Financial Markets and the Economy - Intersections

 (This article appeared in Business Standard on June 23, 2026, link here:  https://www.business-standard.com/opinion/columns/alternatives-to-intervention-the-case-for-freer-markets-fewer-distortions-126062201293_1.html  ) Stepping in may address immediate pressures, but fewer distortions and freer markets could deliver more durable outcomes India’s policymakers have increasingly relied on intervention across markets to pursue multiple objectives simultaneously.   Currently, they want to reverse negative sentiment on the rupee. Meanwhile, fiscal policy is being used to cushion the impact of higher energy prices and likely adverse weather on inflation and growth, even as government borrowing rises. At the same time, they would like interest rates to stay low to support economic activities.   Achieving all this simultaneously is challenging. The Reserve Bank of India’s (RBI’s) subsidised swap window for attracting Foreign Currency Non-Resident (Bank), or FCNR ...

 (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...