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Ashok Kotwal
On demonetisation
Posted on: 23 Dec 2016
On the evening of 8 November, the Prime Minister announced on national television that Rs. ... read on »
Introduction to e-Symposium: The GDP conundrum
Posted on: 16 Nov 2016
Ever since India’s Central Statistical Organisation came out with the new GDP series with ... read on »
Introduction to e-Symposium: The idea of a universal basic income in the Indian context
Posted on: 26 Sep 2016
The idea of an unconditional basic income given to all citizens by the State, has caught o ... read on »
Debate: The Aadhaar Bill
Posted on: 02 May 2016
In a debate on the Aadhaar Bill, commentators from academia and civil society will ... read on »

Topic: Finance

Post demonetisation: Is digital finance in India’s future?
Anit Mukherjee , Divyanshi Wadhwa
Posted on: 16/08/2017 09:53:07

Analysing RBI data from June 2017 – six months after demonetisation was announced on 9 November 2016 – Mukherjee and Wadhwa show that reliance on cash has reverted to pre-demonetisation levels, and the sharp increases in digital transactions did not sustain. While consumers don’t seem ready to give up cash just yet, the experience proves that the digital financial ecosystem of India is in good health.
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Demonetisation, cattle slaughter ban, and India’s cyclical agrarian crisis
Parag Waknis
Posted on: 04/08/2017 04:51:46

In this article, Parag Waknis discusses why India’s rural economy is always on the precipice of crisis, and how the recent shocks of demonetisation and cattle slaughter ban exacerbated the crisis by destroying rural incomes and choking off farmer’s main source of emergency funding, respectively.
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The economic and political consequences of India’s demonetisation
Abhijit Banerjee , Namrata Kala
Posted on: 26/07/2017 09:25:26

The ruling party at the centre won the Uttar Pradesh state election despite its demonetisation policy having some negative economic impacts on the Indian economy. By combining primary data from surveys of wholesale and retail traders, with secondary data on wholesale markets, this column seeks to analyse why this was so.
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Towards financial prescription
Gurbachan Singh
Posted on: 24/07/2017 09:31:23

The Securities and Exchange Board of India has proposed that the distributors of mutual funds should only be allowed to sell financial products and not act as financial advisers for customers. Drawing analogies from the regulatory frameworks for driving on public roads and practising medicine, Gurbachan Singh contends that this is a step in the right direction but much more needs to be done to regulate financial advice.
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How much public debt is too little?
Pronab Sen
Posted on: 16/07/2017 02:26:39

Virtually the entire literature on public debt is focussed on determining how much is too much, beyond which it becomes a systemic threat to the economy. In this article, Pronab Sen outlines some of the considerations which should be taken into account while determining the minimum stock of public debt and its flow counterpart, the fiscal deficit.
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Financing Indian cities
Nandan Sharalaya
Posted on: 12/07/2017 10:50:31
Topics:   Finance , Urbanisation
Tags:   cities


Indian cities are fund-starved and unprepared to handle the stresses of rapid urbanisation in the country. Urban local bodies and municipal corporations, particularly in tier-2 and tier-3 cities, do not have the necessary autonomy or capacity to raise revenue. In this article, Nandan Sharalaya discusses options available to the government for financing cities, above and beyond the traditional model of public-private partnerships.
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Are farm loan waivers really so bad?
Pronab Sen
Posted on: 23/06/2017 09:41:50

Recent announcements by various state governments of their intent to waive farm loans to varying extents have been strongly criticised by the media and other commentators. In this article, Dr Pronab Sen examines the validity of the claims on which this opposition is based.
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Understanding livelihood resilience in Bihar
Surya Bhushan , K. V. Raju
Posted on: 16/06/2017 00:44:08
Topics:   Finance
Tags:   Bihar


This column develops a livelihood resilience index including three key components – bio-physical, economic, and social resources – and estimates the index for districts in the state of Bihar.
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Bank financing of stressed firms
Rajeswari Sengupta , Anjali Sharma
Posted on: 07/06/2017 09:18:46
Topics:   Finance


There is anecdotal evidence that banks in India have been extending credit to highly distressed firms. By delaying recognition of bad loans, banks may improve their own profitability in the short run, but in the long run, this has only exacerbated the non-performing asset crisis in the banking sector. This column provides preliminary empirical evidence that banks have indeed been throwing good money after bad.
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Hazards of farm loan waivers
Tanika Chakraborty , Aarti Gupta
Posted on: 23/05/2017 09:41:30

In theory, debt waivers are expected to induce the optimal level of effort from the debtor for loan repayment. However, repeated waivers may distort household expectations about credit contract enforcements in the future. This column analyses the effect of Uttar Pradesh’s state-level debt waiver programme – announced right after India’s nationwide Agricultural Debt Waiver and Debt Relief Scheme – on consumption and investment behaviour of households.
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Strategy for dealing with the banking crisis
Ajay Shah
Posted on: 17/05/2017 09:27:06
Topics:   Finance
Tags:   banking


To deal with India’s banking crisis, Prof. Ajay Shah of NIPFP recommends a two-pronged strategy – more financing for firms, and RBI reforms.
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The size of personal bank credit in India
Renuka Sane , Anjali Sharma
Posted on: 10/05/2017 08:12:47

In May 2016, the Insolvency and Bankruptcy Code law was passed by Indian Parliament and received presidential assent. The law consists of provisions for both corporate and personal insolvency. However, only the corporate insolvency provisions are being implemented. In this article, Sane and Sharma focus on personal credit extended by banks with a view to informing policy actions on personal insolvency provisions of the Code.
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Reviving the informal sector from the throes of demonetisation
Kaushik Bhattacharya , Siddhartha Mitra , Sarmistha Pal , Bibhas Saha
Posted on: 13/02/2017 09:43:56

