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

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Could It Happen Here? On Sovereign Debt and Bank Capital

India does not suffer the euro-zone problem of a federal central bank with a restricted mandate. What India does have in common with Europe is capital-constrained banks stuffed full of government debt issued by a fiscally over-extended sovereign, in a slowing economy.

Revisiting Reserves

An ideal system of global liquidity for the official sector is one which both lubricates international commerce with low risk while facilitating the smooth adjustment of global imbalances when these represent an underlying disequilibrium, all in an environment of highly mobile international capital.

The Return of Fiscal Dominance

Cross-border finance will increasingly be shaped by the fiscal crisis in the advanced countries.

Who 'Owns' the Foreign Exchange Reserves?

The old idea about the "use" of foreign exchange reserves is now being expressed in a new form. It is suggested that a part of the reserves could be drawn on to set up a sovereign wealth fund to acquire raw material assets abroad. This is just as bad an idea as the proposal mooted years ago.

India in the G-20: What Should Matter Most?

To what degree does the work programme and the initial decisions mandated by the g-20 address the issues that are of concern to the major emerging markets, and what cues should the latter group derive from the deliberations thus far? The heated discussion at the g-20 on a coordinated fiscal stimulus has crowded out a much more difficult and important debate on the issue of global imbalances and mechanisms to intermediate these. Much of the current work emerging out of the g-20 remains oriented to the political and economic predicament of the advanced economies.

Options to Consider in Public Debt Management

The decision to shift the management of public debt from the Reserve Bank of India to a specialised debt office under the ministry of finance offers an opportunity to explore ways in which the costs and risks to the government are minimised. This article explores if it is not worthwhile to denominate a small portion of sovereign debt in foreign currency.

Real Exchange Rate, Fiscal Deficits and Capital Flows: Erratum and Addendum

There is a case to be made for rapid progress towards capital account convertibility and a free float of the rupee as the 'fear of floating' is based on the unwanted dirigiste assumption of the omniscience of bureaucrats and the irrationality or ignorance of private agents.

Grand Bargains and Free Lunches

The debate about 'using' up to $10 billion of the country's foreign exchange for investment in infrastructure is at a stage where all major players, the RBI, ministry of finance and Planning Commission, are locked into their traditional, politically easy and safe positions. Yet there can be little doubt that the present equilibrium is a wasteful one. It would be a grand bargain if the major players were to collaborate and redesign our macro policies to be genuinely supportive of growth and development, but this would have to be an exercise of hard economic and political choices, not a free lunch.

The Real Exchange Rate, Fiscal Deficits and Capital Flows

India should use the opportunity presented by high reserves and low domestic inflation to now fully open the capital account (with a proviso about borrowing in foreign currency), make the rupee fully convertible and allow it to float freely. For in a world of fluctuating capital flows it is impossible for the authorities to predict, let alone implement, the requisite movements in the nominal exchange rate required for a managed float. If this is done, none of the fears that the authorities seem to have about absorbing capital inflows would be realistic and India could very quickly raise its growth rate, which continues to be suppressed by the misalignment of the real exchange rate.

NCAER's Market Information Survey of Households

As shown in recent work, data from the NCAER's Market Information Survey of Households (MISH) can be useful in deriving alternative poverty measures. This paper assesses the scope for further demographic analysis using the survey, by updating for the year 1998-99 earlier poverty estimates based on its data. It discusses the survey's methodological properties and validates its sampling reliability by comparison with the NCAER's earlier Micro Impact of Macroeconomic and Adjustment Policies survey of income and consumption conducted in 1994-95, and the National Accounts Statistics (NAS). The paper concludes by highlighting trends brought out by the above MISH estimates, including large changes in household income distribution.
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