C. P. Chandrasekhar’s Blog

While Pakistan is beset by multiple crises on the political, social and economic fronts, media attention is focused on the debt crisis and analysts are preoccupied with the question whether the IMF would soon release a last tranche of $1.1 billion out of a $6.5 billion loan programme sanctioned in July 2019 and subsequently extended and enhanced. That tranche is presented as a prerequisite for a resolution of the debt crisis facing the country. The government in Pakistan, beleaguered by multiple crises, also seems convinced by this argument and is struggling to meet conditions that have been set by the…

A strike on the Adani group by short-seller the U.S.-based Hindenburg Research has led to the unravelling of the Gautam Adani story, which celebrated the spectacular rise, in an extremely short period of time, of the wealth of a man and his business empire. Much of that wealth disappeared following a crash in the stock values that shaved more than $100 billion off the market capitalisation of seven publicly listed Adani group companies. That led to the withdrawal, post-launch, of a $2.5 billion share issue and, possibly, of rounds of borrowing. Meteoric Rise, Capital-Intensive Projects Following those events, attention has shifted to what this episode…

If we ignore the hype that accompanies and follows the presentation of the Centre’s annual budget, there are principally two strands in it that have attracted attention. The first is the claim of the finance minister Nirmala Sitharaman that in a growth-accelerating intervention, the step-up in capital or investment expenditure during the second term of the Modi-led government is to be sustained with a further 37 price from the Rs. 7.3 lakh crore revised estimate for 2022-23 to Rs. 10 lakh crore in 2023-24. The second is the evidence that budgetary allocations point to significant reductions or scaling down of…

The semi-annual Financial Stability Report from India’s central bank signals that India’s banking system, especially the public banking system, has put behind it the stress from disturbingly high non-performing or bad loans on its books. The story as officially told is now familiar. As a result of “aggressive lending practices” and “wilful default/loan frauds/corruption in some cases”, stressed assets in the banking system rose sharply along with a rise in aggregate gross advances of public sector banks (PSBs)from Rs. 16,98,570 crore at the end of March 2008 to Rs. 45,90,570 crore at the end of financial year 2014. Since this…

With the deficit on India’s trade in goods and services widening, from $19 billion in the quarter ending September 2021 to $49 billion in the corresponding quarter of 2022, net inward transfers recorded in the current account have become crucial to rein in the current account deficit. Personal income transfers provided India with a buffer of $25 billion during July-September 2022, of which $16 billion were on account of worker remittances, according to figures from the Reserve Bank of India (RBI). India is the world’s largest recipient of remittances (far ahead of second-placed Mexico), according to the World Bank’s Migration…

As the number of developing countries likely to default on external debt service commitments increases, the effort to resolve debt crises in countries that have defaulted many months back remains unsuccessful. The experience of Zambia, the first African country to default following the onset of the COVID-19 pandemic, is telling. The reason is the presence of private creditors, especially bondholders, who are unwilling to accept the haircuts (recommended by the International Monetary Fund) needed for a potentially sustainable solution. This has implications for other African countries like Ghana that have also defaulted recently, but in whose case private creditors dominate,…

Tight monetary policies in rich countries obviously affect people in the countries where they are applied, but they also cause ripple effects across the world. We were already in a very unequal world before the most recent global price increases. Most developing countries were not able neutralize the damage inflicted by the pandemic, largely because they had much weaker fiscal stimuli. Of nearly $14 trillion in additional fiscal spending by the end of 2021, more than 80 percent was from just ten advanced economies, and more than half was from the U.S. This fiscal inequality worsened after the start of…

As COP27, the climate summit at Sharm el-Sheikh in Egypt, ended after a being prolonged, assessments of what it achieved were mixed. But tthe overwhelming sense was that the summit had yielded little, since on most counts it had not gone beyond the pledges agreed to at COP26 held in Glasgow last year and incorporated in the Glasgow Climate Pact. However, one ‘failure’ has received most attention, which is the absence in the final declaration of a proposal mooted by India and many less developed countries, calling for a phase down of all fossil fuels and not just coal. Since…

The IMF’s most recent World Economic Outlook, released in time for the annual meetings of the IMF and the World Bank in Washington, presents a confusing picture of what shapes the present global conjuncture. This at a time when most economies are either contracting or recording lower than expected growth, even while global inflation in 2022 is forecast at 8.8 and is running at levels that are their highest in decades. The confusion stems partly from the conservative lens through which the IMF views the world. It is also an outcome of material circumstances, characterised by the simultaneous operation of…

The long-standing debate on whether India’s public sector banks should be privatized has resurfaced in recent days. Two articles, besides numerous statements from advocates of ‘reform’, triggered this round of debate—one wittingly and the other, perhaps unwittingly. The contribution that argued for immediate action in the form of privatization, and was presented at the India Policy Forum, was authored by two established and well-known economists (Poonam Gupta and Arvind Panagariya) who have been closely engaged with Indian policy making in senior positions. It makes a case for privatisation of all public banks, except for the State Bank of India, which…