While recent measures announced by the government indicate some awareness of the hardships inflicted on the informal sector by the note ban, more needs to be done. In this article, Bhattacharya, Mitra, Pal and Saha summarise the emerging evidence on the significant adverse impact of demonetisation on the informal sector, and suggest policy measures to ensure a steady recovery.
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Union Budget 2017-18: No amends for the sins of demonetisation
Siddharth Varadarajan
Posted on: 06/02/2017 17:21:27

Commenting on India’s Union Budget 2017-18, Siddharth Varadarajan, a Founding Editor of The Wire, contends that dealing with the aftereffects of demonetisation requires a fiscal and monetary boost, but the government appears to be in no mood to deliver it. In his view, this is because the fiscal cushion that demonetisation was supposed to provide never materialised.
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Has regulatory intervention been effective in maintaining stability of Indian banks?
Mostak Ahamed , Sushanta Mallick
Posted on: 06/02/2017 09:57:20
Topics:   Finance


To address the challenges that Indian corporates faced in the early 2000s in meeting their debt-servicing obligations to banks/financial institutions, RBI introduced a corporate debt restructuring programme in 2002. This column finds that in the absence of a strong legal system, this out-of-court regulatory mechanism has indeed helped Indian banks remain stable, as there has been no bank failure in India unlike in other countries.
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India’s Union Budget 2017-18: Status quo for the social sector
Yamini Aiyar
Posted on: 03/02/2017 11:46:30

On 1 February, The Finance Minister of India presented the Union Budget 2017-18. In this article, Yamini Aiyar, Director of Accountability Initiative, contends that for social policy, the Budget suggests more continuity than radical change in India’s welfare architecture. However, it lacks a coherent vision for health and education.
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How agricultural debt waiver impacts beneficiary households
Mrinal Mishra
Posted on: 02/02/2017 03:38:36
Topics:   Finance , Agriculture


How a large-scale and unanticipated debt-relief programme impacts beneficiary households is a question that has not been clearly answered by the existing literature. This column analyses the impact of India’s Agricultural Debt Waiver and Debt Relief Scheme of 2008. It finds that beneficiary households increase precautionary savings by increasing investment in jewellery as they anticipate higher credit constraints in the post-waiver period. Consumption levels remain unaffected.
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An economist’s view on recent domestic and world events
Dilip Mookherjee
Posted on: 31/01/2017 19:18:19

Dilip Mookherjee spoke to Hindu Business Line at length on a variety of issues including demonetisation, the upcoming Budget, and the Trump Presidency’s impact on the world economy.
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How to go about chasing black money
Indira Rajaraman
Posted on: 30/01/2017 10:21:44

In the context of demonetisation, Indira Rajaraman argues that the focus of any sustainable reform of the taxation structure must be on reducing flows of tax evasion, not going after existing caches of black money.
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A five-minute loan to unlock micro-entrepreneurship in India
Vibhor Goyal , Niloufer Memon , Varad Pande
Posted on: 11/01/2017 09:26:52
Topics:   Finance


Micro-entrepreneurs are grossly underserved by traditional lenders, as they typically do not have collateral or credit histories to make them creditworthy. In this article, Pande, Memon and Goyal of Dalberg Global Development Advisors, describe how digital infrastructure created by ‘India Stack’ can help provide paperless, presence-less, and cashless credit to micro-entrepreneurs, in a way that is sustainable for lenders.
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Assessing the impact of demonetisation through the gender lens
Mitali Nikore
Posted on: 04/01/2017 09:49:44

In this article, Mitali Nikore, Senior Consultant at PwC India, highlights how demonetisation is impacting women differentially, and offers policy suggestions on how the negative effects can be mitigated.
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On demonetisation
Parikshit Ghosh
Posted on: 23/12/2016 11:16:28

On the evening of 8 November, the Prime Minister announced on national television that Rs. 1,000 and 500 notes are no longer legal tender, and must be exchanged at the banks for newly issued currency. This major policy intervention has sparked a country-wide debate. Will it curb black money? Is it going to nudge us towards a cashless society? How much will be the collateral damage from the liquidity shock and is it a price worth paying?

Ideas for India is following the issue closely. A lot of commentary has already appeared on our pages and more will be forthcoming. This page collects together all the articles we have posted on demonetisation, in reverse chronological order.

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Demonetisation: A thunderbolt in search of a target
Ajit Karnik
Posted on: 23/12/2016 09:22:25

In this article, Ajit Karnik, Professor of Economics at Middlesex University, Dubai, examines the various rationales that have been trotted out to justify demonetisation and finds little evidence to back these up. In his view, this seems to have been done mainly because a dramatic gesture was required to keep the supporters of the current government enthused.
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Post-demonetisation: Can the old notes return?
Badri Sunderarajan
Posted on: 22/12/2016 09:37:49

Banks in India are reported to have received about 87.7% of the demonetised currency notes so far. In this article, Badri Sunderarajan argues that when once all the old notes have come in, it would make sense to reintroduce them into the system as legal tender.
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India’s demonetisation drive: Politics trumps economics
Siddhartha Mitra
Posted on: 20/12/2016 09:39:10

In this article, Siddhartha Mitra, Professor of Economics at Jadavpur University, argues that even though demonetisation fails the standard economic cost-benefit test with regard to its stated objectives, it may still make for sound political arithmetic.
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Demonetisation: Some very counterintuitive effects in practice
Gurbachan Singh
Posted on: 18/12/2016 09:09:25

