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CPI inflation
INDIA · In Brief · 14 Jan 2021

Through 2020, a great debate had raged on the question of inflation and the inflation targeting regime.Under the inflation targeting regime, headline inflation (i.e. year-on-year CPI inflation) is required to stay between 2 and 6 per cent. In December 2019, the bound was breached, when inflation ...

The macro economy in 2021
INDIA · Report · 11 Jan 2021

The 2021 budget announcement will come on February 1. In this note, we review the overall macroeconomic situation. While vaccines will help reduce fear, India is at the late stage of the epidemic through the onset of herd immunity. Household consumption remains below pre-pandemic levels. I...

Credit stress in large private firms - an update
INDIA · Report · 30 Nov 2020

In this report, we review the state of credit stress in large private firms. Given the debt moratoriums and the suspension of the bankruptcy process, a good deal of the bad news is not visible in conventional accounting data. The Merton/KMV model exploits the level and volatility of stock prices,...

The fiscal situation − implications for the future
INDIA · Report · 20 Nov 2020

Some measures of the fiscal situation for the first half of 2020-21 are now visible. Gross tax revenues of the union government were down by 21.6%, spending by the union government was flat, and the gap was made up using an increase in borrowing. This has induced daunting levels of borrowing per ...

Difficulties in a small private bank
INDIA · In Brief · 17 Nov 2020

1. India has experienced a financial crisis from about 2012 onwards.2. At present, there is no resolution framework for financial firms. Hence, when balance-sheet based lenders (either investment banks or banks) get into trouble, there is no playbook for their resolution. The various claimants on...

Peering into the recovery
INDIA · Report · 17 Nov 2020

India has had a relatively good experience, by world standards, in the pandemic. While many have been infected, demand for hospitalization (or death) is taking place at modest rates. Many regions in India are approaching herd immunity. The large listed non-financial firms experienced a decline...

The problem of inflation
INDIA · Report · 18 Aug 2020

By law, the RBI is expected to deliver year-on-year CPI inflation in a range from 2 to 6 per cent. In recent months, headline inflation has often overshot above 6 per cent. Why has this happened? Petroleum product prices in India did not drop in line with the collapse in the world price of cru...

Tracking the recovery from the lockdown
INDIA · Report · 08 Jun 2020

One of most interesting questions in Indian economics today is that of tracking the decline of the economy after the lockdown, and its recovery ever since. As the standard macroeconomic measurement in India works poorly, it is important to come at this question using novel data sources. In thi...

Rescuing the financial system
INDIA · Report · 13 May 2020 · 1 response

On May 12, the Prime Minister made a speech in which he talked about Rs.20 trillion that will be brought into play (in ways that are as yet unspecified). He struck an optimistic note, suggesting that the worst of the epidemic is behind us, and that we now rebuild. There was a surprising emphasis ...

The Indian economy: Taking stock and looking forward
INDIA · Report · 20 Apr 2020 · 1 response

The early evidence about the impact of Covid-19 upon the economy is now visible. The leading indicator of business cycle conditions dropped from -2.2% in Oct-Dec 2019 to -39.9% in Jan-Mar 2020. The employment rate dropped from 40% to 27% in the lockdown. Indexes of consumer sentiment show an unpr...

Covid-19 and India
INDIA · Report · 27 Mar 2020

In this report, we focus on how India is different from the trajectory of Covid 19 as seen in (say) the US. We start on this problem in the context of a weak economy and financial system. There is low state capacity, including in the field of public health. The data shows 24,254 persons tested...

YES Bank unfolding
INDIA · In Brief · 16 Mar 2020

As was emphasised by us earlier, the announcements about Yes Bank do not add up to a tidy completed resolution. More information has now come out about what will happen.The (delayed) financial statement of the bank for the quarter ended 31 December 2019 was released. Conditions have deteriorated ...

Can India use macro policy in responding to the pandemic?
INDIA · In Brief · 11 Mar 2020

In many countries, macro policy is responding to the pandemic. In some ways, the situation is reminiscent of the 2008 crisis. It is important to point out one key difference. Most countries started out with a strong fiscal situation, and relatively high policy rates, in 2007/2008. This gave room ...

The end game for Yes Bank
INDIA · Report · 10 Mar 2020

It was known for a while that Yes Bank had difficulties. There is no institutional arrangement for the resolution of financial firms in India. Each resolution is cobbled together, on the fly, by the Ministry of Finance with support from various financial agencies. However, in the past, when th...

Recent difficulties India faces
INDIA · In Brief · 06 Mar 2020

In 2020, the Indian government has been grappling with four challenges:The political conflict associated with the citizenship question,The financial crisis, where Yes Bank has particularly been under stress,The problems of telecom, where Vodafone has particularly been under stress,Covid-19.In thi...

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