C. P. Chandrasekhar’s Blog

After a year of huffing and puffing, President Donald Trump has launched, since January this year, what some are terming a trade war—fought in scattered industrial and selected locations. It started with quotas and tariffs on solar panel and washing machine imports, but then moved menacingly to steel and aluminium. Tariffs on these two products have been imposed under a WTO clause relating to imports that threaten national security, even while Trump’s rhetoric refers to competition from "cheap metal that is subsidized by foreign countries", which amounts to a completely different ‘dumping’ charge. With the tariff hike on steel at…

The global economy, the soothsayers would have it, is riding the back of a recovery. Growth is seen as having consolidated in the US, picked up remarkably in Europe, and returned, after a minor blip, in China and India. Encouraged by these signs, the IMF in January estimated global growth in 2017 at 3.7 per cent, which was marginally above previous projections, and forecast growth at 3.8 per cent in 2018 and 2019. A key driver here is the effect that the Trump administration’s tax cuts and promise of increases in infrastructure spending are expected to have on demand and…

Speaking at the Krishi Unnati Mela 2018, Prime Minister Modi reportedly complained that confusion is being spread about the announcement on minimum support prices (MSPs) made in the Finance Minister’s 2018 budget speech. The speech had assured farmers that they would in future be able to sell the output of notified crops to the official procurement agencies at prices to be set at a minimum of 1.5 times the cost of production. The confusion being created according to the Prime Minister relates to how costs of production would be calculated. In an attempt to clarify, he stated that beside costs…

As the shakeout in the Indian mobile telephony market continues, price wars are being complemented by verbal wars. The most recent spat involves the Telecom Regulatory Authority of India as well. Its latest revised tariff order has been attacked by Airtel and Vodafone (and by the Cellular Operators Association of India, or COAI) for favouring Reliance Jio, the aggressive new entrant that is seeking to get ahead of the other two, in what is clearly becoming a three-horse race in the industry. The “split” within the COAI, with long-time members and a new entrant on opposite sides, is indicative of…

Globally, equity and bond markets are turning bearish. Analysts seem to be unanimous in their explanation: the era of cheap and abundant money, that was leveraged for investments in capital markets, is over. Governments and central banks are tiring of the long spell over which, having abandoned the initial post-crisis fiscal stimulus, they have resorted to interest rate cuts and infusion of liquidity (through ‘quantitative easing) to drive a depressed economy to recovery. One consequence of the resulting environment of cheap and abundant liquidity was that versions of the carry trade flourished. Investors borrowed money cheap and invested in asset…

Its once again a time for exposés of big ticket scams. The headline hogger currently is the alleged huge Rs. 11,400 crore ‘scam’ unearthed in transactions through the Punjab National Bank (PNB) involving diamond merchants Nirav Modi and Mehul Choksi. That this is not an isolated occurrence is established by news of another Rs. 3,700 crore alleged fraud involving Vikram Kothari of Rotomac Pens being reported almost simultaneously. The full details of the possible fraud in either of these cases is yet to emerge. But underlying them is the suspicion that loans or guarantees of huge magnitudes were offered to…

Billed as the last full budget of this second NDA government, Budget 2018 was not expected to surprise. The leadership of that government may be pleased with having played, during its nearly 4-year tenure, with programmes varying from “Make in India” to Swach Bharat Abhiyan, experimented with demonetisation, and launched the Goods and Services tax regime. But while none of these immediately benefited the “common man”, some of them like demonetisation hit the vulnerable, and the GST disrupted production and damaged the operations of the micro, small and medium enterprises (MSMEs). There was also evidence that agriculture had been neglected…

For India’s post-liberalisation poster-child, the software and IT-enabled services industry, recent developments in the global economy are bound to be disconcerting. Even as early signs of a synchronized global recovery emerge, fears of inflation and high interest rates have resulted in a collapse of capital markets. What that could do to the incipient recovery is as yet unclear and the prognosis is uncertain. But for an industry that has been battling a slowdown ever since the 2008 global financial crisis that is clearly not good news. According to RBI survey figures released in December last year, India’s approximately $150 billion…

This Debate contribution describes the promotion of digital rather than cash payments as a form of the financialization of finance, in its role as a payments system, with reference to recent Indian experience. The obsession with digital transactions as a marker of social and material progress is misplaced; it may become yet another means by which finance extracts rentier incomes out of relatively poor populations. Financialisation_Finance (Download the full text in PDF format) (This article was originally posted in the Wiley Online Library)

The tendency of the current government to misinform and conceal is well known. Yet its periodic resort to such practices does not fail to surprise. The most recent example is the decision to sell its shareholding in Hindustan Petroleum Corporation Limited (HPCL) to the Oil and Natural Gas Commission (ONGC), which it owns, ostensibly to strengthen the latter. The decision comes at a time when low oil prices have hurt the ONGC. Yet, the ONGC board has cleared the proposal to buy 778,845,375 equity shares in HPCL for cash at a price of Rs. 473.97 per share. This acquisition of…