Due to demonetisation, holders of black money lose if they cannot exchange their notes or sell these in the black market. It is widely reasoned that this implies an equal financial gain for the public authorities. In this article, Gurbachan Singh shows that this logic is flawed.
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The demonetisation boondoggle
Amartya Lahiri
Posted on: 04/12/2016 03:07:56

In this article, Amartya Lahiri, Professor of Economics at the University of British Columbia, argues that all public policy must rely on a clear-headed cost-benefit analysis and the recent demonetisation move fails the test.
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Why Demonetisation?
Sarmistha Pal
Posted on: 01/12/2016 09:25:38

In this article, Sarmistha Pal, Chair in Financial Economics at the University of Surrey, examines whether the current government’s stance in tackling black money has significantly differed from its predecessor, and how far it is willing to go in this respect.
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Demonetisation and agricultural markets
Nidhi Aggarwal , Sudha Narayanan
Posted on: 30/11/2016 12:03:41

In this article, Aggarwal and Narayanan contend that demonetisation alone cannot turn agricultural markets cashless. Such a shift would require sustained and focussed effort to expand the reach of formal institutions, especially for credit and storage.
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Consequences of the demonetisation shock
Sudipto Mundle
Posted on: 29/11/2016 00:41:17

In this article, Sudipto Mundle, Emeritus Professor at NIPFP, contends that we are likely to see a significant dip in economic activity till January 2017 or even till the end of the current financial year because of the disruptive demonetisation shock.
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Notes ban: Modinomics vs. Moditics
Maitreesh Ghatak
Posted on: 23/11/2016 00:01:18

Maitreesh Ghatak, Professor of Economics at the London School of Economics, contends that while the ban on high-denomination currency notes is bad economics, it is a brilliant political move.
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Demonetisation and rural cooperative banks
Ajay Vir Jakhar
Posted on: 22/11/2016 09:24:45

The RBI has barred rural cooperative banks from exchanging or accepting the denotified Rs. 1,000 and 500 notes. In this article, Ajay Vir Jakhar of Bharat Krishak Samaj - a non-partisan association of farmers - argues that if rural cooperative banks sink, so will farmers.
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A monetary economics view of the demonetisation
Ajay Shah
Posted on: 21/11/2016 00:35:05

The demonetised Rs. 1,000 and 500 notes were 86% of the total volume of cash in India. In this article, Ajay Shah, Professor at NIPFP, argues that if a significant scale of firm failure were to come about, it would convert a temporary shock into a deeper and more long-term recession.
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Going cashless but thinking cash?
Bappaditya Mukhopadhyay
Posted on: 20/11/2016 09:20:56

In this article, Bappaditya Mukhopadhyay, Professor of Economics and Finance at the Great Lakes Institute of Management, contends that switching from a predominantly cash-based to cashless economy needs a positive, exogenous shock and the recent currency ban could be the perfect opportunity for that. To give India’s cashless economy the push it needs, the government could allow mobile and other digital payment platforms to accept deposits in demonetised notes.
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Picking up the pieces
Pronab Sen
Posted on: 18/11/2016 10:00:00

In an earlier article , Pronab Sen, Country Director, IGC India Central, examined some of the economic consequences of the recent demonetisation of Rs. 1,000 and 500 notes in India, and concluded that the potential damage could be substantial, both in terms of growth and equity.

In this article, focussing on solutions, he contends that the government now needs to realise that credit for production purposes is at least as, if not more, important than providing liquidity for consumption.

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Policymaking in the ‘grey zone’?
Prerna Mukharya
Posted on: 17/11/2016 09:30:00

Prerna Mukharya, Founder of Outline India – a social enterprise that focuses on data collection, impact assessments and evaluation studies, predominantly working with rural populations in remote areas – discusses the impact of the currency ban on their work.
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A macro view of India’s currency ban
Rajeswari Sengupta
Posted on: 15/11/2016 01:24:33

The recent ban on high-value currency notes has taken the country by storm. While much is being written about the pros and cons of this announcement in terms of the effect on black money, logistical costs, and the immediate inconvenience faced by the public, there is little or no discourse on the macroeconomic implications. In this article, Rajeswari Sengupta, Assistant Professor of Economics at IGIDR, discusses the impact of this move on money supply, output and prices, in the short- and medium-term.
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Shock and oh damn
Pronab Sen
Posted on: 14/11/2016 08:35:29

In this article, Pronab Sen, Country Director for the India Central Programme of the International Growth Centre, argues that India’s recent demonetisation has penalised virtually the entire informal sector, and perhaps damaged it permanently.
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A closer look at demonetisation
Gurbachan Singh
Posted on: 13/11/2016 03:43:04

In this article, Gurbachan Singh contends that black money and white money are simplistic concepts; there is a grey area as well. In his view, the economic effects of demonetisation in terms of real estate, seigniorage, and political funding are complex. The measure can be useful in curbing black money only if supplemented by other policies on a sustained basis.
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Currency shock: Does the gain justify the strain?
Parikshit Ghosh
Posted on: 11/11/2016 09:19:40

On the evening of 8 November, PM Modi announced that 1,000 and 500 rupee notes will cease to be legal tender post-midnight. In this article, Parikshit Ghosh, Associate Professor of Economics at the Delhi School of Economics, contends that there are bigger, juicier and relatively low-hanging fruit the government is not reaching for, in the fight against black money.
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Kisan Credit Card programme: Expanded access to credit or expansion of credit?
Somdeep Chatterjee
Posted on: 03/11/2016 09:50:31
Topics:   Finance , Agriculture


