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Showing posts from October, 2017

Kanha - the ancient sal forests of Central India

With the opening of the forest season, I did a five day trip to Kanha National Park. The forests of central India welcome visitors between the first week October and usually until the middle of June. The parks are understandably closed during the monsoons when roads become treacherous. Despite the fact that parts of Madhya Pradesh received very little rainfall this year, Kanha was stunningly beautiful. The tall savannah grasslands intermingled by ancient sal trees, offer visitors a visual delight. My association with Kanha goes back 20 years, when I first drove their all the way from Delhi, in my then newly acquired Toyota jeep. At that time you could visit the park in your own vehicle – as long as it contained off-road abilities. Since then, I have been travelling a few times each year and now work closely with the forest department on certain social initiatives. The Kanha forest authorities provide the infrastructure to disperse scholarships. A recent, initiative by the fores

The Transmission of Interest Rates

The efficacy of monetary policy is judged by the promptness and extent with which it achieves intended outcomes, such as reducing inflation or increasing economic growth. By changing the policy rate, for instance, a central bank seeks to affect money market rates, which then transmit the policy impulse to the full spectrum of deposit and lending rates in the financial system. This in turn affects consumption, saving and investment decisions and eventually demand and inflation. In India, as in other emerging markets, the interest rate is the most commonly used instrument. However, other ways are also available. These include the credit channel which works by constraining the supply of bank loans; the asset price channel which involves influencing other asset prices like equity and real estate; and finally, the exchange rate channel which influences the relative attractiveness of domestically produced goods vis-à-vis imports for consumers. Since January 2015 when the current phase

Farm Loan Waivers

Farming damage In 2008, when the Government of India announced a Rs 60,000 crore farm loan waiver, the decision horrified economists and the financial markets. The waiver, amounting to 1.3% of GDP, would cripple national finances and damage the credit culture. The moral hazard of penalising prudent borrowers would be systemic and enduring. However, its proponents argued that it would free farmers ‘from the suffocating clutches of endemic debt’ and, in the process, also provide a quick consumption stimulus to the economy. Subsequent events proved both assumptions awry and the folly of the decision was absorbed in a hard and painful way. Nevertheless, a lesson was learnt and federal Governments have since avoided a repeat. However, it would seem that it is now the turn of state Governments to blunder. In the last few months, Uttar Pradesh, Maharashtra, Karnataka and Punjab announced waivers of agricultural loans in their states to the tune of Rs 80,000 crore. Fortunately, the