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COUNTRY INSIGHTS

The banking crisis got worse
INDIA · Report · 10 Apr 2018

Three remarkable events took place in the last two weeks. A corruption investigation began concerning the CEO of the largest private bank, ICICI Bank. RBI forced the exit of the CEO of Axis Bank, a large private bank. And central investigation agencies have begun asking RBI employees (including a...

The banking crisis is changing shape
INDIA · Report · 13 Mar 2018

The banking crisis is mutating (going beyond excessive leverage to new concerns about operational risk) and deepening (the problems of many banks are getting worse). The banking system is increasingly pulling back from its role in the economy. In a remarkable decision a few hours ago, the RBI ban...

A gap between reported and true GDP?
INDIA · Report · 16 Feb 2018

There is a remarkable divergence between reported nominal GDP and a sensible nominal output proxy in the period after the CSO changed the methods for GDP measurement. This has interesting implications for how we think about fiscal economics.

The first sign of recovery, in the labor market
INDIA · Report · 23 Jan 2018

Some data about the labor market is now visible through the CMIE Consumer Pyramids household survey data. This shows that the demonetization and GST events made for difficulties from Sep-Dec 2016 to May-Aug 2017. In Sep-Dec 2017, conditions stopped worsening, and by one indicator, have started i...

Has the bond market arrived?
INDIA · Report · 15 Jan 2018

Bank credit to the private sector has grown slowly with the slow realisation by banks and their regulator that there is a serious banking crisis at hand. A natural channel that may get exploited, with inadequate bank lending, is bond market financing. This is particularly important in the field o...

How is investment faring?
INDIA · Report · 14 Jan 2018

Micro data about investment is reliable, and is released immediately after the end of a quarter. Hence, we are now able to observe the Oct-Nov-Dec 2017 quarter. This is the first macro data release for the quarter. The broad picture of weak nominal investment under implementation remains. Private...

Business cycle conditions
INDIA · Report · 27 Nov 2017

The revenues of non-finance non-oil companies appear to be growing at around 4-5%, nominal annualized. Profitability remains weak. In the aggregate, interest payments are growing faster than revenues or profits. However, there is increased divergence in a two-speed economy, with an upper tail th...

How is investment faring?
INDIA · Report · 05 Oct 2017

Micro data about investment is reliable and is released immediately after the end of a quarter. Hence, we are now able to observe this data for the Jul-Sep 2017 quarter, and it is the first macro data release for the quarter. The broad picture of a stalling of aggregate nominal investment under ...

The Indian economy
INDIA · Presentation · 26 Sep 2017 · 1 response

Aggregating micro data shows a different story than official data. Challenges remain for the Central Bank and the banking industry.

How much equity capital is needed for India’s banks?
INDIA · Report · 25 Sep 2017

In a banking crisis, banks are over-leveraged. We use historical experience to identify certain levels of leverage, which we claim are normative values for the maximal permissible leverage of a bank. We work out the additional equity capital that should go into Indian banking in order to achieve ...

The mainstream view on Indian growth is shifting
INDIA · In Brief · 08 Sep 2017 · 1 response

For a sustained period, Ila Patnaik and I have argued that India got into a downturn in 2011 and has not yet come out of it. This was inconsistent with the mainstream discourse. The conventional view of financial firm economists was that growth had crashed with the 2013 currency defense but recov...

Cementing the foundations of liberal democracy
INDIA · Report · 01 Sep 2017

In recent years, there has been increasing nervousness about the soundness of Indian democracy. There are concerns that democracy has become reduced to the rite of elections every five years, that India is succumbing to the problems of majoritarian bias and middle class religiosity plus nationali...

Buoyant P/E ratio, buoyant earnings growth?
INDIA · Report · 09 Aug 2017

Fine points in the handling of firm data do matter. It appears easy and expedient to use the Nifty market capitalization time series and the Nifty P/E ratio time series to back out an estimate of Nifty earnings time series. While many finance practitioners do this, the procedure is highly mislead...

Rate cut by RBI
INDIA · In Brief · 02 Aug 2017

On the 2nd of August, the Monetary Policy Committee of the RBI in its scheduled meeting decided to cut interest rate by 25 bps while it maintained the stance of monetary policy as neutral. This was largely anticipated by the markets. Several indicators suggest a serious slowdown in demand - indus...

Farmer protests, loan waivers and fiscal deficits
INDIA · Report · 15 Jun 2017

The recent decline in food prices and rural stress are causing farmers to protest in some parts of India. Police firings have led to six deaths in Madhya Pradesh. After two years of drought, demonetization hit the cash economy of rural India hard. The cash ban brought rural markets to a halt, pus...

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