Kisan Credit Card programme - a key reform in agricultural lending in India - has been operational for almost 20 years now. However, there is little empirical evidence of its impact on intended beneficiaries. This column finds that the programme has had significant positive impact on agricultural production and technology adoption. It is likely that the channel is enhanced borrowing ability of the already unconstrained, rather than expanded access to credit.
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The tussle between RBI and Ministry of Finance: A different dimension
Gurbachan Singh
Posted on: 18/08/2016 09:36:28

The popular belief about the tussle between RBI and the Ministry of Finance is that it is an issue of the trade-off between inflation and economic growth, with the former more focussed on controlling high inflation and the latter emphasising high growth. However, according to Gurbachan Singh, there is a different dimension to the story; the Ministry doesn’t fully appreciate that RBI cannot ignore market forces while making announcements about interest rates.
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Public sector banks: The more things change, the more they stay the same
Gurbachan Singh
Posted on: 21/07/2016 01:11:48
Tags:   banking


Banks Board Bureau has been set up to help the government appoint heads of public sector banks (PSBs) and to advise on important issues in banking. In this article, Gurbachan Singh asks basic questions – what is the rationale for PSBs? Was there a rationale for the nationalisation of banks even in 1969? In his view, privatisation is needed but as a second-best solution, meaningful autonomy can be useful.
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Land and financial misallocation in India
Gilles Duranton , Ejaz Ghani , Arti Grover Goswami , William Kerr
Posted on: 20/07/2016 09:20:53

Optimising the allocation of factors of production – land, capital and labour - improves productivity. In India, where evidence suggests land is severely misallocated to inefficient manufacturing firms, access to financing is disproportionately tied to access to land. This column examines the link between the misallocation of land and access to capital through financial markets. A very strong positive correlation emerges between the two, consistent with the fact that land and buildings can provide strong collateral support for accessing finance from the credit market.
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Inflation targeting: A long way to go
Rajeswari Sengupta
Posted on: 18/07/2016 22:44:08

The Finance Bill, 2016, amended the Reserve Bank of India (RBI) Act, 1934, to define inflation targeting as the primary objective of the central bank. In this article, Rajeswari Sengupta, Assistant Professor at IGIDR, contends that to actually become an inflation-targeting central bank, RBI will need to undertake a series of reforms to build institutional capabilities and improve the monetary policy transmission mechanism.
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Socially disadvantaged groups and microfinance in India
Jean-Marie Baland , Rohini Somanathan , Lore Vandewalle
Posted on: 16/05/2016 03:12:36

The benefits of microfinance are in the details. This column takes a look at lending by commercial banks in India to self-help groups – smaller, informal community-based groups – as a new and successful microfinance initiative. Different ways of thinking about getting credit to the poorest and most marginalised in society can work, but only if the institutions are properly geared up for their customers
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The Indian banking system: A ticking time bomb
Ashish Pandey
Posted on: 13/05/2016 00:00:00
Tags:   Banking


In response to RBI’s call to accelerate the recognition of stressed assets, publicly traded banks in India added nearly Rs. 1 trillion in bad loans in the quarter ending December 2015. In this article, Ashish Pandey, a finance professional, proposes a multipronged approach to addressing the Non-Performing Assets crisis in the Indian banking system.
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Recapitalising public sector banks by disinvesting in RBI: Right and wrong
Gurbachan Singh
Posted on: 09/05/2016 09:39:43

The Economic Survey 2015-16 put forth the argument that the Government of India could reduce its capital in the RBI from its current large level and use it to increase its capital in public sector banks, which face a capital shortage. RBI Governor Raghuram Rajan has stated that this argument is not valid. In this article, Prof. Gurbachan Singh contends that while the argument does not hold in general, it does so for all practical purposes under the present conditions.
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Achieving financial inclusion: Going cashless
Bappaditya Mukhopadhyay
Posted on: 06/04/2016 09:44:11
Topics:   Finance


A World Bank survey reveals that while about half of all individuals in India had bank accounts in 2014, only 12% had made a cashless transaction in the past year. In this article, Bappaditya Mukhopadhyay, Professor of Economics and Finance at the Great Lakes Institute of Management, contends that cashless transactions can be encouraged by ensuring that payments – beyond government transfers - are made directly into the bank accounts of recipients.
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Land in India: Market price vs. fundamental value
Gurbachan Singh
Posted on: 29/02/2016 08:05:53
Topics:   Finance , Land
Tags:  


The Real Estate (Regulation and Development) Bill, 2015, is focused on protecting the few home buyers who can afford to buy homes but does not address the issue of high land prices, which is a very serious problem. This column demonstrates that the market prices of land in India are very high compared to fundamental values, and to market prices in developed countries.
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Fiscal deficit and growth slowdown
Gurbachan Singh
Posted on: 17/02/2016 09:36:11

Ahead of the Union Budget, several policymakers and economists in India have advocated increasing public spending to spur economic growth. In this article, Gurbachan Singh argues that even if India is facing a slowdown, a larger fiscal deficit is not the solution – more so now that RBI and the government have adopted inflation targeting. The prospect of a fiscal crisis may be farfetched but India may be incurring costs differently.
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Financial inclusion for the poor: Using RCTs for effective programme design
Ruchira Bhattamishra
Posted on: 06/01/2016 09:22:19
Topics:   Finance


