Financial Markets and the Economy - Intersections

(The following article appeared on cnbctv18.com on September 24, 2018 https://www.cnbctv18.com/finance/indian-debt-capital-markets-no-need-to-panic-but-it-is-time-to-act-897431.htm ) We rarely find any market in a just-right Goldilocks frame of mind. Echoing greed and fear, market moods swing between exuberance and dismay. The events of the last few days, starting with the IL&FS downgrade, could mark a turn in our debt capital market mood to the dark side. We were wrong to be complacent earlier – there are real issues that we delayed resolving, which need to be addressed now. We would equally be wrong to panic now – we need to confront all our monster-under-the-bed fears for what they are. It isn’t as good as we thought it was, and it will not be as bad as some fear it could be. But we do need to act – now.   The age of growth In recent times, Indian debt capital markets have gone through a period of complacent, near-exuberant growth. Outstandi...

( The enclosed article appeared as a web-exclusive on Business Standard on 11th September 2018: https://www.business-standard.com/article/markets/global-financial-crisis-lessons-for-india-from-the-2008-crisis-and-beyond-118091001256_1.html ) Managing India's macroeconomics - lessons from the 2008 crisis and beyond The years since the global financial crisis of 2008 have brought into sharp focus the importance of managing financial stability in the Indian context.  Post the crisis, developed economies focused solely on fostering growth, relegating fears around inflation and deficits into the background.  In India’s case, however, when we focused on growth, we allowed financial instability from twin deficits, banking stress and inflation to set in. This led to our own economic crisis of 2013. Even today, our current framework does not pay sufficient attention to the quality of our external and internal balance, and the weaknesses in our fi...

(The following article appeared on cnbctv18.com online on 6th Sept 2018, link provided below: https://www.cnbctv18.com/market/currency/rupee-fall-there-is-no-real-reason-for-panic-just-yet-738901.htm ) USDINR move in perspective Given the relative calm in USDINR between 2014 and 2017, the current rupee depreciation feels painfully sharp. Yet, we are not in an uncontrolled USDINR free-fall, irrespective of what news headlines might suggest. Unlike 2013, RBI still has ample currency reserves to be in control - for now. The current situation is closer to 2011-2012, when RBI’s currency reserves were still enough to buy us time to address core imbalances. That means that there is no real reason for panic just yet. But neither should we feign helplessness, and blame the current context on external events alone. Instead, we must recognize that there are issues of financial stability – the quality of our external balance, the health of our financial ...