C. P. Chandrasekhar’s Blog

With the short-term, frenzied interest that accompanies annual budget presentations in India having ended, it is time to raise issues that were largely ignored in the debate. Prime among them is the question as to how much or how little new taxes were raised to finance the many pressing demands that face the government, from investments in essential infrastructure to building much needed human capital, promoting employment and ensuring universal access to necessities. In an accounting sense budgets reveal where each average rupee the government spends came from and to which areas each average rupee spent was allocated. But in…

The mismatch between the problem at hand and what the Budget offers is stark be it welfare or even taking care of key political allies. Just before Nirmala Sitharaman presented her seventh consecutive Budget as Union Finance Minister of a coalition led by the Bharatiya Janata Party (BJP), which managed to gain power for the third time on an underwhelming mandate, signals from the government seemed to suggest what its thrust may be. The Economic Survey 2023-24 made clear that while India’s industrialists and business elite were “swimming in excess profits”, the priority of the government was not to tax…

The Sri Lankan government announced that it has reached an agreement with its foreign private creditors to restructure the $12.5 billion of its external debt that they hold. The agreement incorporates a novel instrument: a macro-linked bond for which the payout is linked to the GDP performance of the debtor country. These bonds are to be issued in exchange for existing bonds, incorporating a suitable haircut aimed at restoring debt sustainability. However, the terms of those bonds may end up delivering significant gains for foreign creditors without any for Sri Lanka. Early in July, the Sri Lankan government announced that…

In the search for the next country that would transit from backward to advanced nation status, India’s name sometimes features. This is partly because the idea has been mooted by Prime Minister Narender Modi, who promises to make India a ‘developed nation’ by 2047. A country is identified by official agencies and the World Bank as high income mainly based on the size of its per capita gross national income (GNI), with the threshold currently placed at just over $14,000 at 2023 prices. So the claim that India, with current GNI of around $2,500 can exceed that threshold in 2047…

Figures on India’s balance of payments in financial year 2023-24, recently released by the Reserve Bank of India, have added to the hype on India’s growth story. India’s current account deficit, or the surplus of current foreign exchange expenditures and outflows over current foreign exchange earnings and receipts, fell to $23.2 billion from a much higher 67 billion in 2022-23. A lower merchandise trade deficit and higher receipts from export of services and transfers, especially of remittances from workers abroad, explains that improvement. In the same financial year 2023-24, net FDI inflows totalled $9.8 billion, net portfolio inflows $44.1 billion…

A renewed focus on retail lending, or the provision of personal loans, by India’s banking system (and the non-bank financial companies they support), is giving the otherwise confident Reserve Bank of India some cause for concern. That the period after pandemic year 2020-21 has witnessed a spike, if not boom, in retail credit is clear from the evidence. As Chart 1 shows, between late April 2021 and late April 2024, personal credit growth (76 per cent) outstripped the growth in non-food credit (53 per cent) advanced by scheduled commercial banks (SCBs) in India. Personal loans consist predominantly of credit for…

The election results, which gave both the BJP and the NDA far lower seats than they had in the previous parliament and led to a coalition government, surprised many. But now, attention has shifted to assessing what that would do to the behaviour and policies in different spheres of this version of a Modi-led government. One such sphere is economic policy, where the results suggest that the sense of comfort that the second Modi government claimed to have had with the nature and outcomes of its policies was misplaced. Speculation is rife whether the combination of that signal and the…

For some time now, there has been much discussion of and concern expressed about a decline in the net financial savings of the household sector in India. Overall household savings as a percentage of gross national disposable income (GNDI) rose from 18.8 per cent in 2019-20 to 22.4 per cent in pandemic year 2020-21 (Chart 1). That rise is understandable because opportunities and avenues for spending were severely restricted due to the pandemic and the accompanying sudden and prolonged lockdown. So, the fact that following the pandemic that saving rate fell to 19.8 per cent in 2021-22 and 18.1 per…

Political economists Radhika Desai and Michael Hudson are joined by Professor C.P. Chandrasekhar to discuss what is really happening in India's economy, if its government growth statistics and other official data are accurate, the policies of Prime Minister Narendra Modi and his party BJP, and the country's 2024 elections.

Interest in India’s almost unique success as a services exporter in global markets persists. India’s services export receipts rose from $95.8 billion in post-crisis year 2009-10 to $341.1 billion in 2023-24. Close to one half (47 per cent) of those exports were exports of software services, with business services accounting for another 24 per cent. Led by those sectors, India’s share in global exports of commercial services has risen from 3 per cent in 2010 to 4.7 per cent in 2023. India has indeed done well in this area. Charts 1 and 2 illustrate how the increase in global exports…