Financial Markets and the Economy - Intersections

( This article appeared in Business Standard on 24th February 2026, link below: https://www.business-standard.com/opinion/editorial/rbi-money-creation-and-govt-finances-why-non-bank-debt-will-matter-ahead-126022301222_1.html  ) RBI dividends and bond purchases have kept yields low in a low-inflation environment. When conditions change, non-bank debt financing will be essential ---------------------- Alongside helping navigate monetary policy, liquidity, and currency and bond markets, record open market operation (OMO) bond purchases and dividend transfers of the Reserve Bank of India (RBI) have helped the government’s fiscal arithmetic, while keeping yields low. Moderate inflation has made all this possible, though with implications for the external balance. What happens when the cycle turns? Money creation There are four ways through which money supply (M3) is created, across currency in circulation, and banking demand and time deposits. First, when a bank extends a commercial loa...

  (The enclosed article appeared in Business Standard on 28th January 2026 - link  below:   https://www.business-standard.com/opinion/columns/budget-2026-tax-transition-india-needs-to-shift-to-residence-based-regime-126012701501_1.html  ) For years, our government has propelled the economy with its focus on infrastructure investments. However, for sustainable public debt and sustained capital formation, the investment baton must pass on to the private sector.  This requires a conducive, competitive, and stable tax regime that treats capital as a partner, not a target. The quest for expertise When a global major invests in a semiconductor fab, an AI data centre or electronics assembly under the Production Linked Incentive (PLI) scheme, it brings patented processes, integration into global supply chains, research and development, and other specialized skills that can drive future growth. Fostering investment, therefore, remains a top national priority. Global inve...

( The enclosed article appeared in Business Standard on 20th January 2026   https://www.business-standard.com/opinion/columns/regulatory-dilemma-scams-vs-suffocation-in-india-s-capital-markets-126011901326_1.html  ) As India’s capital markets deepen, Sebi, industry and academia must work together to strike the right regulatory balance. Every regulator faces an inherent tension: Act too softly and risk scams; act too harshly and suffocate legitimate business. In navigating this tension, a securities regulator must achieve three distinct goals. The first goal is  investor protection . Large-scale frauds and market manipulation can severely damage trust in the markets. When regulators fail to prevent or respond decisively to such misconduct, they commit a  Type I error . These failures make headlines, cause investors to pull back, erode confidence, and ultimately impair capital formation. The second goal is ensuring regulation does not penalise honest enterprise. Rules ...

  (This article appeared in Business Standard on 15th December 2025, link  https://www.business-standard.com/opinion/columns/india-needs-a-serious-debate-on-monetary-policy-and-the-impossible-trinity-125121501303_1.html  ) India needs an informed debate on when and how financial stability and currency markets should shape monetary policy A foundational principle in international economics is the “impossible trinity” or “trilemma.” This asserts that a country cannot simultaneously maintain a stable exchange rate, allow full capital mobility, and pursue an independent monetary policy.  Putting inflation first The January 2014 report of the Urjit Patel Committee shaped India’s monetary policy framework. The report recognised the trilemma and recommended giving precedence to flexible inflation targeting. It then emphasised the importance of allowing flexibility in exchange rate determination, while managing volatility through a combination of capital flow management (CFM...

  (This article was published in Business Standard as a byline on 8th December 2025. Link to the article is https://www.business-standard.com/opinion/columns/let-some-capital-flow-out-so-more-can-flow-in-why-this-matters-125120801324_1.html  ) One of the most striking shifts in India’s capital market ecosystem in recent years has been the rise of the Indian household as the country’s largest provider of risk capital. This is a structural transformation that is reshaping the engines of capital formation and influencing incentives for both issuers and global investors. While a welcome trend, it carries implications that merit informed policy debate. As the Securities and Exchange Board of India (Sebi) has highlighted, retail participation in securities markets has seen more than a threefold increase over the past five years, to over 136 million unique investors now. Reflecting this trend, net domestic demand for listed equities across primary and secondary markets, through mutua...

 ( Speaking notes   for an address at the  Forex Association of India (FAI) Education Seminar – Mumbai, November 15, 2025) Good morning, friends. It is wonderful to be back with the Forex Association of India (FAI), at your education seminar. I must begin with an honest confession. After three years at SEBI, I am thoroughly out of touch with currency and macro markets. Regulation, enforcement, adjudication, board notes, and circulars tend to relegate currency markets far into the background. So, you can imagine how daunting it is for me to speak to a room full of macro market experts. Nevertheless, when FAI invited me, I accepted immediately. It certainly was not because I had discovered any new macroeconomic wisdom hidden inside a SEBI file. I accepted because this is the perfect opportunity for me to catch up on the world I have missed for three years. Once a dealer, always a dealer. Let me briefly outline what I will speak about this morning. First, I will recapitulate...