Financial Markets and the Economy - Intersections

(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...

( 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...