C. P. Chandrasekhar’s Blog

In a stealthy game played over two decades, corporate India is walking away with huge wealth transfers, largely from the public banking system. After much delay, the halting process of settling the bad debt of defaulting corporates using the Insolvency and Bankruptcy Code (IBC) is being completed in a rising number of cases. When examining the outcome of cases of completed resolution what emerges is that (i) public banks are taking huge “haircuts” and suffering losses, the burden of which falls on the tax payer who funds recapitalisation; (ii) those who acquire the assets of the corporate defaulters that underlie…

The NDA government has decided to further tighten its regulation of e-commerce, taking on in particular foreign giants like Amazon and Flipkart-Walmart, with implications for domestic organized retail majors like Reliance. The Department of Consumer Affairs in the Ministry of Consumer Affairs, Food and Public Distribution has called for comments on an amended version of the Consumer Protection (E-Commerce) Rules, 2020, which it posted on its website in late June 2021. The amendments, conveniently highlighted using track changes, go beyond strengthening consumer protection per se. The intent seems to be to rein in dominant players in an area. Among the…

In mid-June, the National Company Law Tribunal (NCLT) approved a resolution plan for the Rs. 35,000 crore non-performing debt of Videocon Industries. The plan was a successful offer made by Twin Star Technologies, a Vedanta group company, and accepted by a committee representing the creditors exposed to Videocon. While granting approval, the NCLT noted that the scheme involved Vedanta paying almost nothing, with its successful offer amounting to 4.15 per cent of the outstanding claim and the creditors settling for a “hair cut” of 95.85 per cent. Moreover, the NCLT felt it necessary to request the Insolvency and Bankruptcy Board…

In early June Finance Ministers and central bank governors of the G7 met over two days in London, as a prequel to the meeting of heads of states of the grouping a week later. The meet was of special significance. Global leaders now hope that the slow and hesitant vaccination roll-out will help tame the coronavirus. So, their attention increasingly turns to addressing the many economic challenges that preceded the pandemic and were aggravated by it. Before the pandemic, inter- and intra-country inequality, intolerable deprivation, a battered environment and changing climate had forced nations to jointly commit to achieving a…

With India experiencing a severe second wave of the Covid-19 pandemic, forcing decentralized lockdowns, a crisis of loss of jobs and livelihoods and resulting hunger is being reported from across the country. A reluctant central government has, therefore, been forced to revive the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), to distribute 5 kilograms of free foodgrain per person per month to the approximately 80 crore beneficiaries covered under the National Food Security Act (NFSA). The reluctance shows in the decision to introduce the scheme only for a two-month period (May-June 2021) and to ignore demands for a significant hike…

The finance minister’s Budget speech 2021 revealed the government’s plans to establish an Asset Reconstruction Company to take over bad debt from the books of public sector banks for eventual disposal. That suggests that the ARC route rather than recapitalisation would in the coming months be the main means of refurbishing capital in the public banking system. Since there are as many as 28 ARCs already in existence, the reason why the creation of one more would resolve a problem that is expected to worsen over the coming year is unclear. In fact, past experience indicates that ARCs have not helped enhance the actual recovery of…

With rising non-financial corporate debt and evidence of elevated borrowing levels among non-bank financial companies, the fragility resulting from excess leverage has returned to haunt developed country financial markets. The fact that the collapse of a little-known family office firm like Archegos Capital Management inflicted huge losses on leading banks suggests that the failure of a rogue, overleveraged speculator can have systemic effects of the kind that unravelled in 2008. Click here for full article (This article was originally published in the Economic and Political Weekly on May 15, 2021.)

It is the second year running in which the IMF and the World Bank have been forced by the Covid pandemic to hold their annual Spring Meetings online. But this time there was slight cause for optimism. Signs of a strong reversal of the economic downturn in the US and other advanced economies and progress, however unsatisfactory, in the drive to vaccinate populations hold out promise of a recovery. However, a troubling feature, as the April 2021 edition of the IMF’s World Economic Outlook notes, is the sharp divergence in the economic impact of the crisis and in the pace…

It is by now a much-repeated story. Despite the devastation wrought by the Covid-19 pandemic, punters in global financial markets have had a field day. If there is one location where the pandemic has not been able to wreck damage, it is the market for equity and bonds worldwide. This has been true in Asia in general, and in India, as well. Having initially suffered a hit at the end of the first quarter and beginning of the second quarter of 2020, when the virulence and implications of the pandemic began to be recognized, markets soon recovered. However, evidence from…

Forced by the 1997 Southeast Asian crisis to recognize the external vulnerabilities that openness to volatile capital flows result in and upset over the post-crisis policy responses imposed by the IMF, countries in the sub-region saw the need for a regional financial safety net that can pre-empt or mitigate future crises. At the outset, the aim of the initiative, then led by Japan, was to create a facility or design a mechanism that was independent of the United States and the IMF, since the former was less concerned with vulnerabilities in Asia than it was in Latin America and that…