Thirst for Foreign Capital
Jan27th 2012, C.P. Chandrasekhar
Concerned about the fall in FII investments and the financing of the growing current account deficit, the government has allowed a new group of foreign investors to invest directly in India's equity markets. To the extent that the measure is successful, it would mark a transition towards allowing greater presence of speculative players in the Indian markets.
The Lurking Debt Problem
Dec 19th 2011, C.P. Chandrasekhar and Jayati Ghosh
Rising interest rates in the domestic market have been encouraging large firms in the Indian corporate sector to resort to foreign borrowing to finance domestic expenditures. In particular, there has been significant rise in the shares of commercial borrowings and short-term debt in total external debt. This tendency is increasing external vulnerability.
Democracy and the Financial Markets
Dec 1st 2011, Jayati Ghosh
In the last few decades, it has become increasingly common for various developing and “emerging” markets to give greater importance to appeasing the interests of financial markets over the requirements of political democracy. Now, this is afflicting developed countries as well, where governments are sacrificing democracy in favour of the markets.
The End of Europe?
Nov 30th 2011, C.P. Chandrasekhar
The crisis in Europe has recently claimed many political victims, with the governments in Greece and Spain, two of the worst hit countries, being changed. The newer governments promise to implement stringent austerity measures that are being proposed as a solution to the crisis. However, how much of austerity can actually be implemented, and what good such measures will do to resolve the crisis is highly doubtful.
European Banks and Asia
Nov 17th 2011, C.P. Chandrasekhar and Jayati Ghosh
European banks are being forced to take a haircut to deal with the region's crisis. Given their greater role in total international funding and the significant exposure of Asian financial systems to global capital, this raises concerns about the likely impact that the European banking crisis would have on Asia.
Protest in the Age of Crises
Nov 2nd 2011, C.P. Chandrasekhar
If the Occupy Wall Street movement is to acquire strength to actually confront the might of finance capital and the state it controls, it must find greater cohesion, with an organisational structure and a programme that goes beyond anger against the capitalist system and the condition to which it has reduced the majority.
What World Leaders Need to Do Urgently (but are not)
Oct 4th 2011, Jayati Ghosh
Global leaders' efforts to control the prevailing anarchy and enable recovery in their economies end up having the opposite effect, because the direction of their macroeconomic policies is all wrong and mobile finance capital is still largely unregulated. Here are five basic steps that world leaders need to take.
Shifting Havens for Capital
Sep 30th 2011, C.P. Chandrasekhar
In parallel with the sudden strengthening of the dollar recently, the value of a whole host of alternative assets has fallen. In the process developing countries that have been the targets of financial investors and those dependent on commodity exports have become particularly vulnerable.
Is China next?
Aug 10th 2011, C.P. Chandrasekhar
While some observers expect a collapse of the property boom in China and a resultant crisis, this seems unlikely to happen because the state, still a major player in China, is responding to the danger in more ways than one.
America's Debt-ceiling Crisis
Aug 4th 2011, Prabhat Patnaik
The compromise between Obama and the Republicans to end the US debt-ceiling crisis has done great damage in terms of a sharp regression in income distribution and a remarkable shift to the Right in the US, as well as an aggravation of the recession in the world economy.
Changing Guard at the IMF?
Jul 6th 2011, Jayati Ghosh
The change of guard at the IMF would not make a difference as long as there is no significant change in the Fund's approach to economic policies. Despite the experience of continually getting it wrong in so many countries over so many decades, the Fund is still persisting in imposing the blatantly counterproductive strategy of fiscal austerity everywhere.
India’s Schizophrenic Banks
Jun 29th 2011, C.P. Chandrasekhar and Jayati Ghosh
The release of the third of the Financial Stability Reports being prepared by the RBI provides new information on the state and behaviour of the Indian banking system. While banks appear well capitalised and their balance sheets robust, at the margin they seem to be embracing too much risk.
International Banks in Emerging Markets
Jun 2nd 2011, C.P. Chandrasekhar and Jayati Ghosh
The presence and growth of foreign banks in emerging markets pose important challenges, both for these countries and the international financial system. Yet the debate on banking re-regulation before and after the crisis focuses largely on the experience of the developed countries, ignoring the implications of developments in the emerging economies.
Revisiting Financial Reform
Apr 8th 2011, C.P. Chandrasekhar
India is doing away with specialised development banking institutions on the grounds that equity and bond markets would finance industrial development. This is bound to lead to a shortfall in finance for long-term investments, especially for medium and small enterprises. The experience of countries such as Brazil, which has thus far not opted for this trajectory, may be educative.
Teaser Mania
Feb 9th 2011, C.P. Chandrasekhar
The Reserve Bank of India's advice to banks to withdraw loans offered with teaser interest rates comes as a precautionary measure to avoid any crisis of the sub-prime type as India remains prone to such crises. Substantial retail lending by Indian banks using teaser rate loans, especially to the housing market, has led to this apprehension.
