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

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Time-varying Nature of Stock Market Interdependence

In the literature on global market integration, the strength of interdependence has been measured in different ways. However, only an accurate measure of strength of interdependence helps in understanding the nature of integration among markets. This article, by employing novel time-frequency based wavelet techniques, analyses the interdependence of global equity markets from a heterogeneous investor perspective, with a special focus on the Indian stock market. With the wavelet framework effectively capturing the heterogeneity of market participants’ space of operation, an analysis grounded in this framework allows one to capture information from a different dimension than the traditional time domain analyses, where the multiscale structures of financial markets are clearly extracted.

Financial Misconduct, Fear of Prosecution and Bank Lending

The issue and relevance of financial misconduct and fear of prosecution on the lending behaviour of Indian banks is investigated by combining bank-level financial and prudential variables during 2008–18 with a unique hand-collected data set on financial misconduct and fear of prosecution. The findings indicate that, in the presence of financial misconduct, state-owned banks typically cut back on credit creation and instead increase their quantum of risk-free investment. In terms of magnitude, a 10% increase in financial misconduct lowers lending by 0.2% along with a roughly commensurate increase in investment. In terms of the channels, it is found that private banks increase provisioning to maintain their credit growth, although the evidence for state-owned banks is less persuasive.

Economic Slowdown and Financial Fragility

The Indian economy is presently gripped by the dual phenomenon of an unprecedented slowdown as well as financial fragility. What has triggered this? Is this simply a random exogenous shock to an otherwise well-functioning economy? Or, is there anything structural about the present slowdown? What are the binding constraints for recovery? These questions are addressed in the context of India’s overall growth trajectory and policy regime in the last two decades.

Regime shifts in Indian Monetary Policy and Tenures of RBI Governors

The regime shifts in Indian monetary policy during the period 1998–2017 are estimated by applying a multivariate Markov-switching Vector Autoregression (MS-VAR) model. It is found that, in general, Indian monetary policy during this period could be roughly divided into two main phases—one that prevailed from 1998 to 2011 and the other from 2011 to 2016. The tenure of governor Jalan closely corresponds to one regime which also sporadically appears during governor Reddy’s time. The other regime overlaps with the tenure of governor Rajan. In contrast, governor Subbarao’s tenure does not correspond to any specific regime.

Finance and Monetary Policy beyond Neo-liberalism

Against the backdrop of the North Atlantic financial crisis that erupted in 2007–08, this article looks into the changing role of central banks and the monetary and financial sector policies and the challenges of managing the tensions of this impossible trinity, especially from the standpoint of the emerging market economies. Lessons derived from the crises observed in the past three to four decades, whether in the emerging markets or the advanced economies, suggest that financial markets are inherently unstable. Hence, the article concludes that the emerging economies need to practice enhanced and active surveillance of their financial sector in their quest for maintaining of high growth along with financial stability.

Questioning the Orthodoxies

Statements like “money, finance and banking are at the crossroads at this juncture” have become a much-used cliché, but tend to be true for most of the recent past. This year, too, is no exception. At home we have seen that credit growth both from banks and non-banks continue to suffer...

Union Budget and the Trade Sector

The Union Budget for 2020–21 emphasised the need to restrict imports. A number of measures were proposed to realise this objective. These include the use of tariffs and non-tariff measures, making Rules of Origin agreed upon in the free trade agreements work efficiently, and effective monitoring of imports and exports. The finance minister spoke of modifying import tariffs for creating a level playing field for micro, small and medium enterprises in several product sectors and using import tariffs to promote the domestic production of electric vehicles and mobile phones.

Financial Sector in the Budget

The 2020 Union Budget has announced several small steps that could give some fillip to the financial sector in the short run, but the lack of a long-term vision for reviving an economy in downswing remains most conspicuous.

Goal Setting for Indian Agriculture

Though the 16-point action plan for agriculture laid down in the 2020 Union Budget continues prioritising subsidies and safety nets over agricultural investments, it does not make any fundamental improvements in the allocations towards these heads.

Fiscal Consolidation Ex Post the ‘Escape Clause’

Launching an “excessive deficit procedure” in India is inevitable for growth revival. This is crucial, especially when there is considerable ambiguity about why the “escape clause” was invoked in the Union Budget 2020: whether to meet the shortfall in tax revenue emanating from the unanticipated fiscal outcomes of structural reforms, or to boost the capital formation in the economy.

A Low Growth, No Employment and No Hope Budget for ‘Aspirational India’

The Union Budget of 2020 is conspicuous by its non-recognition of the ongoing and widely discussed slowdown of the economy, let alone its impact on the different sections of the people. Given the negative growth in employment and consumption in the rural economy, the budget seems like a cruel joke on the plight of the poor, in general, and women, in particular. Instead of measures for boosting the aggregate demand, especially in the rural economy, the government has exhibited a track record of aiding the process of wealth creation for corporate capital and throwing a few crumbs to the middle class. What comes out crudely and sharply is the ideological predilections of the regime in power.

Tax System Changes in the Budget

There were high expectations from the budget on the changes in the tax system to provide stimulus to the beleaguered economy. However, fiscal conservatism has prevailed. The attempt to broaden the base by eliminating tax exemptions and preferences could have been done without complicating the tax structure. On the macro side, there are questions about the unrealism of the revenue estimates. Unduly optimistic estimates result in “tax terrorism,” lead to inefficient budget management and have adverse impacts on state finances.

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