone wrong.  The policies are trying to address them but again we are just too married to high growth rates. Why can’t we show the picture as it is?

The high growth rates are important as Growth Commission report shows, but clearly we need to do a lot more than just smile at the growth rates. For instance, can the idea of India as an economic superpower be achieved on high growth rates alone? That is why it is important to do a reality check on just the relevance of  GDP growth concept in India. The Stiglitz commission idea needs to become mainstream sooner.