C. P. Chandrasekhar’s Blog

The headlines suggest that the 15th Finance Commission (15th FC) has not let down the states when deciding on their constitutionally mandated share in the divisible pool of the Centre’s tax revenues over 2021-26. It has more or less stuck with the 14th FC’s recommendation to set the states’ share at 42 per cent, reducing it by just 1 per cent to take account of the conversion of Jammu and Kashmir from a state into two union territories. It has decided to drop reliance on a combination of 1971 and 2011 population figures when deciding on the relative shares in…

A process started four year’s back by Australian’s competition commission could offer support to a struggling global news business. The process, to curb internet firms from freeriding on news they do not generate, is expected to culminate in legislation that would require search engines and social media platforms, which curate access to news, to pay publishers whose stories and content they link and direct users to. The proposed code requires Google and Facebook to enter into negotiations with media firms to arrive at the terms on which they can link readers to news stories generated by these publishers. If no…

As governments begin to vaccinate their populations against COVID-19 to win herd immunity, attention would turn to addressing the multiple crises that are the legacy of the pandemic. One such only partially recognised and half-heartedly addressed so far is the burden of debt that developing countries, especially low-income countries (LICs), have accumulated. The January 2021 issue of the World Bank’s flagship publication Global Economic Prospects (GEP) estimates that, during the pandemic year 2020, the ratio of government debt to gross domestic product (GDP) in emerging market and developing economies (EMDEs) rose by more than 8 percentage points from 52.1% to…

It defies all logic. As expected, once the implications of the Covid-19 contagion began to be absorbed, the BSE Sensex lost 37 per cent in value, falling from a level just above 41,000 on February 19, 2020, to just below 26,000 on 23 March 2000 (Chart 1). That was the day when the nationwide lockdown was declared and three days before the first of the government’s stimulus packages was unveiled. The lockdown triggered the severe contraction that overwhelmed the economy over the next two quarters. Yet, starting March 23, the Sensex got off its trajectory of decline, and set itself…

January proved to be an unusual month in the US equity market. The shares of GameStop, a brick-and-mortar retailer of gaming consoles and video games, had in the course of that month risen by close to 2000 per cent. The price of the share rose from around $5 in August 2020 to $350 in late January 2021, with much of the rise occurring towards the end of that period. Besides the fact that no set of fundamentals can justify that rise, this was intriguing because of the recent record of the company. GameStop shares had been losing value for a…

In an attempt to persuade listeners into believing that Budget 2021 will complete the conquest of disease and unleash an era of post-Covid expansion, Finance Minister Nirmala Sitharaman placed special emphasis in her budget speech on two sets of initiatives. The first was a claim that the budget marks a new beginning for the Indian state’s engagement with peoples’ health, riding on an unprecedented 137 per cent hike in allocations for the health sector, from a mere Rs 94,452 crore allocated in Budget 2020-21 to Rs 2,23,846 crore in Budget 2021-22. And the second was a declaration that, rising above…

Buised by the COVID-19 pandemic, Indians, like their counterparts elsewhere in the world, are looking for renewal. So, even granting that an annual budget is not a corrective for all ills, evidence of a change in course was expected in Budget 2021. Change also seemed possible. With the worst of COVID-19 and the lockdown-triggered contraction behind it, the government could intensify efforts to not just accelerate recovery but also turn its attention to the neglected health sector and redress the damage inflicted on the poor by the novel coronavirus pandemic. Conflicting signals Official signals were, however, conflicting. Coming at the…

Budget presentations have turned tiresome for some years now, and for many reasons. Their length, which tends to be way beyond that warranted by substance. The tendency to drone on about off-budget policy initiatives in Part A, most of which tends to be mere hype, while the actual budget in Part B is given cursory attention. The absence of adequate allocations to back budgetary proposals to expand existing schemes or introduce new ones. And, finally, window dressing to claim receipts to finance even limited expenditure increases without upsetting the government’s wholly imaginary fiscal deficit trajectory. Though finance minister Nirmala Sitharaman…

Budgets over the years have become a tiresome spectacle. Much print space and airtime are devoted to the exercise, which on each occasion is presented as an event that would alter the nation’s economic course. Governments and Finance Ministers back that narrative, not least by shrouding the exercise in secrecy till the budget speech is read. But in recent years, with the government adopting measures that erode its own revenues, and having, with the passing of the Fiscal Responsibility and Budget Management Act in 2003, limited its right to borrow, there is not much the budget as an instrument of…

The United States prepares for moving out of the Trump era with the incoming President promising more rounds of stimulus spending to revive an economy ravaged by Covid-19. Other members of the Organisation of Economic Cooperation and Development, a predominantly rich nation’s club, have also been generous with their spending and signalled that they are willing to keep their wallets open to spend more if necessary. The evidence clearly is that the Covid-crisis has upended the fiscal conservatism that has been the hallmark of the neoliberal era since the 1980s. However, not all nations seem to display this ability to…