Tuesday, April 13, 2021

The Second Wave, Lockdown and Indian Economy

The number of new infections a day has already crossed the previous peak of 97,860. On 11th April 2021, a total of 1,69,914 new infections were recorded [1]. Most importantly, these numbers are increasing every day. At present there is not a single state which is not reporting higher numbers than the previous day. The most important part of the whole story of the second wave of infections is that it is happening despite the fact that India has been able to successfully flatten the corona curve with less than 10,000 daily infections. The battle which India had almost won by flattening the corona curve is now again in the courtyard of India.

Sunday, March 28, 2021

Increasing Price of Petroleum Products and Indian Economy

Previously the prices of petroleum products in India have hit the psychological levels of ₹ 100. However, later on, the prices have gone down slightly but these falls in the prices seem to be temporary considering the trend of the global crude oil prices. It must be noted that such unilateral increase in the prices of the petroleum products has a multifaceted negative impact on any economy and when in question is the Indian economy which is almost dependent on imports for the petroleum products and petroleum products are main fuels consumed by consumers and industry, the impact might be even bigger.

Saturday, March 20, 2021

Rising Inflation Poses Risk to the Recovery in the Indian Economy

For the last many months, inflation in the Indian economy is rising. Both the retail inflation as well as the core inflation has increased to 5.03 percent and 5.7 percent respectively in the month of February 2021 in the economy in comparison to the month of January 2021. During the same period, the Index for Industrial Production (IIP) has contracted by 1.6 percent (Mishra, 2021). This has happened when the economic activities in almost every sector of the economy is expanding (Upadhyay, 2021).

Technically this increase in the inflation can partly be attributed to the small base belonging to the earlier month but on overall, it is largely due to the cost push pressures building up in the economy. Most importantly, the inflation is not expected to moderate significantly in the short term besides the base effect until and unless the government decides to cut the taxes on the petroleum products. A major reason for the accelerating inflation in the economy is due to the increasing prices of petrol and diesel. In the last one month, the prices of petrol and diesel have increased by 20.6 percent and 22.5 percent respectively (Kaul, 2021). As a result of the increasing price of petroleum products, the demand for the petroleum products has contracted consecutively for two months in a row since January 2021 (Pathak, 2021).

Friday, March 5, 2021

Reservation in Private Sector Jobs

Reservation is considered to be a positive discrimination to undo the social injustice and inequalities metted out over centuries but people have varied views about the same and India is not an exception to it. Over time people from all spectra of life willingly or unwillingly have accepted and come to the term with the reservation on the basis of caste in the government jobs and education in India. But of late people belonging to the Unreserved (UR) category and creamy layer of OBC (Other Backward Caste) have been becoming very vocal against the caste based reservations as it makes difficult for them to get government jobs and admission in government education institutions (Kumar, Pratap, & Aggarwal, 2019). Considering these disadvantages, there was demand for reservation on the basis of income which now has been accommodated through a new legislation by the Indian Parliament for the Economically Weaker Sections (EWS) of society (MSJE, 2020).

Friday, February 26, 2021

Indian Economy on the Path of Expansion

The blanket lockdown of the whole India by the Government of India in response to the COVID19 pandemic has given a never seen before shock to the Indian economy. However, different economic indicators started indicating the revival of economic activities post gradual relaxations granted in the lockdown since May 2020 by different states. However for more than two quarters, things remained very difficult for the economy. Considering the fall in the aggregated demand in the economy, the government was forced to suspend the Insolvency and Bankruptcy Code (IBC) so that individuals and businesses could get enough time and space to adjust in the post pandemic recession and the events of defaults could be avoided. This single decision has been very helpful for the whole banking sector. Although it has adversely impacted the revenues of the banking sector but has been very helpful in dealing with the non-performing assets (NPA).

Saturday, February 13, 2021

Growth to Drive the Monetary Policy in Indian Economy

Reserve Bank of India (RBI) assesses the prevailing economic conditions as well as the outlook along with the liquidity position in the Indian economy at an interval of two months in its bimonthly meeting of the monetary policy committee (MPC) to formulate the monetary policy for the economy. The meetings of the monetary policy committee are held at least four times in a year and its decisions are published after every such meeting.

The MPC in its recent meeting has decided to keep the benchmark policy repo rate unchanged at 4 percent despite the fact that the rate of inflation has remained above the upper threshold of 6 percent continuously for six months before CPI inflation falling to 4.6 percent in December 2020 due to sharp fall in the food inflation; however during the same period the core inflation largely remained on higher side of the threshold. The resolution of the meeting mentions that there remains the risk of elevated core inflation in the coming quarters. RBI has projected the CPI inflation of 4 percent within a band of +/- 2 percent with the confidence interval of 50 percent and expects it to remain around the upper threshold of 6 percent in short term (RBI, 2021). This clearly signifies that there are high possibilities of elevated levels of CPI in the coming months.

Saturday, February 6, 2021

Budget 2021-22

Post lockdown, the way Indian economy has shown resilience with continued ‘V’ shaped recovery is very optimistic. It indicates that the Indian economy even after the pandemic shock is on a very strong footing (MoF, 2021c). This optimism in the environment has also been echoed by the stock market. However, it is very important that this optimism in the economy gets strong fiscal support with proper fiscal policy response as well as anchoring from the government in the present budget for the fiscal year 2021-22 to gain on the favourable monetary policy response from the Reserve Bank of India (RBI, 2021).

Saturday, November 28, 2020

Banking Licenses to Corporate May not be a Good Idea

An internal working group (IWG) of the Reserve Bank of India in its report has recommended that large business groups as well as NBFCs which have an asset size of ₹ 50,000 crores or more may be allowed to promote banks in India (RBI, 2020). For an economy like India which has avoided giving banking licenses to corporate and ensured that the banks in India are widely held and there is no ownership concentration in Indian Banks, the proposed recommendation of IWG is a sweeping change and naturally raising a number of questions. Large numbers of economists including the former RBI Governor Raguram Rajan and Deputy Governor Viral Acharya have raised questions about this sweeping recommendation as well as the timing (Acharya & Rajan, 2020). It is quite possible that it may prove to be either good or bad idea for Indian banking sector but only time can give the right answer. However, the practices across the world may give insight into the matter.

Monday, July 6, 2020

COVID19 and India: Till 5th July 2020

Life is returning back to the normal post lockdown. All the gains during the nationwide lockdown in India have been almost thinned or evaporated and India lost the opportunities to consolidate its position and give conclusive end to coronavirus outbreak. Now, things getting worse every day, India need to put far higher efforts. In this fight against coronavirus, every effort must to be conceptualized and implemented locally than depending on unfruitful centralized instructions. This article analyses the national as well as state data till 5th July 2020 for the purpose of analyses and comparisons.

Tuesday, June 30, 2020

COVID19 and India: Till 28th June 2020

The nationwide blanket lockdown in India is now a thing of past. Post lockdown, far higher efforts are needed. To be successful, this fight against coronavirus needs to be localized. Centralized efforts wouldn’t be effective anymore. This article analyses the national as well as state data till 28th June 2020 for the purpose of analyses and comparisons.