C. P. Chandrasekhar’s Blog

The universe of Indian startups is teeming with ‘unicorns’, industry slang for firms with valuations in excess of $1 billion. But most have yet to show the profits that legitimise that valuation, and many are bleeding. That was ignored till New York headquartered WeWork, the leader in the coworking office space business, which was expanding as if there are no limits to the demand for shared office space, hit a roadblock. Now Indian celebrity firms like OYO and PayTM, also backed by Softbank among others, are under the scanner. OYO’s business model was typical of the start-up boom fuelled by…

Even while the effort to resolve the crisis resulting from non-performing assets in the banking sector was underway, India’s financial sector was overwhelmed by failures of large non-bank financial companies. In the discussion that followed the collapse of these NBFCs, the emphasis has been on the absence of due diligence, poor financial management and downright fraud. While the environment these firms found themselves in did encourage such tendencies, there were structural reasons why these institutions accumulated bad assets, which are often ignored. The crisis that engulfed IL&FS and Dewan Housing Finance Limited focused attention on what was India’s numerous but…

In the revised estimates for 2018-19 reported in Budget 2019, the NDA government had hugely inflated figures on central revenues and expenditures in 2018-19. This was one of many signals that it was faced with a fiscal crisis it did not want to reveal. Matters have only worsened since then. Numbers released by the Controller General of Accounts (CGA) show that, over the months April to October, net tax revenue accruing to the Centre had risen by just 1.1 per cent relative to the corresponding period of the previous year, way short of the inflation rate and the rate of…

In the latest of many critical interventions since he demitted office as Chief Economic Advisor to the Government of India, Arvind Subramanian (in collaboration with Josh Felman, together hereafter referred to AS-JF) has argued that the recent sharp deceleration in India’s growth is not an ordinary slowdown, but “India’s Great Slowdown, where the economy seems headed for the intensive care unit.” The paper that makes this assessment goes on to argue that most existing analyses of the slowdown have not got it right, and claims to ‘make a contribution’ by offering “a different diagnosis of the problem” and providing “a…

With the Index of Industrial Production (IIP) registering negative month-on-month annual rates of growth over the three months ending October 2019, the perception, based on trends in individual industries, that Indian industry is experiencing or is on the road to a recession has gained strength. It is true that month-on-month growth rates tend to be volatile and are heavily influenced by the base effect. However, trends depicted in Chart 1 suggest that growth decelerated sharply for some recent months before turning negative. Moreover, even the growth of 0.5 per cent during the first seven months of this financial year (April…

Unless the Trump administration’s views on the WTO change dramatically, December 11 could mark the end of an era in global trade. On that date two more members (of the three in position out of a mandated seven) of the appellate board for dispute settlements at the World Trade Organisation (WTO) would complete their terms. The Appellate Board (AB) is the final arbiter on decisions taken by the panels set up to address member complaints on violation of WTO rules by competing nations. Since, over the last few years, the US has prevented the appointment of successors to retiring AB…

The Moody’s decision, citing a growth slowdown and policy inadequacy, to downgrade India by changing its credit rating outlook to ‘negative’ from ‘stable’, and doing the same for a bunch of financial institutions and firms in the power and infrastructure sectors, has created a stir. At first glance the fuss is difficult to understand. There has been a consensus building even in ‘Modi-friendly’ circles, stretching from the international financial institutions to the domestic media, that the Indian economy has been experiencing a significant deceleration in growth. Hence, Moody’s, whose credibility has in any case been suspect ever since the decade-old…

The experience of depositors in the Punjab and Maharashtra Cooperative Bank (PMCB) suggests that the government and the central bank are unwilling to protect the financial savings of ordinary households. Besides allowing depositors in the bank to access only a maximum of Rs.50,000 from their savings, more than a month and half after the cooperative bank was asked to cease its business because of potential insolvency, the government is ‘considering’ raising the woefully inadequate level of deposit insurance from Rs. 1 lakh to just Rs. 2 lakh. It is to be expected that this and other similar experiences are likely…

Neoliberal reform has plunged more than one industry into a crisis, where large scale failure is the norm, but there is no sign of resolution. India’s civil aviation sector is a stark example. So is the beleaguered telecommunications industry. The mess in telecom has been highlighted by what should have been a routine event: a Supreme Court judgement upholding the Department of Telecommunications (DoT) definition of what constitutes Adjusted Gross Revenue (AGR) of firms in the industry. Delivered at the end of more than a decade of litigation, the judgement has thrown the industry into disarray. The government has consistently…

A common refrain in assessments of India’s current economic predicament is that the economy is performing below potential because of a lack of ‘liquidity’. Often, this is merely a means of stating that an inadequacy of credit flow is choking up demand, operations and investment in the real economy. Influenced by such a reading of the current economic situation, the government’s crisis response has focused on measures that could enhance financial flows, spur credit growth, and ensure that all agents, large and small, are serviced. In the most recent of such initiatives, Finance Minister Nirmala Sitharaman said that it has…