ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Partha RaySubscribe to Partha Ray

Recent Downfall of the Indian Rupee

Assessing the trends in India’s balance of payments, it is argued that a combination of substantial trade deficit and a significant current account deficit financed predominantly by fickle portfolio investments could have made the rupee vulnerable to the moods of the global capital market. India’s huge dependence on oil imports along with high gold and electronic imports could also have played their roles in making the exchange rate volatile.


In the context of the recent deal between the Life Insurance Corporation of India and Industrial Development Bank of India, is this proposed investment prudent from its impact onLIC’s balance sheet and income prospects as well as from an average premium payers’ standpoint? A possible alternative in whichIDBI’s retail assets could have been sold to a commercial bank and the remaining project finance portfolio turned into a wholesale and long-term finance bank is discussed.

Rise and Fall of Industrial Finance in India

Examining the sources of finance for Indian industry, this paper traces the transition from a state-owned and state-dictated financial sector to a regime of financial liberalisation. There are still a number of rough edges to this transition. With the initiation of financial sector reforms and the demise of development banking, there are indications that the industrial sector faces a credit crunch. While newer sources of finance could have compensated for the paucity of bank financing, the exit of development banks before establishing a successful corporate debt market has turned out to be costly for long-term financing. In this context, the experience of the Brazilian Development Bank could serve as a useful model for India.

Financial Sector, Monetary Policy and Budget 2014

The announcements in the union budget relating to the financial sector were incremental in nature and can be seen as a continuation of the policies of the United Progressive Alliance government. A critique.

The Global Crisis and Systemic Risks: Matching Sources with Correctives

Using the literature of pollution control and extending the idea of a Tobin tax, this essay argues that as far as unwanted excessive leverage by financial institutions is concerned, a leverage tax could be thought of. As far as complex financial products are concerned, the solution perhaps lies in transparency and a process of simplification of the products. In handling misrepresentation/fraud, regulatory oversight of products or establishment of effective customer protection agencies could be thought of.

How Do We Assess Monetary Policy Stance?

This paper develops a measure of the monetary policy stance from the detailed reading of various monetary policy announcements in India from 1973 to 1998. According to the proposed measure, the stance of monetary policy has been mildly contractionary over this period with its emphasis on inflation control. The constructed measure of monetary policy stance is then linked to output and prices in a three-variable vector autoregression framework, which indicates that, for the period of study, the potency of monetary policy seemed to have been more effective in price control vis-a-vis stimulating output growth.

Employment and Poverty in India during the 1990s

In an otherwise win-win situation of increasing growth and declining poverty in the 1990s, the phenomenon of jobless growth has been disquieting as well as puzzling. This study focuses on the observed inverse relation between poverty and unemployment, which holds both at the aggregate level as also at various cross-sections. The jobless growth of the 1990s, in general, and more so for agriculture, arguably contained the extent of underemployment and contributed to declining poverty. Continuing employment generation in the unorganised sector, albeit at a decelerated pace, coupled with increasing productivity also played a role. While there has been increasing casualisation of employment, the real wage rate increased sharply amongst casual labourers in rural India, possibly as an offshoot of public employment programmes and declining general prices for agricultural/rural labourers. Interstate remittances, as also those from abroad, could have also made possible the emergent configuration of declining poverty, increasing unemployment and decelerated growth at the state level.

Basel II and Bank Lending Behaviour

The new Basel accord is slated to come into effect in India around 2007 raising the question of how the revised standards will influence bank behaviour. Using a simple theoretical model, it is shown that the revised accord will result in asymmetric differences in the efficacy of monetary policy in influencing bank lending. This will, however, depend on a number of factors, including whether banks are constrained by the risk-based capital standards, the credit quality of bank assets and the relative liquidity of banks' balance sheets. The basic model is empirically explored using data on Indian commercial banks for the period 1996-2004. The analysis indicates that the effect of a contractionary monetary policy will be significantly mitigated provided the proportion of unconstrained to constrained banks in the system is significantly high.

Bank Nominee Directors and Corporate Performance

Banks and financial institutions play a major role in governance of non-financial companies in India through the mechanism of nominee directors. This paper probes two allied issues: firstly, the isolation of the firm specific factors which determine the presence of bank nominee directors on boards and secondly, whether companies, with bank nominee directors exhibit better performance/governance than companies with no banker representation on their boards. A Probit model estimated over a cross-section of Indian manufacturing firms for 2003, indicates that bankers on boards seem to exert a healthy impact on the companies. In fact, large public limited companies are likely to exhibit banker representation, primarily in their role as expertise providers. The evidence from Tobit model reconfirms these results.


Back to Top