The recent order by the Competition Commission of India on NSE and MCX-SX has a bunch of difficulties based on a lack of understanding of new age industries where a pricing of zero is quite feasible and important, a focus on protecting a competitor instead of upholding competition, etc. I wrote about this in the previous blog post.The most important problem with this order is that it represents a diversion away from the real story. The real story is that trading in the Indian rupee is leaving India.The rupee is traded on three venues: The onshore...
Thursday, 30 June 2011
Wednesday, 29 June 2011
India's governance crisis: Tales from the battlefront
Posted on 12:57 by Unknown
The Competition Commission of India (CCI) has written an order on NSE and MCX-SX in the currency derivatives market. Even if you do not take interest in financial markets, this is an interesting episode in Indian governance. It illuminates the larger problems of building regulatory agencies, and India's middle income trap.In an impressive show of strength with the media, there was a flurry of editorial and other commentary praising CCI for this order - even before the order had been released. The files are now on the CCI website....
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How to damage market quality
Posted on 07:09 by Unknown
The problem of measuring the priceIn a liquid and transparent financial market, there is no doubtabout the price. There is high pre-trade transparency, becauseorders are visible on the limit order book, and the best estimate ofthe true price is (bid+offer)/2. You glance at the screen and you knowwhat is the price.In a non-transparent market, it is hard to know the trueprice. Special schemes have to be constructed in order to measure theprice. Price measurement does not happen `for free' as a minor sideeffect of the very trading process.Why price...
Monday, 27 June 2011
The impending cabinet reshuffle: A few interesting links
Posted on 12:16 by Unknown
The UPA-2 seems to be trying to come back into the game with a new look cabinet:Annie Banerji on Reuters blogs.Anil Sharma in the DNA.T. C. A. Srinivasa Raghavan in the Hindu Business Line.The gossip in Delhi.Reportage in the Indian Express.Reportage in the Hindu.James Lamont in the Financial Times blo...
Sunday, 26 June 2011
Envisioning future scenarios for India and China
Posted on 04:00 by Unknown
Suppose we go back to 1870 and envision future scenarios for four interesting and promising countries.Britain: the incumbent, the pioneer of the industrial revolution, home of Newton and Darwin, with a head start on building institutions, with sound economic policy and deep integration with a global empire.Germany: the rising power of Europe, rapidly catching up with the frontier (and ahead of Britain in some fields). More centralisation of power, which perhaps gave an edge in certain things.The US: a vast country blessed with a...
Thursday, 23 June 2011
Great SEBI orders, continued
Posted on 09:22 by Unknown
Today we get the privilege of reading another amazing SEBI order: on Sahara. You might like to see some of the other orders which have caught my eye.It takes immense competence and integrity to go after the facts and write a top quality order like this. The individuals and institutions who add up to this capability are the essence of attacking India's problem of corruption.Does someone know how much money will have to flow back from Sahara to the investors of India, as a consequence of this order? And how will Sahara do fund-raising to meet this...
Monday, 20 June 2011
Making sense of the Mauritius tax treaty
Posted on 08:47 by Unknown
Since the Mauritius treaty is back on the front burner, do see some sophisticated thinking on how the tax system can be made compatible with globalisation: Page 29 (`Residence based taxation of finance') in Indian social democracy: The resource perspective by Vijay Kelkar and Ajay Shah, February 2011. Chapter 9 of the Ministry of Finance Working Group on Foreign Investment, 30 July 2010. The Mauritius Code by Ila Patnaik, in the Indian Express on 12 July 2010.An entry titled India's financial globalisation, in Encyclopedia...
Wednesday, 15 June 2011
Inflation targeting: What have we learned
Posted on 03:25 by Unknown
Inflation targeting: What have we learned, a seminar by Spencer Dale, Chief Economist of the Bank of England, at NIPFP, 16 Ju...
Monday, 13 June 2011
Interesting readings
Posted on 20:21 by Unknown
Sanjaya Baru in the Business Standard on India's relationship with Taiwan.I added Monsoon: The Indian Ocean and the Future of American Power by Robert D. Kaplan to my suggestedIndiabookshelf. It is a truly fabulous book.Sanjay Banerji in Business World on how socialism went wrong in Bengal.Minxin Pei has anexcellent note on the CASI website titled Dangerous misperceptions:Chinese views of India's rise.On 16 May, I had written a collection of links titled a href="http://ajayshahblog.blogspot.com/2011/05/new-low-for-indian-economic-policy.html">Anew...
OECD-NIPFP Symposium
Posted on 02:18 by Unknown
An interesting event, linked to the release of OECD's Economic Survey of India, 20...
Sunday, 12 June 2011
Can we get back to track on corruption now?
Posted on 03:16 by Unknown
India's corruption crisisSomewhere in 2010 or so, I started getting much more gloomy about India's problem of corruption. For a snapshot of the zeitgeist, see this group of articles from August 2010. A large swathe of the economy operates in close contact with government. If government will not sensibly make rules, and then fail to impartially enforce rules, then the entire enterprise of the market economy is under threat.In the months that followed, the topic of corruption exploded in the Indian public policy discourse. The two main events were...
Friday, 10 June 2011
India's privatisation problem
Posted on 12:47 by Unknown
When the UPA came to power, the word privatisation was buried,partly out of deference for the communist parties which weresupporting the UPA. The sale of shares did revive after the UPA-2commenced [ahref="http://www.divest.nic.in/SummarySale.asp">history]./aOn a global scale, the experience with firms like British Airwaysand AlItalia has done a lot to persuade people that government is aterrible owner of firms. As a consequence, even though governmentsworldwide took up ownership of many financial firms during the globalcrisis of 2008 and 2009,...
Sunday, 5 June 2011
Freedom of speech in Pakistan and India
Posted on 22:01 by Unknown
One of Pakistan's more remarkable journalists, ahref="http://en.wikipedia.org/wiki/Syed_Saleem_Shahzad">Syed SaleemShahzad, was tortured and murdered, probably by Pakistan'sISI./a a href="http://www.atimes.com/atimes/South_Asia/ME27Df06.html">Part one of the article, in Asia Times Online that got him killed. /a a href="http://www.atimes.com/atimes/South_Asia/MF03Df02.html">Saleem in the shadow of Massoud by Chan Akya, also in Asia Times Online, tries to ask why this would make sense. And once you start thinking about this,...
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