While the Pradhan Mantri Jan Dhan Yojana – the Indian government’s flagship financial inclusion scheme - is impressive in its mission, it does not seem to have achieved meaningful results so far. In this article, Ruchira Bhattamishra, Senior Fellow at the Centre for Development Research, Sustainability and Technical Advancement, makes a case for the use of the Randomised Controlled Trial methodology for impact evaluation to gather credible evidence on the effectiveness of pilot financial programmes/particular components of programmes, before the government invests heavily in scaling them up.
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When higher volatility is good news
Rudrani Bhattacharya , Ila Patnaik
Posted on: 16/12/2015 09:36:13
Topics:   Finance


Conventional wisdom suggests that access to financial services such as banks and bond markets, providing savings and borrowing instruments, allows smoothing consumption over lifetime, irrespective of income fluctuations. Yet, India and other emerging economies have witnessed an increase in consumption volatility relative to income volatility after financial sector development. This column argues that large permanent income shocks in emerging economies explain this puzzle.
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Transforming Indian agriculture: The role of credit policy
Amartya Lahiri , Dilip Mookherjee
Posted on: 14/12/2015 09:27:21
Topics:   Finance , Agriculture


Despite various policy attempts at priority sector lending to poor farmers, very little progress has been made on the ground, suggesting problems in the design and implementation of these policies. In this article, Amartya Lahiri and Dilip Mookherjee and explore where the problem really lies and what can be done to address the issues.
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Cash to cashless
Bappaditya Mukhopadhyay
Posted on: 30/11/2015 09:35:30
Topics:   Finance
Tags:   banking


The RBI is in discussion with the government on ways to reduce cash usage in the economy and to promote the use of cashless instruments. This column presents results from a study that estimates the extent of cashless transactions in the economy, and analyses the enabling factors and bottlenecks.
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JAM and the pursuit of nirvana
Jean Drèze
Posted on: 13/11/2015 09:38:09

The Finance Ministry is proposing to roll all subsidies into a single, lump-sum cash transfer to households, on the back of the JAM (Jan Dhan Yojana, Aadhaar, Mobile numbers) trinity. In this article, Jean Drèze, Honorary Professor at the Delhi School of Economics, argues that a single-minded focus on high-tech cash transfers as a foundation for social policy in India is fraught with dangers.
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Foreign currency borrowing by Indian firms: What do we know?
Ila Patnaik , Ajay Shah , Nirvikar Singh
Posted on: 09/11/2015 09:30:50
Topics:   Finance


As foreign currency borrowing by Indian firms has been increasing, concerns have surfaced about rising associated risks. Hence, recent policy changes seeking to make the regulatory regime simpler and more transparent are timely. This column addresses several important questions regarding foreign currency borrowing of Indian firms, the answers to which can provide a firmer basis for ongoing policy formulation.
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Are banks responsive to credit demand shocks in rural India?
Sankar De , Siddharth Vij
Posted on: 05/10/2015 04:57:57
Topics:   Finance


The output of Kharif crops is estimated to decrease by about 2% this year due to deficient monsoon rains in some Indian states. How responsive are commercial banks to a credit demand shock in rural India? Analysing data on rainfall and agricultural credit during 1993-2010, this column finds that banks increase the supply of agricultural credit to farmers following a drought, but that the additional credit is directed towards existing customers.
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Can microcredit improve food security among the rural poor?
Asad Islam , Chandana Maitra , Debayan Pakrashi , Russell Smyth
Posted on: 28/09/2015 09:52:23

A core objective of microcredit in Bangladesh is to make the rural poor more food secure. To what extent has this been achieved? Analysing household data from Bangladesh, this column finds that participants of microcredit programmes are more food secure, with improved calorie availability, reduced child stunting and better maternal nutritional status. However, programme participation in itself does not improve dietary diversity.
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Household savings and India’s current account deficit
Nikhil Gupta
Posted on: 25/09/2015 10:37:28

India’s current account deficit widened consistently in the post-crisis period between 2008-09 and 2012-13. This column finds that while the public sector was the key driver of this trend in the first two years, the increased consumption/investment by households was responsible for the high deficit in the later period. It recommends that policymakers should now incentivise household savings rather than consumption/investments, which implies limited scope for further interest rate cuts.
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Emergence of Bandhan as a bank: A new era in the Indian banking industry
Somdutta Basu , Souvik Dutta , Abhirup Sarkar
Posted on: 27/08/2015 10:34:55
Topics:   Finance


At a time when the Indian banking industry is experiencing a steep rise in bad loans, Bandhan – an MFI with a near 100% loan recovery rate – has converted into a bank. Based on a survey of 112 Bandhan clients in West Bengal, this column highlights the features of Bandhan’s lending model that have enabled it to keep its bad loans at negligible levels.
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Inclusive finance for inclusive growth: A gender perspective
Vigneshwara Swamy
Posted on: 31/07/2015 09:51:29

While research has established that financial inclusion programmes lead to economic upliftment of poor families owing to the participation of women, the evidence on the impact of such programmes on women empowerment is mixed. Based on a household survey data in India, this column finds that female-headed households that participate in financial inclusion programmes gain more in terms of economic well-being, vis-à-vis male-headed households.
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How interest rates affect financial decisions of Indian households
Nikhil Gupta
Posted on: 17/07/2015 09:52:35

RBI has cut interest rates three times this year so far. While rate cuts are welcomed by the Indian corporate sector, their impact on households is less discussed. This column analyses the relationship between deposit rates and financial decisions of households. It finds that lower rates reduce net financial savings of households, which in turn reduces the resource pool available to the corporate sector.
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Reining in gold imports
Gurbachan Singh
Posted on: 12/06/2015 00:00:00
Tags:   imports , RBI


