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

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Role and Impact of Inflation Targeting Regime on Households’ Inflation Expectation

The inflation targeting regime has almost no impact on households’ inflation expectation formation. The article finds a very high correlation between the three–month ahead households’ IE and current inflation perception. It argues that the IE majorly depends on households’ realisation of current inflation, providing very less space for other factors, like regime shift to IT. It further questions the fundamental need of awareness regarding the IT regime for it to affect the IE formation among households.

RBI’s Scale-based Regulations for NBFCs

Certain issues regarding the scale-based regulation framework for non-banking financial companies laid out by the Reserve Bank of India are scrutinised. These pertain to divergence with globally adopted definition of systemically important and differences in the usage of two literally identical terms, namely systemically important and systemically significant, by the RBI, coupled with irregularities in the measurement of perceived riskiness, the adoption of the binary concept rather than the continuum concept of systemically important NBFCs with regard to top 10 asset size-based inclusion in the upper layer, inclusion of systemically significant NBFCs for a minimum period of five years, supervision on calibrated increment of business, and the relevance of the top layer.


To Regulate or Strangulate?

A critique aspect of the current regulatory framework for non-banking financial companies by the Reserve Bank of India shows that such regulations would stymie the growth of NBFCs, constricting their lending ability that has been affected by the pandemic. What is needed is regulation through incentives instead of the threat of penalisation.

Yet Another Major Setback

The slump in foreign direct investments will further constrain the growth prospects.

RBI’s ‘Financial Stability Reports’ and Stress Testing Methodologies

Analysing the contents of the Reserve Bank of India’s biannual FSRs and the methodology of the RBI’s supervisory stress tests reveals that there is scope for improvement, specifically regarding the continuity in the tracking of certain risk drivers, the extent of commentary on the information, and aspects of stress tests. Improving on these, along with disclosing results of individual banks’ stress tests, would aid in enhancing transparency and inspiring confidence in the financial system.

Why Does Extralegal Finance Survive?

Debt, Trust, and Reputation: Extra-legal Finance in Northern India by Sebastian Schwecke, Cambridge: Cambridge University Press, 2022; pp 372, price not stated (hardcover).

Caught in the Middle

The deceleration in consumer prices to within the upper tolerance threshold of 6% in the last two months of 2022 came as a major relief.

Options for Strengthening Municipal Finances

The extent and nature of intergovernmental transfers to our cities from the higher levels of governments have not been paid adequate attention in the report. International experience from both developed and emerging economies suggests a much higher level of IGT to local governments. The transfers are especially critical in view of the goods and services tax regime, which has left out any provision for the third tier of governments.

A Surge in State Spending

State budgets continue to support the macroeconomic recovery even as state fi nances deteriorate.

The ‘What,’ ‘Why,’ and ‘How’ of a Widening Current Account Deficit

The reason for the increase in the current account deficit during first quarter of fiscal year 2022–23 is analysed. One reason for the widening of CAD has to do with India’s growing dependence on fossil fuels. There is also an element of lack of price competitiveness that is hurting exports. India is exporting low-valued technology-intensive goods whereas importing high-valued technology-advanced goods. The Government of India and the Reserve Bank of India are taking adequate measures to control the widening trade deficit. While some of these measures are yielding results in reducing CAD, external factors such as geopolitical tensions and the United States Federal Reserve System’s move of quantitative tightening are making CAD difficult to control.


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