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Wednesday, 11 September 2013
Monday, 9 September 2013
Implications of bringing commodity futures into the Ministry of Finance
Posted on 10:21 by Unknown
Essentially everywhere in the world, we see unification of trading in all kinds of products -- spot or derivatives, equities or currencies or fixed income or commodities etc., OTC or exchange. It makes too much sense to reap economies of scale and economies of scope, both in the private sector and in the work of regulation and supervision. The arrangement in India, where the Forward Contracts Regulation Act (1952) envisages the Forward Markets Commission that is a part of the Department of Consumer Affairs, is a silly one.Everything we have learned...
Posted in commodity futures, financial sector policy, legal system, policy process, success
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Thursday, 5 September 2013
Interesting readings
Posted on 19:30 by Unknown
An editorial in the Business Standard on getting away from gerontocracy.An editorial in the Indian Express on the next steps on pensions and the next steps on legislation.Anil Padmanabhan in Mint about the people in India who would like for India to remain focused on poverty. I would add one more interest group in this: Development economics.The burqa joins the league of cape and cowl by Mahvesh Murad.N. Sundaresha Subramanian in the Business Standard reports on the parties of India which have the biggest criminal...
Wednesday, 4 September 2013
Implications of the Pensions Act
Posted on 07:19 by Unknown
In 1998, the Ministry of Social Justice and Empowerment setup `Project OASIS', led by Surendra Dave, to engage in deep thinking about pension reforms. The report, which was submitted on 11 January 2000, envisaged an individual account defined-contribution system with central recordkeeping, and recruitment of fund managers by an auction which asked for the lowest fees+expenses.This was a futuristic vision at the time, as a lot of the surrounding infrastructure had not fallen into place. In socialist India, it was quite novel to propose that households...
Tuesday, 3 September 2013
A season for bad ideas
Posted on 03:36 by Unknown
One feature of each period of turbulence is that we get an upsurge of out of the box thinking. While it is always good to think out of the box, these innovative ideas must also make sense. If I were a teacher of economics, I would use these in class as demos of how not to do economics:Coordinated intervention by emerging markets. Andy Mukherjee nails this one.Devesh Kapur and Arvind Subramanian want an import tariff -- that they term a `third best measure' -- to do things that exchange rate depreciation does better.Veerappa Moily says we should...
Tuesday, 27 August 2013
Finding the middle road between Gotham City and Jurassic Park
Posted on 17:46 by Unknown
In the Independence Day special issue of Forbes magazine, I have an article titled Rightsizing the State. At a recent show organised by Dun & Bradstreet, I joked that the puzzle in India is that of finding the middle road, between Gotham City on one hand (a murky world of corruption and criminality) and Jurassic Park on the other (with socialist dinosaurs destroying the economy). Pessimists about India might say that if the goons won't get you, the dinosaurs wi...
Sunday, 25 August 2013
Capital controls: what might sound nice at 40,000 feet is a big mess on the ground
Posted on 03:46 by Unknown
Every now and then, some people get enamoured about capital controls as a tool for macroeconomic policy. The actual operation of capital controls on the ground is a mess.As an example, consider the recent decision to hinder outbound capital flows by individuals and firms. At first it sounds fair and plausible. We are hindering outbound capital flows by households by interfering with their purchase of gold, and in similar fashion we should intefere with their outbound capital flows through other routes.Vatsal Gaur and Sidharrth Shankar review this...
Saturday, 24 August 2013
The talent pool in Macro and Finance
Posted on 23:17 by Unknown
by Percy Mistry.Dhiraj Nayyar, Director of the Think India Foundation, has just written an excellent, sympathetic piece about Dr. Subbarao's tenure as Governor of RBI.It is full of pathos because Dr. Subbarao is a decent, dignified and extraordinarily intelligent, capable man with a powerful sense of politeness and decorum. These days: decency, decorum, dignity and politeness are virtues that, in modern political, bureaucratic and corporate India, seem conspicuous by their absence. So anyone who exhibits them, should score highly in anyone's book.Dr....
Friday, 23 August 2013
Reverse Dutch disease from reverse resource curse
Posted on 21:53 by Unknown
The problemShekhar Gupta and Swaminathan S. A. Aiyar have pointed out that our domestic policy logjam is leading to the import of natural resources which are amply present in mines in India. This is giving a bigger current account deficit and a weak rupee.I feel this is not such a bad thing. Many countries have been afflicted by the resource curse and many countries have been afflicted by Dutch disease. We are blessed with reverse resource curse and reverse Dutch disease. Here's the argument.Reverse resource curseThe idea of the resource curse...
Thursday, 22 August 2013
Too sensational: The defence of the rupee
Posted on 01:46 by Unknown

Miss Prism: Cecily, you willread your Political Economyin my absence. Thechapter on theFall of the Rupeeyou may omit.It is somewhat too sensational.-- Oscar Wilde,The Importance of Being Earnest,1895.The graph above superposes the INR/USD exchange rate and Nifty, both reindexed to start at 100 on 15 May 2013....
Tuesday, 20 August 2013
Why did we bumble on the defence of the rupee?
Posted on 17:52 by Unknown
I have a column in the Economic Times today on this subje...