In an attempt to reduce gold imports, the Indian government has proposed three new schemes – gold monetisation, sovereign gold bonds, and domestic production of branded gold coins. In this article, Prof. Gurbachan Singh diagnoses the market failure and government failure involved in large gold imports, and provides a broad perspective on the issue. He examines the potential effectiveness of the schemes, and suggests policy alternatives.
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Barriers to basic banking in India
Camille Boudot , A.J. Mowl
Posted on: 29/05/2015 00:00:00
Topics:   Finance


The Indian government is promoting the Jan Dhan Yojana, Aadhaar and mobile banking – or the “JAM trinity” — as the pathway to financial inclusion. But are banks capable or even willing take on their role in this ambitious agenda? Based on a field study in Chennai, this column highlights the range of costs and constraints imposed by banks on customers attempting to enter the formal financial sector.
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Impact of American FDI in India

Posted on: 15/05/2015 00:00:00
Topics:   Finance


The United States is one of India’s largest trade and investment partners. This column discusses the impact of American FDI in India in terms of direct effects such as job creation, exports and technology transfers, as well as indirect effects like spillovers from R&D and adoption of best practices. It also highlights challenges faced by American firms while investing in India.
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14th Finance Commission: A trust-based approach towards local governments
Meera Mehta , Dinesh Mehta
Posted on: 27/04/2015 00:00:00

The 14th Finance Commission has been hailed as ‘path-breaking’ for recommending larger fund allocations to state governments and giving them more autonomy in spending these funds. In this article, Meera Mehta and Dinesh Mehta highlight that the Commission has also recognised the need to trust and respect local government bodies, and has allocated much larger funds to them. Will this approach work and will state governments cooperate?
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Can bank account-based payments boost savings?
Vincent Somville , Lore Vandewalle
Posted on: 06/04/2015 00:00:00
Topics:   Finance


?The Finance Ministry plans to focus on mobilising savings in the next phase of PMJDY, the financial inclusion scheme. This column presents results from an experiment in Chhattisgarh, which tests whether the method of payment of wages and other transfers affects household finances. It finds that people that are paid through their bank account save more than those that are paid in cash.
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The financial inclusion agenda and Aadhaar
MS Sriram
Posted on: 18/03/2015 00:00:00

The central government is pushing financial inclusion in a big way. In this article, MS Sriram discusses the role of identity in financial inclusion, and the importance of Aadhaar in this context. He argues that while Aadhaar has facilitated opening of bank accounts by providing a verifiable identity to the poor, it has distracted the financial inclusion agenda by claiming to be a ‘fix-all’ solution.
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Financing India’s infrastructure growth
Samik Metia
Posted on: 12/01/2015 00:00:00

Interest rates in the developed economies are still at very low levels, while investors are looking for high and stable returns for their money. This article outlines an innovative proposal for financing India’s infrastructure needs via government bonds targeted at foreign investors, with returns linked to the growth rates in the country.
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Financial literacy: When, what and how
Parul Agarwal
Posted on: 05/01/2015 00:00:00

The need for financial literacy and its importance for financial inclusion have been widely recognised. Based on various research studies on financial literacy initiatives, this column outlines financial services’ needs of a poor household at various stages of its life cycle. It contends that customising financial literacy programmes according to the stage of life of targeted individuals is crucial for their effectiveness.
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An economist’s view on the new government’s initiatives
Pranab Bardhan
Posted on: 19/12/2014 00:00:00
Topics:   Finance


In this article, Pranab Bardhan, Professor of Economics, University of California, Berkeley, provides his perspective on some of the initiatives of the new Indian government at the centre in their first six months in office – Swachh Bharat Abhiyan, Jan Dhan Yojana, ‘Make in India’ campaign, and the proposed changes to MNREGA. In his view, inefficient subsidies must give way to a basic monthly income for all citizens.
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Financial inclusion for agricultural growth: An alternative approach
Pushkar Maitra , Sandip Mitra , Dilip Mookherjee , Alberto Motta , Sujata Visaria
Posted on: 08/12/2014 00:00:00

Traditional, group-based microcredit has had limited success at enabling farmers to expand the cultivation of risky but profitable cash crops. Evidence suggests that this is mainly because of its mechanisms for borrower selection and enforcement of repayment. This column proposes a new approach that leverages local intermediaries and aligns their incentives with farmer profits, to generate better outcomes for agricultural production and incomes.
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From tapering to tightening: The impact of the Fed’s exit on India
Kaushik Basu , Barry Eichengreen , Poonam Gupta
Posted on: 27/11/2014 01:09:10
Tags:   US


India was among the hardest hit by the Fed’s ‘taper talks’. This column argues that this impact was large for two reasons. First, India received huge capital flows before. This had made it a convenient target for investors seeking to rebalance away from emerging markets. Second, macroeconomic conditions had worsened, which rendered the economy vulnerable. The measures adopted in response were ineffective in stabilising the financial markets. Implementing a medium-term framework that limits vulnerabilities and restricts spillovers could be more successful.
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Challenges and priorities for financial sector reform in India
K.P. Krishnan , Nirvikar Singh
Posted on: 17/11/2014 00:00:00

I4I Editor Nirvikar Singh (Professor, University of California, Santa Cruz) interviews K.P. Krishnan (Former Additional Secretary, Department of Economic Affairs, Ministry of Finance) on the central government’s plans and priorities for financial sector reform, and associated challenges. Dr Krishnan provides his perspective on issues including the regulatory architecture, financial inclusion initiatives, strengthening the banking system, and infrastructure financing.
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Do location-based incentives promote industrialisation?
Ritam Chaurey
Posted on: 23/09/2014 00:00:00

