C. P. Chandrasekhar’s Blog

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…

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…