C. P. Chandrasekhar’s Blog

India’s stock markets seem to be riding one more bubble. Between 19th February and 29th March, the Sensex rose by 9.3 per cent. The trend has not been restricted to a few stocks. The S&P BSE 100, which tracks 100 and not just 30 stocks, also rose by 9.8 per cent between those dates. In fact, financial year 2018-19 as a whole seems to have been a good period for punters, with the Sensex outperforming many global markets. Among the explanations doing the rounds is that confident of a return of a market-friendly, Modi-led government, investors are making hay in…

At the end of its five-year term, the NDA government’s claim that the Indian economy has experienced rapid growth during its tenure sounds shallow. The GDP numbers many observers argue are wrong and possibly fabricated. The GDP figures have since 2011-12 been computed using some new data sources and a changed methodology, showing the economy in much better light when compared with the series with 2004-05 as base. But the change was so drastic that for the official statistical agency could not for long put out a “back series” that allowed comparison of performance across time. Scepticism about the GDP…

Late in February 2019, the GST Council, prodded by the Centre, decided to modify Goods and Services Tax rates applicable to the housing sector. The declared intention was to reduce prices that home buyers would have to pay for their property. The modification, which takes effect as of 1 April 2019, involves doing away with input tax credit for residential property construction for sale and significantly reducing the GST rate applicable at the final stage of sale of housing. At present the GST rates stand at 12 per cent for normal residential housing and at 8 per cent for “affordable…

When the final session, prior to the impending election, of the current Parliament ended in February, high on the list of the unfinished business of the Modi-led NDA government was its aggressive effort to rewrite the laws regulating wages and employment conditions of workers in India. While opposition by workers’ movements, trade unions (including those aligned to the ruling BJP), the parliamentary opposition and democratic opinion has managed to stall the effort, it is more than likely to be revived by future governments. The conservative legislative push of the NDA was presented not just as an effort at rationalisation that…

India’s efforts to activate its corporate debt market, not least by periodically raising the ceiling on investment by foreign portfolio investors in corporate bonds, are yet to succeed. Mobilisation of capital through the issue of corporate bonds has just about crept up to 4.4 per cent of GDP (Chart 1). Though that is much larger than the 0.2 per cent of GDP for mobilisation through new equity issues, it is way short of the figure (varying from 15 to 50 per cent) for most similarly placed emerging markets. Relative to the size of its economy, India’s corporate bond market is…

In a pre-election budget speech filled with propaganda about the supposed developmental achievements of the Modi government, substitute Finance Minister Piyush Goyal read out a text that both window-dressed the revised estimates and violated all norms that should apply to an Interim Budget. Principally, the speech lays out three sets of changes on the expenditure side with the hope clearly of winning votes at election time: one to provide for a Rs. 6,000 crore cash transfer in a year to “landholding” farmers with holding size upto 2 hectares; a contributory pension scheme for unorganised workers with monthly income upto Rs.…

As the term of the current NDA government nears its end, with signs of popular dissatisfaction over its performance on the economic front, the urge to ramp up expenditure to woo the electorate intensifies. But a number of factors have combined to render that task difficult, with the failure of the government’s misplaced disinvestment programme being among the most important. Disinvestment receipts are crucial to the government this year for two reasons. First, while direct tax collections in 2018-9 are according to official figures on track to reaching targets, indirect tax collections have fallen short after implementation and periodic revision…

As election 2019 approaches, the Modi government, damaged by agrarian distress, is also being challenged by evidence that its record on employment generation has been extremely poor. To recall, in its campaign during the 2014 election which brought it back to power, the BJP-led National Democratic Alliance (NDA) promised to create 10 million jobs every year. The best source of information on employment we currently have is the privately conducted (and heavily priced) Consumer Pyramids Household Survey undertaken by the Centre for Monitoring the Indian Economy (CMIE). These figures are available from 2016 from a sample of more than 170,000…

The decision of the newly elected Congress-led governments in Chattisgarh, Madhya Pradesh and Rajasthan to implement the manifesto promise to waive farm debt has set off a controversy. Opposition to the move comes not just from opposing parties. In fact, the political leadership has been sensible enough not to oppose the policy per se. For example, the BJP that had gone the same route in Uttar Pradesh and Maharashtra, has only said that these governments are not doing things the right way, and are deceiving farmers with mere platitudes. The opposition comes from the neoliberal advocates, who paint this decision…

As the state election results trickled in on December 11, to the surprise of many, the Sensex after a hiccup rose and closed 190 points above its previous end-of-day level. The following day too, the Sensex moved upwards. This was a surprise to many, since the impression had spread that influential players in the market favoured a return of a Modi government in 2019. To the extent that the defeat of the BJP in three important states was a signal of a possible defeat next year, they expected investors to walk out, triggering a market collapse. That did not happen.…