In a bid to industrialise the relatively under-industrialised states of Himachal Pradesh and Uttarakhand, the government implemented a tax incentive and capital subsidy scheme in the two states in 2003. This column finds the policy change led to new business creation and growth of existing firms in these states, most of which was not at the cost of neighbouring regions.
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Increasing tax compliance through social recognition
Mushfiq Mobarak
Posted on: 15/09/2014 00:00:00
Topics:   Finance


To enhance government revenues, it is important to tackle the menace of tax evasion. This column discusses an experiment that tests whether sharing a firm’s tax compliance status with neighbouring firms and/ or providing social recognition for compliance helps increase compliance. It finds that these interventions do bring about a positive behavioural change, but only for non-compliant firms in areas where some firms were already complying.
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Economics of public pension: Analysing India´s old-age pension scheme
Neeraj Kaushal
Posted on: 03/09/2014 00:00:00
Topics:   Finance


India’s older population aged 60 or above, is the second largest in the world. This column analyses the effects of India’s National Old Age Pension Scheme on the wellbeing of the elderly. It recommends that the Indian government should increase the pension amount to lower the risk of poverty among the elderly, and work to expand inclusion of the most vulnerable groups.
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Finance and growth in China and India: Have firms benefited from capital-market expansion?
Tatiana Didier , Sergio Schmukler
Posted on: 08/08/2014 00:00:00
Topics:   Finance
Tags:   China


Financial sectors in India and China are fast expanding. This column presents a new dataset on the capital-raising activity and performance of publicly listed firms in the two countries. It suggests that at least a part of the fast growth in India and China seems to come from firms that are able to raise funds from capital markets. However, benefits are restricted to the largest firms.
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Financial inclusion of women: Myth or reality?
Deepti KC , Mudita Tiwari
Posted on: 04/07/2014 00:00:00
Topics:   Finance , Gender


Research indicates that initiatives targeted at financial inclusion of women have had limited success. This column contends that limited formal ownership of material assets by women and a lack of understanding of their socio-economic and cultural constraints are key explanations. It recommends innovative measures to promote financial inclusion and entrepreneurship among women.
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Corporate debt market in India: Issues and challenges
Vaibhav Anand , Rajeswari Sengupta
Posted on: 19/05/2014 00:00:00
Topics:   Finance
Tags:   credit


While it is true that the Indian corporate debt market has transformed itself into a much more vibrant trading field for debt instruments from the elementary market that it was about a decade ago, there is still a long way to go. This column systematically lays down the issues and challenges facing the corporate debt market in India.
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What voters reward: Evidence from the 2009 Indian parliamentary elections
Poonam Gupta , Arvind Panagariya
Posted on: 12/05/2014 00:00:00
Topics:   Finance
Tags:   democracy


Do voters care about economic outcomes? This column analyses the 2009 parliamentary elections in India and finds that voters favoured parties that delivered high growth in their states and rejected those that did not. It also finds that voters preferred candidates who had served in the parliament before, were wealthy, educated, and affiliated with a large party.
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Estimating losses to consumers due to mis-sold life insurance policies
Monica Halan , Renuka Sane , Susan Thomas
Posted on: 19/02/2014 00:00:00
Topics:   Finance
Tags:   insurance


Mis-selling of financial products has prompted regulators in India to work on consumer protection in financial markets. However, evidence on actual mechanisms and extent of mis-selling is lacking. This column estimates losses to consumers owing to mis-selling of Unit Linked Insurance Products in India between 2004-2005 and 2009-2010 – one of the biggest episodes of malpractice in the country’s finance sector.
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Inflation targeting in India: Right and wrong
Gurbachan Singh
Posted on: 31/01/2014 00:00:00

An RBI-appointed Expert Committee has recommended targeting a 4% inflation rate, but allowing it to vary between 2% and 6%. This column takes a different position on the target and leeway. It argues that achieving truly low and stable inflation alongside macroeconomic stability is not as difficult as is usually made out to be, if the right policies are in place.
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Changing dynamics of the Indian gold market
Misha Sharma
Posted on: 13/01/2014 00:00:00

The demand for gold and its import have been on the rise in India, despite rising gold prices. The RBI has responded by introducing various measures to curb the demand for gold and gold loans. This column discusses the implications of these measures, and suggests complementing such curbs with innovative financial products that can act as substitutes for gold loans.
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What is mitigating a financial crisis in India?
Gurbachan Singh
Posted on: 08/11/2013 00:00:00

The recent turmoil in the currency market and the general slowdown in growth in India are disturbing. However, India has by and large performed better in terms of macro-financial stability as compared to many parts of the world. This column discusses the problems confronting policymakers, and current policy responses and associated costs, and suggests alternative policies.
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Migrating out of poverty: The role of finance
Meghana Ayyagiri , Thorsten Beck , Mohammad Hoseini
Posted on: 13/09/2013 00:00:00

Financial liberalisation has been controversial as it is not clear whom the expanded credit allocation actually benefits. Using variation across time and states in India, this column finds strong evidence that financial deepening reduces rural poverty, especially among the self-employed. Financial deepening is also found to be associated with an inter-state migration trend from rural areas into the tertiary sector in urban areas.
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Foreign investors under stress: Evidence from India
Ila Patnaik , Ajay Shah , Nirvikar Singh
Posted on: 19/07/2013 00:00:00

