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Five major challenges that shook India’s economy in 2018
INDIA · In Brief · 03 Jan 2019

As a service to our clients, we are reproducing this Op-Ed by Ila Patnaik, which appeared in ThePrint on December 29, 2018. From GST to RBI to NPAs, both institutions and governance had a turbulent ride. The year 2018 saw significant challenges for the Indian economy. Implementation of the GST, a...

The RBI governor is likely to find a way to transfer the right amount of money to help the government meet its fiscal targets
INDIA · In Brief · 19 Dec 2018

As a service to our clients, we are reproducing this Op-Ed by Ila Patnaik, which appeared in ThePrint on December 19, 2018. The RBI governor is likely to find a way to transfer the right amount of money to help the government meet its fiscal targets At a time when the Narendra Modi government is ...

State elections and a new Governor
INDIA · Report · 11 Dec 2018

Two major developments in India have reduced the recent uncertainty about politics and economics in the country. The first was the counting and announcements of results of state elections in which the ruling BJP lost elections. The Congress party, which had lost the 2014 elections, made a comebac...

Stress at RBI
INDIA · In Brief · 10 Dec 2018

We should see the larger context of Urjit Patel's departure.1. There is significant economic stress. We are at the early stages of recovery from a tough recession that ran from 2012 to 2017. About 40% of the balance sheet of non-financial firms is in stressed firms. Matters are particularly diffi...

Governor Patel resigns
INDIA · Report · 10 Dec 2018

The resignation of RBI Governor Urjit Patel was a surprise after the last RBI board meeting, which is reported to have been quite cordial. While the governor cited personal reasons for his resignation, it is suspected that the forthcoming RBI board meeting on December 14 had agenda items about RB...

Credit stress in the non-financial firms
INDIA · Report · 20 Nov 2018 · 1 response

We utilize firm data to identify the set of large stressed non-financial firms. We measure the size of balance sheet, borrowing and bank borrowing in these firms relative to the overall non-financial corporate sector. About 60% of the debt outstanding – by banks or by others – is in stressed firm...

Stress in NBFCs and real estate companies
INDIA · Report · 16 Nov 2018

We review the stages of the slow-moving crisis in Indian finance. At present, NBFCs are facing a stress test. We analyze the small subset of listed NBFCs and identify the firms that have fared the best and worst since the date of the IL&FS default. We also identify the firms with the highest and ...

Macroeconomic conditions in the Jul-Sep quarter
INDIA · In Brief · 06 Nov 2018 · 1 response

GDP measurement in India is unreliable. We have built a `coincident indicator', which is a linear combination of trusted and well-measured series, to help get a sense of business cycle conditions.We are in a position to have an estimate for the Jul-Aug-Sep 2018 quarter: +3.87% above trend. There ...

A milestone in the institutional structure of RBI
INDIA · In Brief · 31 Oct 2018

1. Under the existing RBI Act, there is no autonomy of the RBI. Section 7 of the RBI Act empowers the government to give `directions' to the RBI on any subject, without any transparency provisions. This feature of the RBI Act has always been present. Many people in the Indian discourse have loose...

A small firm default that says something more
INDIA · In Brief · 17 Oct 2018

In our previous report, of 15 October, we had said: Deleveraging at NBFCs has adverse effects upon the real economy, particularly in areas where NBFCs were important, such as real estate and micro-finance. The stock market drama of 17 October turned out to be about a default by a real estate comp...

Macroeconomic and financial stress in five areas
INDIA · Report · 15 Oct 2018

​In India today there are five areas of stress that are interacting with each other. They are: 1) the bond market; 2) non-bank financial companies; 3) mutual funds; 4) the banking crisis; and 5) currency depreciation. Investor flows into mutual funds, which fed demand for primary issuance of b...

ILFS default and what comes next
INDIA · Report · 23 Sep 2018

Non Bank Finance Companies (NBFCs) have succeeded in India given the difficulties of banks. They have somewhat bank-like assets with bond market financing. Fixed income mutual funds have become an important method for channeling household and corporate treasury money into the bond market. But the...

Drama in IL&FS and its implications
INDIA · Report · 17 Sep 2018

IL&FS is a financial/infrastructure conglomerate with a consolidated balance sheet of about Rs.1 trillion. Reflecting the difficulties of the economy and the financial system, this firm has been under credit stress for many years. Some of its subsidiaries recently defaulted. This could potentiall...

Will RBI defend the rupee?
INDIA · In Brief · 12 Sep 2018

The Indian rupee has depreciated sharply in the first week of September. Since 3rd September 2018 it has been the fastest depreciating currency in Asia.There seem to be three key factors at play. First, EM currencies are under pressure. Second, India is a large oil importer and global oil prices ...

A fresh debate over GDP measurement, and historical growth
INDIA · Report · 03 Sep 2018

The GDP measurement debate was reignited by a government committee that proposed a historical (“back”) series that accentuated the superiority of GDP growth during the 10 years of the UPA, compared with the four years of the present government. Many economists mechanically interpret GDP data, ...

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