Business as usual, in India, is taking us to a destination where RBI & SEBI & company will preside over a minor and inconsequential financial system. The bulk of India-linked finance will take place overseas, and the overseas market will dominate price formation for India-related financial products.Why might this happen?Finance is the business of bits and bytes. Orders being sent to India can be easily switched to other venues. An array of other venues are now springing up:Nifty futures trade in Singapore on the SGXAn array of sophisticated...
Wednesday, 30 May 2012
Monday, 28 May 2012
by ShubhoRoy and Ajay Shah.The macroeconomic settingIndia's macroeconomic woes consist of high inflation, low GDP growth and a drop in asset prices. The loss of momentum is visible in the seasonally adjusted data: IndicatorEarly 2009Latest GDP growth (QoQ, saar) 9.83Q2-20094.25Q4-2011 Inflation (CPI-IW, pop, saar, 3mma)7.5Feb 200912.9Mar 2012 INR/USD48Jan 200956May 2012 The picture is not uniformly bleak. The most important asset price of the economy, Nifty, has not dropped across this period....
Friday, 25 May 2012
All models are wrong, some models are useful. A model reduces complications that are true in return for tractability and insight. In finance, all too often, one complication which has been wished away is transactions costs. A great deal of what we see in the world around us is caused by the costs of transacting. Some of the most important finance is about analysing the causes and consequences of the costs of transacting.The bid offer spread as a...
Monday, 21 May 2012
Raymond Fisman, Florian Schulz and Vikrant Vig have a fascinating new working paper: Private returns to public office, which gives us new insights into Indian politics.We know that elections in India are typically rather close. There is something almost capricious about who wins and who doesn't. The random outcome of an election can, then, be interpreted as randomised allocation into control and treatment. One candidate gets elected, another candidate is very much like him but doesn't get elected.We can then ask the question: what happened to the...
Tuesday, 15 May 2012
Mobis Philipose in Mint, Sunil Jain in the Financial Express: on the SEBI order (by Prashant Saran) on the Tayals. Also see coverage on firstpost.The great debate about Pranab Mukherjee as President of India: readahref="http://www.thehindubusinessline.com/opinion/columns/b-s-raghavan/article3397776.ece">B. S. Raghavanin the Hindu Business Line; ahref="http://www.indianexpress.com/news/the-man-for-all-reasons/947859/0">InderMalhotra in the Indian Express./a/aa href="http://www.business-standard.com/india/news/nick-robinsonred-tape-rules/470471/">NickRobinson...
Thursday, 10 May 2012
The new world of security in IndiaOnly in a police state is the job of a policeman easy.-- Orson WellesThe policemen of India say: It is only by using onerous and intrusive tracking procedures that we will be able to block the terrorism, the tax evasion, the money laundering. But society should be designed for the convenience of the median citizen and not for the convenience of the policeman. Yes, when citizens have liberty, it imposes more work upon the policeman. That is a tradeoff we should favour.In every place in the world, I walk into a coffee...
Sunday, 6 May 2012
A recurrent theme in the field of public administration is the appropriate separation, between things done within government qua government, versus the things that are best contracted out.Example: A fascinating question in finance is the supervisory role of exchanges. Do we want exchanges to be rule makers and the front line of supervision, or do we want them to be mere profit-maximising IT companies who run trading systems, with all regulatory/supervisory functions being performed by SEBI? Is the exchange a public utility or a mere business?In...
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