Articles by Partha Ray

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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.

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.

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.