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

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Calm before the Storm?

It is generally believed that India is doing far better than most emerging market economies in these times of global economic turmoil. Emerging markets are facing capital flight, with large-scale outflows, especially since the second half of 2015, with the trend expected to continue in 2016. India has been less affected than others, but is clearly vulnerable due to the large number of Indian firms that are exposed to external borrowings, a weak rupee, a year or more of declining merchandise exports, falling corporate profitability, and stressed corporate balance sheets.

How Real Are Estimates of Corporate Investment?

The NAS estimates for private corporate investment based on RBI's studies of joint stock companies suffer from shrinking coverage, especially in the 1990s, leading to overestimates. Re-examining the official methodology, this study reports an alternative estimate. The results show that the level of re-estimated GFCF of the corporate sector had remained lower than that of NAS estimates. The trend between these two series has been diverging, more significantly since the mid-1990s. While the NAS series shows that the momentum of corporate investment has been sustained throughout the 1990s, the alternative estimates suggest that it had tapered off since the mid-1990s.

Growth vs Inflation Control

The reduction in the Bank rate and in the cash reserve ratio effected in the latest credit policy statement may appear small, but what is significant is the signal conveyed to the market that the policy of supporting investment by providing adequate liquidity and a softer interest rate environment will continue.

Secondary Market to the Fore

The growth of the financial market in 2002-03 was much more marked in the secondary market than in the primary segment. Turnover in all three components of the secondary market - equity, debt and forex - continued to grow apace.

Redefining the Debtor-Creditor Relationship

While the ordinance on non-performing assets of financial institutions is a landmark measure to restore the balance between lenders and borrowers and thus move towards better risk-sharing between them, the provisions of the ordinance must be seen as one of a whole gamut of means available for restructuring/settlement of the overdues of the financial system.

Financial Sector Reforms

Financial Sector Reforms and India’s Economic Development by N A Mujumdar (two volumes); Academic Foundation, Delhi, 2002; pp 319 + 328, price not mentioned.

Corporate Governance: Myth and Reality

Free markets are not free-for-all markets. And while the contours of corporate governance are not perfect even in the west, there exist in most developed countries well developed legal, regulatory and institutional frameworks for corporates with a critical degree of activism of shareholders and institutional investors. Indian corporates need to regard the issue of governance not as an irritant or impediment but as an essential tool and mechanism for their very survival in the new economic environment.

Signs of Incipient Industrial Recovery

Reflecting the incipient and selective upturn in the industrial sector, there has been a sizeable turnaround in non-food bank credit in the first quarter of 2002-03. A major disappointment, however, has been the term-financing institutions whose sanctions and disbursements were sharply lower in 2001-02 than in the preceding year.

View from the Pavilion

From Reserve Bank to Finance Ministry and Beyond: Some Reminiscences by M Narasimham; UBSPDA, New Delhi, 2002; pp 189, Rs 395.

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