C. P. Chandrasekhar’s Blog

In recent years, when the economy as a whole performed poorly, reports on how old and new businesspersons accumulated huge volumes of wealth in short timespans have been commonplace. There is also evidence that conspicuous consumption is on the rise. This has led observers to conclude that income and wealth inequality in India has increased. Hard evidence on the extent of that increase is difficult to come by. One reason is that official surveys of trends in income in different income classes are not available. Using consumption surveys and treating consumption expenditure as a proxy for income does not help.…

In early December, the State Bank of India (SBI), which dominates the country’s banking sector announced that it had entered into a partnership with Adani Capital, a private sector non-bank finance company (NBFC). The aim was to engage in “co-lending” to farmers to help them buy tractors and farm implements, and in the process increase efficiency in farm operations and raise productivity in farming. The announcement surprised many and angered quite a few. That response was partly influenced by the perception that the Adani group, being close to the current government, was receiving favourable treat ment in multiple are, that…

State governments in India are experiencing a fiscal crisis that would adversely impact their development and welfare expenditures in the coming years. As per the revised estimates for 2020-21 collated by the Reserve Bank of India, after averaging 2.7 per cent of GDP over 2012-17 and 2.5 per cent of GDP over 2017-20, the gross fiscal deficit of the states rose sharply to 4.7 per cent of GDP in pandemic year 2020-21 (Chart 1). The revised estimates (RE), which are available towards the end of the fiscal year, have in the past been adjusted downwards when final figures become available…

The near relentless bull run on India’s stock markets seems to be faltering, with signs of a descent from recent peaks. These signs of investor reticence are visible across emerging markets, with India being one of the better performers. While short-term international and domestic developments are blamed for that reticence, there is a more serious fear keeping policy makers and central bankers awake in these emerging market economies. That is the prospect of an exit of foreign investors from their equity and bond markets, consequent to a readjustment of monetary policy in the advanced economies. Across the world, there is…

In recent weeks the media have featured stories bordering on the alarmist about a coal shortage in India. Coal inventories with thermal power plants had fallen to levels at which major country-wide power outages seemed inevitable. Fortunately, that has not (as yet) materialized, but it is indeed true that coal inventories with the power producers did collapse from the equivalent of around 30 days requirement to that for a couple of days or more in the case of many plants. According to data from the 135 plants with over 165 GW of installed generation capacity monitored by the Central Electricity…

As COVID-19 infection rates fall and demand revives the world over, the new global fear is that persisting supply chain disruptions could trigger inflationary trends that would be more than transitory. In India, however, the consumer price index that was on the rise between January and July 2021 has since been in decline (Chart 1) with the inflation rate relative to the corresponding month of the previous year falling from 6.3 per cent in June 2021 to 4.3 per cent in September of that year. This is indeed surprising for two reasons. First, a relentless spike in the prices of…

A charade played out in the weeks preceding the fall meetings of the IMF and the World Bank has subsequently occupied time that should have been devoted to more crucial issues such as a looming debt crisis, inequalities in vaccine distribution and finance for mitigating and adapting to climate change. G7 governments and IMF directors have been preoccupied with the question as to whether Managing Director Kristalina Georgieva had in 2018 manipulated the results of the World Bank’s annual (ease of) Doing Business report (DBR), when she served as the chief executive of that institution, and whether she should for…

China’s Evergrande group, identified as the world’s most indebted property company with accumulated liabilities in excess of $300 billion, missed an interest payment instalment due on September 23, 2021 on bonds borrowed through US dollar bond markets. Though the company enjoys a 30-day grace period to pay up and avoid being in default, the absence as yet of any clarification on the missed instalment has increased uncertainty. Markets seem sceptical that the firm would meet in full the $129 million of interest payments on its bond issues due this month and the $850 million due by year end. Evergrande’s share…

Though not featuring in any of the three farm laws, the Minimum Support Price (MSP) at which the government promises to procure 25 different commodities through different agencies, is a central issue in the standoff between the government and protesting farmers. The latter fear that the implementation of the three laws will end the MSP regime, with the government withdrawing from procuring output at a remunerative cost-plus price. The response of the government and advocates of reform has been that sale at the MSP is resorted to or available only to a few farmers. That opportunity, it is argued, would…

Carbon prices in the European Union (EU), or the value of one unit of an EU allowance (EUA) that gives the holder the right to emit one tonne of carbon dioxide (or its equivalent of other greenhouse gasses), are soaring. From 33.69 euros per tonne at the beginning of the year, the prices of EUAs traded through the EU’s emission trading system (ETS) had risen to a high of 62.75 euros on September 9, or by more than 80 per cent. Since the ETS was created to generate market-driven price signals that would influence the volume of emissions by firms,…