Emerging market policymakers are concerned about the effects of foreign portfolio flows on financial stability. This column focuses on the behaviour of investors in extreme events, allowing for the possibility that what happens under stressed market conditions may differ from day-to-day outcomes. The findings for India suggest that while on good days, foreign investors exacerbate the boom by bringing in additional capital, no significant effects are found on very bad days in the local economy.
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A right time for inflation-indexed bonds?
Viral Acharya , Gangadhar Darbha
Posted on: 07/06/2013 00:00:00

While the introduction of inflation-indexed bonds in India has been hailed by many as a step in the right direction, this column argues that their success will depend on how serious the government is about taming inflation. These bonds will help the government reduce its debt only if they are accompanied by anti-inflationary monetary and fiscal policies.
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Does caste influence access to agricultural loans in rural India?
Sunil Mitra Kumar
Posted on: 03/06/2013 00:00:00
Tags:   credit


Increasing access to agricultural credit in rural India is a major policy priority. This column examines whether farmers’ access to formal agricultural loans depends on their caste. It is found that while commercial banks do not discriminate against lower caste farmers in lending, cooperative banks do as they are prone to interest-group capture at the local level.
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The market for inflation-indexed bonds
Gurbachan Singh
Posted on: 31/05/2013 00:00:00

On 15 May 2013, the Reserve Bank of India announced that it would begin monthly issues of inflation-indexed bonds starting June 2013. These bonds, wherein in the principal amount adjusts according to changes in the price level, are already in use in the developed world and their introduction in India is a welcome development. However, they are likely to have different implications for India given the presence of the Statutory Liquidity Ratio regulation in the country.
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The Chit fund crisis: Should not put all financial intermediaries in the same bracket
Abhijit Banerjee , Maitreesh Ghatak
Posted on: 03/05/2013 00:00:00
Topics:   Finance , Crime


The government has announced a bailout package for the participants of unregulated saving schemes that have been put at risk by the current Chit fund crisis in West Bengal. In this article, Banerjee and Ghatak caution against putting deposit-takers and micro-lenders in the same bracket while considering stricter financial regulation to prevent recurrence of such events.
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Willingness to pay for index-based crop microinsurance in India
Janani Ramasubramanian
Posted on: 22/04/2013 00:00:00
Topics:   Finance , Agriculture


Given the significance of the agricultural sector in India and its vulnerability, an adequate and sustainable risk management system is critical. However, uptake of microinsurance is quite low. This column presents research that shows that while there is awareness regarding market-based formal insurance schemes, people continue to be more comfortable relying on own savings or informal borrowing, which can only help manage small shocks or losses.
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Why India should not further delay a credit line from the IMF
Gurbachan Singh
Posted on: 03/04/2013 00:00:00

India is expected to run a current account deficit of more than 4% of its GDP this year. At the moment this can be paid for with money coming in from abroad – but what if the flow of money were to suddenly stop? This column argues that India should not further delay a credit line from the IMF.
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Helping the poor to save
Parul Agarwal , Deepti KC , Mudita Tiwari
Posted on: 23/01/2013 00:00:00

Do poor people save? This column portrays the saving and financial behaviours and preferences of the poor. It recommends designing and marketing savings products that address the constraints they currently face.
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Helping India’s informal manufacturing sector to grow
Kunal Sen
Posted on: 09/01/2013 00:00:00

India’s informal manufacturing sector is dominated by small household enterprises that keep everything within the family – but these firms are often the least productive. Why aren’t these small enterprises making the changes needed to bloom and grow? This column asks whether the problem is access to finance and what can be done about it.
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Formally insuring the informally insured
Mushfiq Mobarak
Posted on: 16/11/2012 00:00:00
Topics:   Finance , Agriculture


Rainfall is critical for the livelihoods of millions of Indians – yet many have no formal insurance if the rains fail. This column looks at what happens when a new formal insurance policy based on the weather is offered at random to farmers and farm workers across several states in India.
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Why some poverty-fighting programmes show no net impact
Jonathan Morduch , Shamika Ravi
Posted on: 16/10/2012 00:00:00

An increasingly popular way to tackle acute poverty is ‘targeting the ultra-poor’. The scheme provides not only money but also training and support and has been hailed a huge success in its origin country Bangladesh. But this column evaluates a copycat scheme in southern India and finds that the gains are met by losses elsewhere and that, overall, the effect is minimal.
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Microfinance and predatory lending: The same old story?
Latika Chaudhury , Anand Swamy
Posted on: 19/09/2012 00:00:00

Once hailed as a near-miraculous way of lending money to the poor, microfinance is now often seen as exploitation – and governments are stepping in. This column looks at another point in India’s history where lawmakers have intervened in lending practices: following the Deccan Riots between farmers and moneylenders in 1876. It argues that in hindsight this was an overreaction – and perhaps there is a lesson for today.
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Monetary policy in India and other developing countries
Prachi Mishra , Peter Montiel
Posted on: 03/09/2012 00:00:00

Setting interest rates and controlling inflation is an altogether different challenge in countries like India. This column argues that in many developing countries, the financial system is still too underdeveloped for monetary policy to have a reliable effect on the economy, raising doubts over several of today’s policies.
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The value of land administration information for financial development
Aparajita Goyal
Posted on: 28/08/2012 00:00:00
Topics:   Land , Finance


While the effect of improved property rights on economic development has been extensively studied, the specific relationship between better land administration information and improved credit access is understudied. This column uses evidence to demonstrate that the computerisation of land registries reduces the cost of lending and can result in expanded access to credit for urban borrowers. It lists certain factors that can dilute these positive effects and argues that these need to be managed.
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