Ajit Ranade (for Info only, not official)

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Ajit Ranade

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    ...When the current account deficit climbed to danger levels of 5% of gross domestic product, and the currency tumbled? That panic had origins in the “taper tantrum” of Ben Bernanke, then US Federal Reserve chair. But it was also connected with India’s burgeoning imports. It wasn’t just import of gold or Chinese telecom equipment, India was also importing coal, iron ore, fertilizer and edible oil in very large quantities. The awkward fact was that the country with the world’s third largest coal reserves was forced to import one-fourth of its coal requirement, at record high prices. India imported 171 million tonnes in the fiscal year ended March 2014, which was 15% higher than the previous year. But worse was to come. The imports for the next fiscal year climbed to 215 million tonnes, possibly the highest in history. This was also partly a consequence of the Supreme Court’s September 2014 decision to cancel all coal block allocations to private coal miners, virtually stopping all captive coal production. ...

    Live Mint on Nov. 15, 2017, 12:59 a.m.

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    ...Banks collects savings from depositors and give it to borrowers. The intermediaries have not been collecting their deliveries back (that is, the bad loans), and the clean-up is as messy as uncollected used tiffin boxes! Low credit offtake The metaphor is a bit mixed up but catches the imagination. A better metaphor would be “cleaning the carburettor” of the credit pipeline. Bad loans have clogged the pipes, and new credit has stopped flowing. One of the most reliable leading indicators of economic growth is the growth of non-food credit. High growth in credit foretells healthy growth of GDP, since credit goes mostly into investment and building of new capacity. India is predominantly a bank finance-led economy, so when bank lending slows down, it surely impacts future growth. Bank credit growth has been at nearly a 60-year low. ...

    The Hindu on Nov. 1, 2017, 11:03 p.m.

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    ...The US has become the world’s largest producer of oil and gas, and is now also an oil exporter. It is also becoming a free trade sceptic. China is now the flagbearer of free trade and is also leading climate change activism. Ageing Europe is electing young leaders, with the latest being a 31-year-old prime minister in waiting. Into this new normal is the unusual stance of the International Monetary Fund (IMF). The latest IMF report, called the Fiscal Monitor, is cautioning about increasing inequality in the world. Not Thomas Piketty, this is the IMF! The report says that income inequality is the highest it has been in more than half of all member countries of the IMF. Traditionally, the development and inclusive growth agenda has been with the World Bank, whereas the IMF’s mandate is rescuing countries from currency, fiscal and financial crises. The IMF now is advocating redistributive policies, and is asking rich countries to spread their wealth more evenly among their own people. ...

    Live Mint on Oct. 18, 2017, 12:13 a.m.

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    ...This optimism is not because of job security, but because of the belief that one will get a new job, even if one becomes unemployed. The same is true for an entrepreneur setting up a new factory or new business. It’s called risk taking, but that is not to imply reckless gambling. It reflects the investor’s confidence about the future returns on the investment. If that confidence starts to wane, then potential home buyers refrain or postpone their decisions. Investors adopt a wait-and-watch attitude. If everyone in the economy starts becoming extra-cautious, the decline in confidence and economic activity becomes self-fulfilling. As the economy slows down, people say, “See I told you so! It was wise to not invest and take unnecessary risk now.” This decline can happen even if the economy is fundamentally sound. What causes investor or home buyer confidence to wane? It could be anecdotes, actual economic evidence, broken trust in government or socio-political developments. ...

    The Hindu on Oct. 3, 2017, 11:54 p.m.

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    ...It makes the Reserve Bank of India (RBI) focus on a single policy mandate, i.e. controlling the inflation rate. The target rate is given to the monetary policy committee (MPC) by the government. It is actually a band, currently between 2% and 6%, and that’s why the framework is more correctly called flexible interest rate targeting (FIT). FIT as economic reform, in its significance, is right up there along with the discontinuation of automatic monetization of the fiscal deficit. In the bad old days, if the government had a fiscal deficit, what would it do? Just ask the RBI to print extra notes! Even a school kid understands the stupidity of this approach, but many developing countries followed this practice for several decades. That was discontinued as a big reformist step. This meant that the government would now have to borrow the extra funds, and not just print new notes. The other related reform was that the borrowing would be at “market rates”, i.e. ...

    Live Mint on Oct. 3, 2017, 11:50 p.m.

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    ... Any talk of a fiscal stimulus is sure to make the purist amongst economists raise a red flag. Even policy-makers begin to sound defensive when pushing fiscal expansion. However, historically, this term has been quoted out of context in India, and the current debate is no different. Even as there is talk that the government is planning a fiscal push to support growth, strong dissenting voices are suggesting that all hell will break loose. Comparisons are being made with the 2008 stimulus and dire warnings are being issued. We believe that there must be an impartial assessment of the current situation, and a fair comparison between 2008 and the current situation is required. It is our conviction that a counter-cyclical fiscal policy push is the need of the hour, and it should not be misconstrued as similar to the misguided fiscal policy of the past. First, let’s put the numbers in context. ...

    Indian Express on Sept. 26, 2017, midnight

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    ... Any talk of a fiscal stimulus is sure to make the purist amongst economists raise a red flag. Even policy-makers begin to sound defensive when pushing fiscal expansion. However, historically, this term has been quoted out of context in India, and the current debate is no different. Even as there is talk that the government is planning a fiscal push to support growth, strong dissenting voices are suggesting that all hell will break loose. Comparisons are being made with the 2008 stimulus and dire warnings are being issued. We believe that there must be an impartial assessment of the current situation, and a fair comparison between 2008 and the current situation is required. It is our conviction that a counter-cyclical fiscal policy push is the need of the hour, and it should not be misconstrued as similar to the misguided fiscal policy of the past. First, let’s put the numbers in context. ...

    Indian Express on Sept. 26, 2017, midnight

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    ...Since the first quarter of last year, growth rates have been 9.2%, 7.9%, 7.5%, 7.0%, 6.1% and 5.7%. These cannot be explained only by temporary disruptive factors like demonetization or destocking prior to the roll-out of the goods and services tax (GST). Nor can this steady decline be explained solely by global conditions. Other key indicators also corroborate this longer-term decline. Fixed capital formation as a share of the GDP has been declining for five years. Credit flow to industry has been drying up. This of course is a manifestation of the twin balance-sheet problem, namely over-leveraged corporates, and stressed bank loans. The big picture is that from a spending and demand-side perspective, all four drivers of growth are sputtering. Private investment spending (as evidenced by fixed capital formation) is growing at barely 1.6%. Exports have grown only about 1.2% last quarter. ...

    Live Mint on Sept. 19, 2017, 11:34 p.m.