Wednesday, 14 August 2013
Author: Harsh Vardhan
Posted on 23:34 by Unknown
The case for differentiated bank licenses, 15 August 2013.Rethinking the Statutory Liquidity Ratio (SLR) in Indian banking, 29 October 2012.Should government capitalise public sector banks?, 9 October 2012.White label ATMs, 6 August 20...
The case for differentiated bank licenses
Posted on 23:28 by Unknown
by Harsh Vardhan.The much hyped applications for new bank licenses are in – all 26 of them. Now, RBI will evaluate these applications which will require scrutinising mountains of documents that have been presented.A casual look at the applicants reveals remarkable diversity in their character. The applications include non-banking finance companies, micro-finance companies and brokerage firms. There are established and new firms. There are focused (i.e. single business oriented) and diversified firms. There are public and private firms. A number...
Will the capital controls to defend the rupee work?
Posted on 08:15 by Unknown
We will wake up to the 66th anniversary of free India with reduced freedom. Today, new capital controls were announced. Once every decade, we have to trot out Did the Indian capital controls work as a tool for macroeconomic poli...
Tuesday, 13 August 2013
The convenience of the citizen or the convenience of the government?
Posted on 00:43 by Unknown
Road safety is a problem in India. The authorities are getting push back from the citizenry about the carnage on the roads. What is convenient for them is: to shut down roads.Finding terrorists is difficult. Terrorists can use open wifi networks or trains. What is convenient for the authorities is to shut down open wifi networks or trains.Achieving safety in public spaces late in the night is difficult. What is convenient for the authorities is to force all establishments to close down at 10 PM.In similar fashion, I was disappointed to read Chanpreet...
Monday, 12 August 2013
We don't know much about what the exchange rate ought to be
Posted on 07:29 by Unknown
Many people are confidently saying that the market's price of the rupee-dollar exchange rate is wrong. They think they know what the exchange rate should be. There are many pitfalls along this path.The simplest international trade perspectiveTo fix intuition, let's think there are only two countries: India and the US. Suppose there was no capital account. Suppose there was only import and export of goods and services on the current account. In the absence of a capital account, in every time period, the current account would have to work out to...
Tuesday, 6 August 2013
Was it worth picking a battle on the rupee?
Posted on 17:58 by Unknown
For the last month, financial and monetary policy has pursued the goal of preventing rupee depreciation. I have a column in the Economic Times today titled Should we have picked this batt...
Tuesday, 23 July 2013
Interesting readings
Posted on 21:56 by Unknown
One cool idea for improving the Indian police : video monitoring. We always knew that gender-segregation of society, as is practised in most of traditional India, is deeply damaging. Writing in the New York Times, Adam Grant shows new insights on why men need women. Are India's policy rates too low? by Niranjan Rajadhyaksha in Mint.Atul Gawande in the New Yorker at his best: he has deep insights into how new ideas diffuse. In India, with GDP doubling every decade, we need for new ideas to come into every ...
Monday, 22 July 2013
Re-igniting economic reforms in India: Three key principles
Posted on 23:09 by Unknown
I have a column in the Economic Times today on this subje...
Sunday, 21 July 2013
What platforms might work in Indian politics?
Posted on 10:00 by Unknown
High GDP growth has led to structural transformation, with dramatic change in the composition of the labour force. The latest data from the CMIE Consumer Pyramids database pertains to December 2012, and shows the following occupation structure of the Indian workforce:OccupationShare (Per cent)Small farmer13.39Organised farmer8.69Agricultural labourer8.70Industrial worker7.92White collar worker8.44Manager / supervisor0.53Support staff6.93Businessman7.91Small trader / Hawker3.32Self-employed professional4.92Home-based worker1.50Wage labourer27.75How...
Saturday, 20 July 2013
A better output proxy for the Indian economy
Posted on 12:00 by Unknown

by Akhil Dua, Pinaki Mukherjee, Radhika Pandey, Ila Patnaik, Pramod Sinha, Ajay Shah.India's emergence as a market economy has been accompanied by the emergence of business cycle fluctuations that are similar to those seen in market economies [link, link]. In understanding business cycle conditions, and in crafting institutional arrangements for stabilisation, it is essential to properly measure output and prices.The problemIndia is in reasonably...
Thursday, 18 July 2013
Low price-points for new kinds of computers
Posted on 12:02 by Unknown
An entry level game consoleA console with quirks, for tinkerers by David Pogue in the New York Times: a gaming computer which is a cube with a 3 inch side, at $100. It runs Android. It is an open design; you can hack the software and hardware.Raspberry PiThis is a complete computer for $35. You have to see it to believe it. Connect in an ordinary smartphone power supply, an Ethernet cable, a USB keyboard, a USB mouse and an HDMI screen, and you're up and running. It boots linux and runs a browser. [link] [link] [link]A bit more money and a lot...
Tuesday, 16 July 2013
Taking a stand on the equity risk premium in India
Posted on 21:28 by Unknown
by Suyash Rai.What is the Equity Risk Premium and why it mattersThe basic intuition in investing is that over and above the time value of money, the return on an investment must compensate for the risk it adds to the portfolio of an investor. In the Capital Asset Pricing Model (CAPM), this rate of return can be computed based on two variables: the risk premium of the market on the whole (ERP), and the sensitivity of an asset to the market (Beta). The asset must generate returns equaling the time value of money (a.k.a. the risk free rate) plus...
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