C. P. Chandrasekhar’s Blog

It’s a paradox that has periodically recurred in recent times. Financial indicators are hugely favourable from the point of view of those who benefit from them, even when the performance of the real economy is poor or dismal. In this Covid-afflicted year, that paradox has manifested itself with greater intensity. And with a difference. Even while the real economy remains in contractionary mode, not only have stock market returns exploded, but India’s stock of foreign exchange reserves, considered a measure of the country’s economic health from Independence to the balance of payments of crisis of 1991, have registered record-breaking increases.…

On December 12, in an outburst of suppressed anger, workers employed at a factory assembling iPhones in Narasapura near Bengaluru ransacked its premises and damaged parked vehicles. The facility is a unit of Wistron, a Taiwanese vendor engaged in assembly of Apple iPhones, that had begun commercial operations only recently. This made the worker action surprising to say the least. Workers recently employed in a known foreign-invested firm are not likely to turn against the management in a matter of months. Something was clearly amiss. The initial response of the administration was to arrest the workers involved for criminal violation…

Discussions of China’s growing global presence normally refer to its large investments overseas and lending by the state-owned China Development Bank and China sponsored multilateral institutions like the Asian Infrastructure Investment Bank and New Development Bank. But there has been a less highlighted instrument that has contributed to China’s growing global influence in developing countries worldwide—bilateral currency swaps between China’s central bank, the People’s Bank of China (PBoC), and the central banks in these countries. These bilateral swap arrangements (BSAs), denominated in RMB and the currency of the relevant partner central bank, allow the latter to access RMB liquidity for…

A month after the signing of the Regional Comprehensive Economic Partnership (RCEP) agreement among 15 countries in the Asia-Pacific, speculation on what could be its economic and strategic fallout has waned. Attention seems to have been diverted by the more immediate concerns that the pandemic and the recession that accompanies it have raised. At first, commentators and observers woke up in the middle of a pandemic to express surprise and exude a sense of uncertainty at the deal being signed. Surprise, perhaps because China was a part of the agreement, despite the unrelenting discussion about its expansionist ambitions in the…

Preliminary evidence that India’s economy contracted by 7.5 per cent in the second quarter of financial year 2020-21 was, as news, both good and bad. Good because that figure is far lower than the 23.9 per cent contraction registered in the first quarter of this financial year. Bad because a 7.5 per cent second quarter contraction is high both in itself and when compared with most similarly placed countries. The figure signals that the substantial relaxation of lockdown restrictions during that quarter has not ensure automatic recovery. The government, however, sticks with its recovery hype. It has chosen to focus…

A report of an internal working group (IWG) set up by the Reserve Bank of India (RBI) has revived discussion on the wisdom of allowing entry of corporate players, including large business groups, into India’s banking space. Though the process of licensing a new generation of private banks began in 1993, primarily non-financial corporate entities have been eligible under the RBI’s guidelines to apply for banking licenses only since 2013. Their entry, when permitted, was to be subject to rules such as functioning through a Non-operative Financial Holding Company as a means of ringfencing financial activities or banking operations from…

The fall in remittance flows following the loss of migrant jobs in leading host countries has been among the many adverse effects of the Covid crisis on developing countries. While there have been job losses across the board in regions and countries hosting a large proportion of the world’s migrant workers, job losses for foreign workers have been greater than those for domestic workers in most. Moreover, a major region hosting international migrants, constituted by the Gulf Cooperation Council countries, has seen economic conditions worsen also because of the steep fall and continued low level of oil prices. As is…

South Korea, long lauded as a “model” for developing countries looking to transit to developed status, had lost some of its sheen after the 1997 Southeast Asian financial crisis. Yet, the return of stability after the crisis and the global success of its conglomerates (like Samsung and LG) has kept the country in the limelight. More recently, South Korea has been included among countries that managed the Covid-19 pandemic well. Though the test positivity rate for the country rose from below 1 per cent in early October to 2.5 per cent at the end of the first week of November,…

In a move that was expected, the US Justice Department has filed an anti-trust lawsuit against internet search giant Google, alleging that it resorts to anti-competitive practices to ensure its dominance in the search engine space and, through that, over the related online advertising revenues. As a leading example the case cites the successful effort to exclude the competition through a deal, in place since 2005, in which Google pays Apple around $8-12 billion a year in return for pole position as the default search engine in Apple’s devices and the Safari browser. Around half of Google’s search traffic is…

A chapter in the October 2020 edition of the IMF’s biannual publication, Fiscal Monitor, argues that as a response to the Covid-19 pandemic, and to support the recovery as Covid-19 induced lockdowns are relaxed and the world moves to a post-pandemic phase, enhancing public expenditure is crucial. So, governments, the IMF argues, must bother less about increasing their levels of indebtedness and choose to spend instead. While the ongoing phase of partial lockdowns of varying severity, that spending must focus on saving lives and livelihoods, as these shut downs are relaxed and the world finally moves to a post-pandemic era,…