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The de-monetization shock sinks in
INDIA · Report · 21 Dec 2016

Five shocks are playing out: monetary, exports, investment, banking and aggregate demand. The contraction in cash began on November 8 and will worsen until December 31. The shock will gradually be alleviated from January 1 onwards. We estimate that normalcy on cash in circulation will return b...

First facts about the impact of de-monetization upon business cycle conditions
INDIA · Report · 12 Dec 2016

We carefully examine the first five well-trusted data releases about the real economy that report on November 2016. This early data suggests that the shock in the event month (November 2016) was worse than what we observed in September 2008, the event month of the Lehman bankruptcy.

GDP outlook worsens 10 days after demonetisation
INDIA · In Brief · 19 Nov 2016

It has now been more than ten days after the Prime Minister of India announced that the Rs 500 and the Rs 1000 notes will no longer be legal tender. The shock to the economy has not eased as hoped. Instead, the impact is spreading across the economy. At present various sectors are seeing an actua...

“Demonetisation” : The impact of removing 500 and 1000 rupee notes
INDIA · Report · 11 Nov 2016

The demonetisation of the Rs 500 and Rs 1000 notes in a sudden and dramatic move by the government is a significant negative monetary shock to India’s economy, particularly the informal sector. The cash economy in India is about 30 to 40 percent of the economy and well integrated with the formal ...

Denotification of Rs.500 and Rs.1000 notes
INDIA · In Brief · 09 Nov 2016

The BJP government announced a big surprise move last night. They declared that the existing Rs.500 and Rs.1000 currency notes were no longer legal tender. Persons who have these currency notes have to go to a bank, and over the next few weeks, exchange them for either bank balances or a new seri...

MPC gives priority to growth
INDIA · In Brief · 19 Oct 2016

The minutes of the first MPC meeting of the RBI have been released. In the meeting the MPC had unanimously decided to cut the policy rate by 25 basis points. The minutes show that all the new MPC members appear to give higher weight to output growth compared to inflation. We think they are on the...

​MPC cuts rate
INDIA · In Brief · 04 Oct 2016

In its first meeting following being given a legal mandate to target inflation, RBI cut the policy rate by 25 basis points. This was in line with what I had suggested in my note over the weekend titled “First meeting of RBI’s MPC” before the meeting started. The decision was unanimous, as expecte...

​ First meeting of RBI's MPC
INDIA · In Brief · 02 Oct 2016

A new arrangement The first meeting of the newly constituted Monetary Policy Committee of the Reserve Bank of India will take place on October 3 and 4. The decision of the MPC will be final and the repo, rate will be set as decided by the committee. This is a break from past practice where the RB...

Urjit Patel appointed RBI Governor
INDIA · In Brief · 20 Aug 2016

Deputy Governor Urjit Patel has been appointed the new Governor of the Reserve Bank of India. He was among the front-runners for the post. He is a macroeconomist by training, has worked in India for many years, has been RBI Deputy Governor Monetary Policy, and was part of the team that worked on ...

From confusion to de jure inflation targeting
INDIA · Report · 11 Aug 2016

For many decades, the RBI has claimed it pursues multiple objectives based on looking at multiple indicators and using multiple instruments. Critics argued that this was a fancy phrase to describe the lack of a monetary policy framework. A series of expert committee reports, starting with the Per...

The Good News
INDIA · Report · 08 Aug 2016

The 122nd Amendment to the Constitution, which is essential to the GST (Goods and Services Tax), was approved in the Upper House (where the BJP does not have a majority). This is an important milestone in terms of politics. When the BJP was in opposition, it ran a scorched earth policy, blocki...

Macroeconomic headwinds associated with the banking crisis
INDIA · Report · 13 Jul 2016

The official position of the government is that the banking crisis is being contained. From 2013 onwards, bank credit growth has been stable at roughly 4% in real terms. While this is low by historical standards, it does not suggest a crisis. While overall bank credit has been growing at 4% in...

The cabinet reshuffle
INDIA · In Brief · 07 Jul 2016

Summary The BJP administration has had negligible changes of the cabinet in its first two years. A cabinet reshuffle, announced on Tuesday, reflects the difficulties faced by the administration in its two years. The reshuffle speaks well for the clarity and clout of the prime minister. Changes at...

Consequences of Raghuram Rajan's departure
INDIA · Report · 19 Jun 2016

Rajan's departure has been the subject of furious attention in the Indian tabloid press and on facebook/twitter. Millions of words will be written about this. The adverse impact of a Brexit upon India will be attributed as the adverse impact of Rajan's departure. We believe his departure does not...

Business cycle conditions
INDIA · Report · 13 Jun 2016

The controversy about Indian GDP data has become acrimonious, as it has become linked up with the attempts of the administration to put its best foot forward at the Second Anniversary. The first data for the Jan-March 2016 quarter is now in hand. Conditions in the economy remain difficult. Despit...

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