C. P. Chandrasekhar’s Blog

Sri Lanka’s new president, Anura Kumara Dissanayake, must reject his predecessor’s recent debt-restructuring deal with the IMF. That agreement would inflict unnecessary pain on Sri Lanka’s population and set a dangerous precedent, undermining other developing economies’ ability to restructure their foreign debts. Ranil Wickremesinghe, Sri Lanka’s president, recently lost his re-election bid after voters overwhelmingly rejected the debt-restructuring deals he negotiated with the International Monetary Fund and other creditors. Instead, Sri Lankans elected Anura Kumara Dissanayake, leader of the left-wing National People’s Power (NPP) alliance and a vocal critic of IMF-imposed austerity measures, who has vowed to renegotiate the country’s agreement with the Fund............. Download…

It is more than a year since China, reportedly in retaliation to US-driven restrictions on exports of advanced semiconductors and related manufacturing equipment, imposed export controls on two crucial materials—germanium and gallium—that enter into the production of semiconductors and military and communications equipment (advanced microprocessors, fibre-optic products and night-vision goggles). Imposed in the name of safeguarding “national security and interests”, the restrictions on the exports of these materials from China were viewed with alarm. China accounts for 98 per cent of global production of gallium and for two thirds of imported supplies of germanium in the US market. If these…

Recently Congress President Mallikarjun Kharge quipped that the ‘U’ in UPS (Unified Pension Scheme) stands for U-Turn. While that may be seen as stretching interpretative liberty, he was touching a raw nerve. Whether it be lateral entry into the civil services or the Waqf (Amendment) Bill, the current Modi-led government in which the BJP and the NDA must share power with outside partners, seems to be learning the art of coalition politics on the job. Accustomed to brute majorities that allowed them to ‘bulldoze’ policy change, the inclination of the BJP’s leadership is to push ahead with its preferred policies…

India’s quasi-federal democracy, which was in danger of collapsing into a centralised authoritarianism, seems to be holding up. The results of the 2024 Lok Sabha election that reduced the brute majority of the National Democratic Alliance fronted by the BJP, making the coalition it leads dependent on support from two regional parties—the Janata Dal (United) and the Telugu Desam Party—is one important reason. The whims of the centralist BJP have to be tempered to meet the demands of these regional partners, the exact nature and financial costs of which are by no means clear. In fact, the concessions to these…

(Paper presented at the PERI-IDEAs conference on "Debt and Climate Justice". 3-5 May 2024) Abstract The ongoing sovereign debt crisis in low- and middle-income countries (LMICs) was signalled by instances of default or failure to meet external debt obligations denominated in hard currencies. But the response to the crisis has included attempts to restructure domestic sovereign debt issued largely in domestic currencies. Such moves have been justified by identifying the crisis as one of excessive aggregate public debt rather than just unsustainable levels of external debt. There is a need, it is argued, to reduce the gross financing needs (foreign…

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…