Financial Markets and the Economy - Intersections

 (This article appeared on 27th May 2026 in the Business Standard, link:  https://www.business-standard.com/opinion/columns/india-s-policy-mix-needs-a-rethink-on-capital-flows-and-rupee-stability-126052601924_1.html  - summarizing my views expressed on this CNBC Indianomics show hosted by Latha Vankatesh: https://youtu.be/E5U8F-kA17s?si=ucrLbGDz277Yhq_a ) One root cause of rupee weakness is distortions that deter capital flows Recent movements in the rupee warrant attention, but not overreaction. Even after the sharp rise in energy prices, economists expect India’s current account deficit in FY27 to settle at around 2-2.5 per cent of gross domestic product (GDP). This is manageable by historical standards. The Reserve Bank of India (RBI) also holds foreign exchange reserves of around $580 billion net of forward foreign currency sales. However, there are important policy takeaways. India needs sustained net foreign capital inflows, which ultimately require growth and inno...

(This article appeared in Business Standard on 19th May 2026, link:  https://www.business-standard.com/opinion/columns/future-ready-market-regulation-needs-expertise-credibility-consultation-126051801680_1.html  ) Effective regulation requires consultation, expertise, incentives, and institutional credibility The draft Securities Market Code (SMC) consolidates and modernises the Securities Contracts (Regulation) Act, the Securities and Exchange Board of India (Sebi) Act, and the Depositories Act.   An ideal regulatory framework must mitigate Type I errors of market failures, while avoiding Type II errors of onerous regulations that constrain innovation and capital formation.   Balancing both objectives in increasingly complex markets requires transparent consultation, deep expertise, the right incentives, and institutional credibility.   Dialogue before regulation   Transparent consultation is essential for balanced regulation.   To Sebi’s credit, its ...

(This article appeared in Business Standard on 21st April 2026, link below: https://www.business-standard.com/opinion/columns/india-s-buffers-can-steady-markets-but-hard-policy-choices-lie-ahead-126042001216_1.html ) Time Bought, Not Problems Solved India’s buffers can manage markets for now, but hard policy choices still lie ahead   India is navigating uncertainties arising from the US-Israel-Iran conflict. Economic and regulatory buffers are in place, and markets have priced in higher risk. However, macroeconomic vulnerabilities remain. India needs more investments and innovation. To this end, appropriate policies can help address external and fiscal imbalances, attract foreign investment, and better support balanced growth.   Markets, Flows, and Regulations   India has been managing a persistent external imbalance.   In FY25, India experienced a core external deficit of $38 billion, across its current account deficit (CAD), net foreign direct investment (FDI), and...

  (this article appeared in Business Standard on 24th March 2026, link below:  https://www.business-standard.com/amp/opinion/columns/india-s-hidden-credit-constraints-issue-lies-in-pricing-regulation-126032301248_1.html   ) India’s hidden credit constraints  Its credit problem may lie less in liquidity and more in how it is priced and regulated By Ananth Narayan Even with abundant banking liquidity, banks continue to scramble for deposits. Overall, India’s credit ecosystem remains small relative to the size of our economy.  All this reflects a combination of tax incentives, regulatory structures, and monetary conditions that suppress the attractiveness of fixed income and constrain credit expansion. In turn, this has wider implications   for our asset markets and external balance. Sizing the problem Data from the Reserve Bank of India (RBI), the Securities and Exchange Board of India, and the World Bank suggests that India is a global outlier in the re...