There is fresh rage on the bad state of law and order in Indiatoday. That rage is entirely appropriate.My father was born in 1926 and experienced British rule. One of thehigh points of his life was participation in the freedom movement. Heused to say to me with great regret that under British rule, the ShivSena would have never arisen. What has happened in India is adisgrace.The interesting and important question is: How can the problems besolved?Moral outrage does not lend itself to good policy analysis. As withthe problem of corruption, the problem...
Sunday, 23 December 2012
Thursday, 20 December 2012
The next interesting development after ICE trading of rupee futures: CME will launch rupee futures soon also. See CME follows ICE into rupee futures by Tom Osborn on Financial News.ICE and CME are the world's top exchanges and they are serious rivals for the global rupee market. These recent developments add up to a substantial change in the outlook for the rupee as an internationally traded currency. The rupee will become more prominent as a globally traded and liquid market. And, ICE and CME are likely to do well, thus accelerating the decline...
Wednesday, 19 December 2012
A recent literature has explored the effectiveness of capital controls (a href="http://www.brookings.edu/~/media/Projects/BPEA/Fall%202012/2012%20fall%20klein.pdf">Klein, 2012, a href="http://voxeu.org/article/how-effective-were-2008-2011-capital-controls-brazil">Yothin, Noy and Zheng, 2012, a href="http://macrofinance.nipfp.org.in/releases/PS2012_CapitalControls.html">Patnaik and Shah, 2012). In a recent paper on trade flows, we find that unofficial capital flows through the channel of trade misinvoicing are an additional...
Monday, 17 December 2012
As part of the NIPFP-DEA Research Program, we have been running a conference series in the fields of macroeconomics and finance. The 10th of these conferences was a joint effort with Journal of International Money and Finance: a subset of the papers will appear as a special issue on the Macroeconomic and financial policy challenges of China and India. The materials of the conference are up on the website....
Friday, 14 December 2012
Ruminating over The Republic by Plato is the first step to thinking about politics and the State, and many angry young men that try to think about India do wrong by a href="http://ajayshahblog.blogspot.in/2011/06/can-we-get-back-to-track-on-corruption.html">skimping on their intellectual foundations. a href="http://www.livemint.com/Opinion/xlDkKDre1EI4JKKTm5pFgP/Arvind-Kejriwal-and-the-economic-illiteracy-in-public-life.html">Saugato Datta in Mint worries about similar problems in the domain of economics./a/aa href="http://ilapatnaikblog.blogspot.in/2012/12/identify-this.html">IlaPatnaik...
Thursday, 6 December 2012
Tuesday, 4 December 2012
Ronald Coase has an interesting new piece titled Saving economics from the economics profession. You may like to see What is wrong with Economics on this blog.Last week, in the US, I heard that the number of Ph.D. graduates coming out vastly exceeds the number of academic job openings. Most economics Ph.Ds. are going to end up in non-academic jobs. In fields like Physics, the basic arithmetic became clear early on. Each academic in a research university produces 12 Ph.D. students, on average, over his or her life. In steady state, 11 of them...
Thursday, 29 November 2012
Intercontinental Exchange has announced cash-settled futures on the Indian Rupee and the Brazilian Real [press release] [Saabira Chaudhuri in the Wall Street Journal]. With this, ICE is the first serious global exchange to start trading in the rupee.Vimal Balasubramaniam and I have pointed out that the global market for the Indian rupee is adding up to some fairly big numbers. I recently noticed that in 2010, even though China is a much bigger economy than India, rupee trading was 0.9 per cent of global currency trading while RMB trading was...
Sunday, 25 November 2012
A talk by Pratap Bhanu Mehta.Governance 2.0 by Ila Patnaik, on the notions of autonomy and independence for agencies like the CVC.Trampling on the individual in India:Jim Yardley in the New York Times. An `Oppressive' Regime Limits Free Speech in India, Civil Liberties Expert Says in the New York Times. How two Mumbai girls changed the Thackeray conversation by G. Pramod Kumar on Firstpost. Why are India's politicians scared of social media? by Mahima Kaul on UnCut. Conceived in haste, India's Internet law now targeted for...
Tuesday, 20 November 2012
A recent article: Did the Indian capital controls work as a tool for macroeconomic policy, Ila Patnaik and Ajay Shah. IMF Economic Review, page 439--464, volume 60, 2012.At the main page for this paper, you will find all the materials: a video presentation, PDF paper, link into the journal, a compact summary on vox...
Thursday, 15 November 2012
We have released a cost-benefit analysis of the UID system. In one line, the result of the calculations, under fairly conservative assumptions, is that the IRR of building the system is 53% in real terms. Hence, building UIDAI is a pretty good use of public money.Through this page, you can access a short and accessible explanation, a video presentation, and the full PDF paper. We have also released the spreadsheet used in our calculations, so that others can modify the assumptions or other numerical values, and obtain alternative answers.This is...
Monday, 12 November 2012
Venue: Institute of Rural Management, Anand (Gujarat). Dates: 04-06 December 2012. In recent years, land related issues have emerged at the top of the social and political agenda. A three day workshop on theoretical aspects and practical implications of property rights for rural transformation is being organised at IRMA, jointly with ARCH, Gujarat, and Liberty Institute, New Delhi, with the support of Friedrich Naumann Foundation. The workshop will deal with topics such as the political evolution of property rights, their constitutional significance,...
