C. P. Chandrasekhar’s Blog

Once again, the World Bank has released a Brief declaring India to be the largest recipient of remittances from abroad. According to the Bank, remittances to India that totaled $65 billion in 2017, are likely to touch $80 billion this year, way ahead of China, the second largest recipient with $67 billion. The rise is in keeping with longer term trends, despite short periods when it appeared that remittance volumes were on the decline. Official Indian balance of payments data provide information on private transfers (which include (i) remittances for family maintenance, (ii) local withdrawals from Non-Resident Rupee Accounts (NRE…

The so-called ‘synchronised recovery’ that global policy makers periodically refer to, seems to have bypassed much of the world’s working people. According to the just released Global Wage Report 2018/19 of the International Labour Organisation (ILO), the rate of growth of average monthly earnings adjusted for inflation of workers across 136 countries registered in 2017 its lowest growth since crisis year 2008, and was well below figures recorded in the pre-crisis years 2006 and 2007. What is more, if China, where wage growth has been rapid and whose workforce size substantially influences the weighted average global figure, is excluded, the…

Unlike in the worlds of business and politics, there is little scope for gossip in the world of economics. So, when multiple signals suggested that that there was a stand-off between the government and the Reserve Bank of India (RBI), the media made the most of it, with a multitude of stories reporting and explaining the nature of the spat and its implications. Given the formal economic arguments that must enter those discussions, there is much that the lay reader cannot process to assess which of the two institutions is right in this controversy. However, the thrust of the reportage…

Voices questioning the claim that nations and the majority of their people stand to gain from global trade are growing louder. The one difference now is that the leading protagonist of protectionism is not a developing country, but global hegemon United States under Donald Trump. Free trade benefits big corporations with production facilities abroad, Trump argues, while harming those looking for a decent livelihood working in America. With time Trump has made clear that his words are not mere rhetoric, matching them with tariffs that have frightened European and North American allies and US corporations, besides troubling the likes of…

In the midst of a crisis reflected in a collapsing rupee, India’s BJP government is acting ostrich-like, burying its head in the ground. Nothing illustrates this better than its much-delayed response to the collapse of the rupee with a set of measures that are the opposite of what is needed. Having fallen from just below Rs.64 to the dollar to close to Rs.73 to the dollar between the beginning of 2018 and mid-September, the rupee has depreciated by about 14.3 per cent with respect to that currency. But it is not relative to the dollar alone that the rupee has…

July 2018 marks the first month of the second year in which the much-heralded Goods and Service Tax (GST) regime has been in place. When launched 13 moths earlier, in a propaganda blitz that (wrongly) claimed that this “one nation, one tax” system was a game-changer, the government had promised that the new regime would help the Centre and the states to efficiently mobilise the resources needed to put India on a high growth trajectory. In fact, demonetisation and the GST regime were presented as the two initiatives of the Modi government that would transform India. Demonetisation, as the government’s…

Having overcome a legacy of extreme shortage of supply, India’s power sector is in the midst of a crisis with ramifications of a wholly different kind. The crisis arises because firms accounting for significant proportion of power sector assets have defaulted on their debt servicing commitments, and banks are not able to find ways of restructuring that debt or recouping their money. So the RBI’s guidelines requires that the assets should be liquidated to recover whatever is possible and compensate banks from which these firms had taken loans and then defaulted. But the assessment is that liquidation would yield the…

With Imran Khan’s Pakistan Tehreek-e-Insaaf (PTI) or “Movement for Justice” winning 116 of the 272 seats filled through election in Pakistan’s National Assembly, the former cricketer is set to be installed as his country’s next Prime Minister. So attention has now shifted to how he would address the  ‘crisis’ the country faces. That crisis is not a crisis of growth. Pakistan has registered year-on-year growth rates exceeding 5.4 per cent in the three consecutive years ending financial year 2017-18, a record matched this century only in the globally-synchronised, high growth years 2003-2007. Nor could it be identified as a crisis…

Among the pro-farmer policies that the NDA government claims to have initiated, one often flagged is the modified crop insurance scheme titled Pradhan Mantri Fasal Bima Yojana (PMFBY). Effective as of kharif season 2016, this scheme is supplemented with the Restructured Weather Based Crop Insurance Scheme (RWBCIS). While in the former crop loss is computed by comparing actual yield in a season based on crop cutting experiments by state government agencies with an indicator of expected or ‘threshold’ yield, in the latter it is computed using leading weather indicators. Together, the schemes promise enhanced and more reliable crop insurance for…

These are uncertain times for emerging market economies (EMEs) like India. They have been important destinations for investments financed by the cheap liquidity that was pushed into the financial system by developed country central banks attempting to address the financial crisis of 2008 and after. The result has been the accumulation of large sums of portfolio investments in their equity and debt markets. This has generated fears that, as central banks in the US, EU and elsewhere unwind their easy money policies and raise interest rates from their historic lows, this capital will exit the emerging markets. Once access to…