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

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Dividend Behaviour of Indian Companies post Macroeconomic Policy Shock

The impact of the macroeconomic shock of demonetisation in 2016 on the dividend payout policy of Indian companies is examined. The analyses of 2,157 Indian companies’ data for the period from 2013 to 2018 find that both aggregate dividend payout ratio and the number of companies paying dividends dropped in post-demonetisation years. The results of the dynamic system generalised method of moments show that the long-term target dividend payout ratio declined by 9.31% post demonetisation. The study suggests that major macroeconomic shocks affect the dividend payout decisions of companies.

Banking Sector Resilient in the Face of Pandemic

Contrary to several gloomy forecasts, the Indian banking sector has been surprisingly resilient in the face of the pandemic. This is because corporates, which account more than half the loans, are in better shape and banks are well-capitalised. This bodes well for loan growth and bank performance post the pandemic.

Sharing of Goods and Services Tax Revenues

The operation of the Integrated Goods and Services Tax Act, 2017 and the Goods and Services Tax (Compensation to States) Act, 2017 is examined to identify the distortions that have crept into this devolution channel. These problems can be successfully addressed if the existing laws are implemented completely and consistently. This is not the case now.

Development Finance Institutions in India

A historical trajectory of the evolution of development finance institutions in post-independence India in the context of the renewed interest in them is necessary to draw a few appropriate lessons. They are indispensable for infrastructure development and the incorporation of lessons from past experiences will help to set up robust and well-functioning DFIs.

Indian Corporate Bond Market

The Indian corporate bond market has remained small in size despite a long history, several committee recommendations, and continuous reforms. It is besieged by several problems ranging from illiquid secondary market, narrow investor base, lack of diversity of instruments, crowding out by large public issuance, high costs of borrowing, information asymmetry, regulatory restrictions on demand, unavailability of repo options, to absence of well-functioning derivatives market and credit enhancement facilities that could absorb interest and default risks.

Asset Reconstruction Companies and the Bad Debt of Indian Banks

The finance minister’s Budget speech 2021 revealed the government’s plans to establish an Asset Reconstruction Company to take over bad debt from the books of public sector banks for eventual disposal. That suggests that the ARC route rather than recapitalisation would in the coming months be the main means of refurbishing capital in the public banking system. Since there are as many as 28 ARCs already in existence, the reason why the creation of one more would resolve a problem that is expected to worsen over the coming year is unclear. In fact, past experience indicates that ARCs have not helped enhance the actual recovery of lock-up in stressed assets. This suggests that the move is a means to postpone the problem of bad debt resolution so as to avoid having to recapitalise the banks with budgetary resources, which would widen the central fiscal deficit.

The Need for Saving Livelihoods for Saving Lives

The pandemic has led to the loss of many livelihoods due to the economic crisis. In order to curb the ongoing economic crisis from aggravating further, an international fiscal coordination worldwide is the need of the hour.

A Performance Appraisal of the Inflation Targeting Regime

The recently published Report on Currency and Finance, 2020–21 of the Reserve Bank of India reviewed the performance of the flexible inflation targeting regime in India. In the light of stylised facts, cross-country experience, and detailed econometric results, the report seemed to suggest that despite several shocks (like demonetisation or introduction of the goods and services tax), a combination of good policy and luck have worked in favour of the success of the FIT regime in India. Going forward, while advocating some nuanced, subtle changes in the operation and administration of the FIT regime, the report called for its continuation as a strategy of monetary policy in India.

Reading K N Raj in the Age of Free Market Fundamentalism

This article tries to assess how K N Raj would have weighed in on some of the major contemporary issues like the trade policy, farm crisis and reprivatisation of public sector banks on the basis of his many writings. It also highlights his views on the fundamental orientation that an academic discipline like economics needs to have for contemporary social relevance.

Bad Bank, Bad Loans and the Indian Banking Mess

This article looks into the reasons for the large non-performing assets of the Indian banks, particularly public sector banks, and the various steps taken by the government and the Reserve Bank of India to tackle the issue of bad debts. It also examines if a bad bank is the magic wand that can...

Growth Transitions in India

Growth has consistently remained a central topic in economic policy considerations of the government in India. However, there has also been a more scholarly interest in it among social scientists. As a part of the latter tradition, this paper addresses the proper delineation of the phases of growth in India, a matter of some discussion in the literature. Using state-of-the-art statistical methodology, it first establishes the trajectory of growth and then provides a theoretical explanation for that history. With data spanning the period 1950–2020, the procedure adopted is also able to assess the impact on economic growth of the policies of the present government. The results are conclusive. First, it is established that growth in India has accelerated continuously since the 1950s, implying that dynamism in the economy did not have to wait for the liberalising reforms launched in 1991. Next, the performance of India’s economy is compared to growth that has taken place in the rest of the world. It is seen that while India’s economy has, in recent years, shown a dynamism relative to the rest of the world, it has consistently fallen behind its most dynamic regions, notably in East Asia.

Hostile Takeovers

The number of mergers and acquisitions has boomed in India since liberalisation, but few hostile takeovers have succeeded, primarily because of the concentration of promoter shareholding in companies and because takeover regulations favour promoters. Hostile takeovers would facilitate M&A growth, and the success of hostile takeovers is essential to facilitate corporate competence and foster capital market development. To be effective, the anti-takeover mechanisms in India should be practised as a protectionist measure and the takeover regulations must adopt a lenient approach towards hostile takeovers, as in the United States.

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