Saturday, 10 November 2012
China: Worse than you ever imagined by Ian Johnson in the New York Review of Books.Totalitarianism, Famine and Us by Samuel Moyn in the Nation.Stalin's cannibals by Ron Rosenbaum, on Slate.The worst of the madness by Anne Applebaum in the New York Review of Books.Stalin and Hitler: Mass murder by starvation by Timothy Snyder in the New York Review of Books.Kakfa in Beijing by John Garnaut and Sanghee Liu in Foreign Policy.Bloc heads by Louis Menand in the New Yorker magazine.Yegor Gaidar's story about the dying days of the USSR is fascinating....
Thursday, 8 November 2012
Proposals to spend more on government programs in India are generally criticised on the grounds that this is sending more money down a leaky pipe. In addition to the problem that the pipes leak, there is an equally big problem that we have no idea about what happens at the other end.In order to build and refine a system, the first foundation that has to be laid is that of measurement. What you measure is what you can manage. In India, all too often, government agencies and programs start out with lofty ambitions, and embark on spending money to...
by Anand Sahasranaman. The recent approach paper of the Financial Services Legislative Reforms Commission has brought a fresh focus on consumer protection. What are the possible frameworks for financial consumer protection in India, and what would be the core elements of an ideal framework? This is the question that the IFMR Financial Systems Design Conference 2012 sought to answer. The Conference titled Envisioning the Future of Financial Consumer Protection in India was held at IFMR Trust, Chennai, on 31st August and 1st September 2012. The Conference...
Monday, 5 November 2012
In consideration of a number of requests for extension of the last date for paper submission for Financial Law & Policy: An Inter-disciplinary Approach, the dates for submission of paper and intimation of shortlisted papers have been extended which are as follows: Crucial Dates The last date for submission of the completed paper: November 12, 2012 (23.59 hrs) Intimation of shortlisted papers: November 20, 2012 Date of the seminar: December 01, 2012Other details about the seminar are as provided in my earlier po...
Monday, 29 October 2012
by Harsh Vardhan.The CEO of a leading bank recently caused a flutter in the bankingcommunity by demanding the abolition of the Cash Reserve Ratio (CRR).RBI has promptly appointed a committee to look at this issue. The reserveratios, CRR and SLR (Statutory Liquidity Reserve), are an importantfeature of Indian banking regulation. Alongside the debate about CRR,and new thinking about how monetary policy should be conducted, weshould also review the SLR. SLR is a muchbigger burden on the banking system and has no role in monetarypolicy.What is SLR?SLR...
Saturday, 27 October 2012
While many researchers have started studying corruption, as of yet, the field is remarkably bereft of tangible policy choices that would yield reduced corruption. As I read The other side of reforms by A. K. Bhattacharya in the Business Standard, and Obtaining financial records in China by David Barboza in the New York Times (which describes the modus operandi of the New York Times' remarkable expose of corruption in China at the level of the Prime Minister, also by David Barboza), I thought there is one tangible policy lever through...
Friday, 26 October 2012
A. K. Bhattacharya in the Business Standard on how the UPA is faring well without Pranab Mukherjee.As we ponder the fundamental challenges that India faces, it is interesting to read Boss Rail by Evan Osnos in New Yorker magazine.India's new approach lets individual states take the lead on development by Simon Denyer in the Washington Post.Madhavi Goradia Divan in the Indian Express on defamation law.Towards better financial regulation and What is regulation for, by Ila Patnaik, on the big picture of the FSLRC...
The graph above shows headline inflation in India, i.e. year-on-year CPI-IW inflation. The informal target zone for policy makers in India is to have year-on-year CPI-IW inflation between four and five per cent. This is shown on the graph as blue dashed lines.From February 2006 onwards, inflation breached the upper bound of five per cent. It has never come back below five per cent. The red line shows the overall average inflation from 1999 to today:...
Wednesday, 24 October 2012
Who does agriculture in India? Here's some fascinating evidence, from the CMIE Household Survey for the quarter Apr-May-June 2012. This is a survey of 700,000 individuals in 150,000 households all across India, both urban and rural. Let's look at the share of the working population, in each age group, that's engaged in agriculture:Age 15-20 19.69Age 20-25 21.22Age 25-30 24.70Age 30-35 28.22Age 35-40 30.91Age 40-45 32.76Age 45-50 34.75Age 50-55 36.96Age 55-60 40.02Overall 31.31As we see, in the overall dataset, 31.31 per cent of the working population...
Monday, 15 October 2012
My previous blog post, on not cancelling trades after a fat finger trade, elicited some interesting email conversations. In a nutshell, there are two views of the world. One camp argues that it is important to prevent fat finger trades and other such weird episodes. This requires building an array of preventive measures. The other side argues that the costs of prevention are high, and what's really important is to make a resilient market that is able to absorb shocks.Prevention is difficult for two reasons:NSE and BSE are some of the biggest exchanges...
Saturday, 13 October 2012
When inexplicable things happen on an exchange, many people argue that those trades should be cancelled. I think it is useful to be clear about the test to apply for this.The key question should be: Did something foul up in the order matching software? If order matching went wrong, or if there was a systematic breakdown of connectivity to the exchange, then there is a case for cancelling trades. We'd say that persons placed certain orders, but the exchange mis-handled the orders, hence the observed series of matched trades and prices is unfair.If...
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