C. P. Chandrasekhar’s Blog

The People’s Bank of China’s network of local currency swap arrangements provide Asian countries with a much-needed safety net, while also strengthening China’s diplomatic position. For full article Click here (This article was originally published in The Institute for New Economic Thinking on April 15, 2021)

For quite some time, China was seen as a ‘threat’ by virtue of being a global manufacturing hub, embedding knowledge in production and riding on its cheap labour force and large volumes of foreign investment, to win a disproportionate share of global markets. But more recent declarations from official Western sources focus on the threat stemming either from China’s illegal appropriation or theft of intellectual property, or knowledge for production to move up the value chain, or from China’s misuse of technology (allegedly illustrated by Huawei) for espionage aimed at advancing its increasingly aggressive security interests. These allegations are founded…

With President Joe Biden having put through Congress and signed a $1.9 trillion American Rescue Plan, the world is set to experience one of the biggest fiscal boosts of recent times, larger than that resorted to in response to the 2008 Global Financial Crisis. Together with the $900 billion short term stimulus announced by the earlier administration end-December 2020, the level of pandemic induced Federal spending in the US is estimated at 13 per cent of GDP this year. Coming after the $2 trillion of fiscal spending last year, under the CARES Act, this is indeed a gigantic vote for…

With the cabinet approving amendments to the Insurance Act of 1938, to raise the cap on foreign direct investment (FDI) in insurance companies from 49 to 74 per cent, the process of implementing the next stage of reducing public control over Indian insurance has begun. Once legislated and implemented, the proposed increase in the FDI cap would permit foreign control over a majority of insurance companies operating in the country. Possibly to appease those among its constituents, such as some members of the Swadeshi Jagran Manch, who still espouse a version of economic nationalism, the Finance Minister promised domestic private…

Having recovered from their lows touched early or mid-2020, food prices are rising fast. At $574.8 a metric tonne in February 2021, the price of soyabean was 53 per cent higher than the corresponding month of 2020, when the effects of the Covid pandemic were yet to be felt (Chart 1).  Over that period, the price of maize had risen from $168.71 to $245.24 a metric tonne or by 45.4 per cent; of rice from $426.45 to $531 a metric tonne or by 24.5 per cent; and that of wheat from $238.98 to $$276.63 a metric tonne or by 15.8…

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…