C. P. Chandrasekhar’s Blog

Around a month ago, The Reserve Bank of India, in a controversial circular, reversed its long-standing policy of not allowing banks to arrive at compromise settlements with willful defaulters or holders of fraudulent accounts. A willful defaulter is defined as “a borrower who refuses to repay loans despite having the capacity to pay up,” and, a fraudster as “one who intentionally cheats the bank with false documents/information and misappropriates the money.” Since the perpetrators of these criminal offences are clearly aiming to cheat banks of their money, they need to be proceeded under the law and their assets expropriated to…

By far the most significant ‘innovation’ in industrial policy under the current NDA government is the production linked incentive (PLI) scheme. It provides an incentive pay out or subsidy of 4-6 per cent of incremental sales based on domestic production. The focus is just on boosting production, since there are no domestic value addition or export sales requirements set. As Raghuram Rajan and his colleague have pointed out, using iPhone production as an example, this can encourage foreign firms to import components and equipment to assemble products here with little value addition. That seems to be okay in the government’s…

In a barely noticed development, the International Monetary Fund (IMF) has “reformed” and extended the conditions it imposes in return for emergency balance of payments support to less developed countries with stressed external accounts. The evidence of that shift comes from Ghana, the West African nation that moved from external debt stress to default in December 2022. The process is likely to be repeated in Sri Lanka. The change is the decision to require restructuring of both internal and external public debt, and not just the latter, as a condition for IMF support. Ghana is, of course, still to get IMF Board…

At the start of May 2023, the central government released yet another statement exuding optimism about the progress of India’s Goods and Services Tax regime, based on the previous month’s collections. The statement said that monthly goods and services tax (GST) collections in April had risen by 12 per cent year-on-year to a record high of Rs. 1.87 trillion. This compared with Rs. 1.60 trillion collected in March, and 1.68 trillion in April 2022. It is worth noting that simple growth in total collections is being presented as evidence of good performance, even if that growth had been preceded by…

Ministers, central bankers, officials and civil society activists returning home from Washington after the Spring Meetings of the World Bank and the International Monetary Fund held in April 2023 were not clear as to what the outcomes of the meetings, however minor, were. To the extent some of them have spoken on what they thought was achieved, opinions diverge significantly. This is of relevance because the Bank and the Fund sit, legitimately or not, at the apex of the international financial architecture. Their roles differ, though in recent times the line dividing their responsibilities has blurred. The World Bank, along…

This propositional paper looks at the World Bank's new roadmap to evolve its mission. As the ongoing crisis of development reveals in the myriad forms it takes, it is clear that the international community and special institutions such as the World Bank, established with the promise that they would advance global development, have failed in their mission. Given that context, what is needed is not just “evolution” but radical reform. In this 75th year of the Universal Declaration of Human Rights, adopted by the United Nations General Assembly on Dec. 10, 1948, what stands out is that, from the perspective of…

Despite the far-reaching implications of debt distress and debt defaults in low- and middle-income countries, efforts at resolution are plagued by delay and ineffective when undertaken. This is largely because the solutions, influenced by unreformed international financial institutions and creditor interests, don’t address core structural issues that result in periodic crises. The need for reform is urgent and the role of civil society organisations in driving that reform crucial. Click here for full article. (This article was originally published on the website of Brettonwoods Project on April 19, 2023)    

The world economic outlook released in time for the recently concluded spring meetings of the World Bank and the IMF presents a gloomy picture. Global GDP growth is expected to fall from 3.4 percent in 2022 to 2.8 percent in 2023, and recover only marginally to 3.0 percent in 2024. Advanced economies are expected to experience a more pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. These projections have to be seen in the context of a long and deep recession that has afflicted the global economy since the North Atlantic financial crisis of 2008.…

The global distribution of surpluses and deficits in the balance of payments, or the excesses or shortfall in foreign exchange earnings vis-à-vis expenditures, has for multiple reasons been in constant flux. This has implications for the directions in which capital must flow or surpluses must be recycled to deficit countries to ensure global stability and prevent the disruption of development in those countries. One factor that influences the distribution of surpluses and deficits is the uneven development of capitalism with a small set of ‘advanced economies’ at one pole recording surpluses and a large number of less developed or underdeveloped…

C. P. Chandrasekhar speaks to us about the Silicon Valley Bank crisis and whether the financial contagion is likely to spread to India and other countries. Last week, California-based Silicon Valley Bank, the 16th largest bank in the United States, collapsed, sending shock waves through the start-up universe. Then two more banks – the crypto-currency focused Signature Bank and Silvergate Capital – shut down, sparking fears of wider financial contagion, similar to how the collapse of Lehman Brothers in 2008 triggered a global crisis. The American government and the Federal Reserve acted fast to try and avoid precisely such a…