Going after the Little Guys
Jan 13th 2011, Jayati Ghosh
In order to control their large volume of non-performing assets (most of which are loans made to large corporate houses), several commercial banks in India are selling off their small NPA accounts to private players at a large discount. By doing so, the banks are indirectly putting great pressure on the small scale producers, the middle class families and other similar groups for repayment instead of the large defaulters.
Corruption in the Age of Liberalisation
Dec 3rd 2010, C.P. Chandrasekhar
Liberalisation does not mean that the state withdraws from intervention, but merely that there is a change in the form of state intervention that also enables the state to deliver illegitimate gains to individuals and private players. During the phase of liberalisation in India too, the state seems to be turning into an important site for primitive accumulation for the private sector.
Market Madness Again
Oct 11th 2010, C.P. Chandrasekhar
The signals emanating from the highest economic policy making quarters have helped talk up the Indian market, allowing equity prices to outrace earnings and fundamentals that has resulted in the current speculative boom that seems similar to the bubble that burst not so long ago. This signals that it is time the government regulates and limits the capital inflows.
Ignoring Asset Price Inflation
Sep 22nd 2010, C.P. Chandrasekhar and Jayati Ghosh
The spike in stock prices and the strengthening of the rupee are signals that it is time the government acted to regulate the capital flows that are generating these speculative trends. But while the government and the central bank are responding to inflation in the prices of goods, they are choosing to ignore the much sharper inflation in asset prices.
Money Illusion
Jun17th 2010, C.P. Chandrasekhar
The perception created by the spectrum auction that there is much money in government coffers to pursue a social agenda is an illusion for two reasons. First, whatever money appears to be at hand is not available in the long term. Second, the new receipts from the private sector that create this illusion could be substantially matched by reduced government receipts in other areas or reverse flows to the private sector.
National FDI Concepts: Implications for investment negotiations
Jun 4th 2010, Smitha Francis

Free trade agreements and bilateral investment treaties make privileges for and treatment of foreign direct investors legally binding. Thus, apart from the concerns of being able to capture the ''real'' financial and economic contribution of foreign direct investment inflows, FDI definitions are also about protecting the ''rights'' of the so-defined investors in the host country. Keeping this in mind, the article analyses India's current FDI policy and warns that if we define FDI within our national regulatory framework too broadly to allow instruments and flexibility that were earlier resisted, we would have already lost most of the leverage in investment negotiations at the regional and multilateral levels.
The Spectre of Public Debt
Apr 21st 2010, C.P. Chandrasekhar
The sovereign debt crisis of Greece has led to appeals for a reduction in the size of public debt in countries worldwide. Given that increasing taxes and reducing expenditures may not be considered viable options, there would soon be strident calls for disinvestment and privatisation aimed at generating the resources needed for this.
What Small Government Means
Mar 1st 2010, C.P. Chandrasekhar
Against the backdrop of the debt ‘crisis’ in Greece and growing cries around fiscal "profligacy", this article argues that those demanding austerity of governments that have built up large fiscal deficits and accumulated debt, are not ideologically committed to minimal government. The so-called "backlash" against the state is a demand for governance of a particular kind, that favours the already well endowed at the expense of those who have not shared in the benefits of development.
FDI and the Balance of Payments in the 2000s
Mar 10th 2010, C.P. Chandrasekhar and Jayati Ghosh
The most quoted indicator of the success of economic reform is the noticeable rise in the inflow of foreign direct investment during the last decade and a half. However, the available Indian evidence on the performance of foreign direct investment companies suggests that their balance of payments consequences are adverse.
Financial Euphoria and Aftershock
Feb 24th 2010, Jayati Ghosh
John Kenneth Galbraith's analysis of the capitalist economy in the delightfully written tract ''A Short History of Financial Euphoria'' remains as relevant today as it was then. However, unlike what Galbraith offers, the solution to capitalism's proneness to recurrent bouts of speculation has to go beyond capitalist markets and profit motivation.
The WTO as Barrier to Financial Regulation
Feb 8th 2010, Jayati Ghosh
Many of the financial regulatory proposals now being considered by developed countries might not be feasible given the legally binding commitments these countries have made under GATS with respect to financial services liberalisation. Such WTO rules may therefore get ignored or GATS may require to be renegotiated, for the necessary financial sector reforms to take place.
Are we Heading for Another Global Primary Commodity Price Surge?
Jan 13th 2010, C.P. Chandrasekhar and Jayati Ghosh
Following the unprecedented volatility of global commodity prices in 2007-08, it was widely predicted that the global economic crisis would generate a dampening effect on such prices. But the recent revival of prices especially in some commodities suggests that this perception may be premature. Examining recent trends in global commodity prices and the reasons behind them, the article assesses the prospects for prices in the immediate future.
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