C. P. Chandrasekhar’s Blog

With India’s development strategy relying increasingly on private investors across industrial and infrastructural categories, the question of how private investment would be financed has moved to centre stage. This question has gained in significance not merely because areas earlier reserved by the public sector are now expected to be led by the private sector, but because the development finance institutions that in the past had, with state support, financed a substantial chunk of private investment are no more in existence, having been converted into commercial banks. How then has private investment been financed in recent years? Recently released flow-of-funds data…

Besides slowing growth and record unemployment, a major problem facing Indian policy makers is the fragility characterising the financial sector. With public sector banks still burdened with large non-performing assets (NPAs) and two major non-bank financial companies (NBFCs) bankrupt or near-insolvent, credit flow has turned sluggish and even a financial meltdown is a possibility. But, surprisingly, this did not seem to bother finance minister Nirmala Sitharaman, who spoke of the issue as if it is a problem that has been resolved. According to her: “Financial gains from cleaning of the banking system are now amply visible. NPAs of commercial banks…

The general election is over and a new government has been formed. But the campaign does not seem to end. More than an hour of Finance Minister Nirmala Sitharaman’s maiden Budget speech was largely devoted to underlining what she claimed were the remarkable economic achievements of the previous government. Given that legacy, she presented her role as one of expanding and strengthening the many achievements of Prime Minister Narendra Modi’s first government. To underline that, she flagged the 10 points earlier presented as a vision for the decade in the interim Budget speech. This raises two questions. First, how far…

Facebook has launched a process that would lead to the creation of a new cryptocurrency, “Libra”, in the first half of 2020. Named after a unit of weight used in ancient Rome, Facebook hopes Libra would become the dominant measure of value for transactions, at least on the internet. As is characteristic of the world of digital business that, outside of finance, has delivered the largest number of billionaires in recent decades, the creation of libra is presented as an altruistic mission that would mainstream individuals, businesses and agents who have hitherto been excluded by the financial sector. In Facebook’s…

India’s financial sector is in the midst of a second crisis, even as the first in the form of a humungous mass of non-performing assets on the books of commercial banks remains unresolved. This time the problem is not of non-financial entities, especially corporations, defaulting on loans taken from the financial sector, mainly the banks, but of financial firms, mainly non-bank financial companies (NBFCs), defaulting on debt instruments they sold to banks, insurance companies and mutual funds. The current round of panic began when Dewan Housing Finance Limited (DHFL), an earlier favourite of investors, financial markets analysts and the policy-making…

The tariff war with China unleashed more than a year back by the Trump administration threatens to turn into full-fledged economic war. The US claims that China is engaging in unfair trade practices and adopting coercive measures against US firms, undermining US economic interests. China not only denies US allegations, but in a White Paper released early June dismisses US claims that it reneged on agreements arrived at in the negotiations to end the war. In the press conference held to release the paper, Vice-Minister of Commerce Wang Shouwen noted that it is not uncommon for both sides to propose…

World trade is in deceleration mode. After having recovered smartly from 2.3 and 1.6 per cent in 2015 and 2016 to 4.6 per cent in 2017, the growth in the volume of world merchandise trade slowed to 3.0 per cent in 2018, WTO estimates show (Chart 1).  The deceleration has been greater in recent quarters. Quarter-on-quarter growth rates, as estimated by the Netherlands Centraal Planbureau (CPB) indicate that trade growth fell from 1.1 per cent in the third quarter of 2018 to -0.6 per cent in the fourth quarter and -0.3 per cent in the first quarter of 2019 (Chart…

With China having successfully convened the second Belt and Road Forum in Beijing late April, discussions on the significance, impact and sustainability of this ill-defined, even if tangible, effort at economic diplomacy have revived. That effort is the Belt and Road initiative (BRI) formally launched by President Xi Jinping in 2013. Global responses to the initiative have varied from dismissal on grounds that it is more hype than a matter of substance, to fear that it reflects Rising China’s bid for economic territory and, finally, to moves to be in on the game, and benefit in ways varying from profits…

On May 2, the Trump administration brought to an end the waiver the US had granted eight countries, including India, of sanctions on imports of oil from Iran. Having pulled out of the 2015 multi-country agreement with Iran to limit its nuclear programme, the US government had invoked the nuclear threat from that country to impose sanctions. The most damaging element of those sanctions for both Iran and the world’s oil importers was the ban this implied on imports of oil from Iran. Even with the waivers, sanctions had significantly reduced global oil supply. According to the International Energy Agency,…

This year’s just-concluded spring meetings of the International Monetary Fund and the World Bank were marked by a mood of gloom among the world’s leading policy makers. As recently as January 2018 the IMF had claimed that “the cyclical upswing underway since mid-2016” was growing stronger, contributing to “the broadest synchronized global growth upsurge since 2010”. By October it felt that while “the global economic expansion remains strong”, it had “become less balanced and with more downside risks.” Now the mood is much more sombre. The IMF’s April 2019 edition of the World Economic Outlook finds that global growth has…