General Collection

Bangladesh Central bank heist:

Reuters has done quiet an extensive investigation into the Bangladesh central bank heist. The hack into Bangladesh central bank shocked the entire world. Its not just about the $1 billion which the hackers almost got their hands on, but the heist also put a very big question mark on the SWIFT message system, used in most of the International bank transfers. Read full report here.


This article talks about government’s plan to allow foreign educational institutions to set up campuses in Special Economic Zones (SEZs) as a way around some of the legal hassles currently being faced by them.

This article talks about proliferation of Kunjis in the educational system. It never occurred to me that Kunji or Question bank, as I used to call them, selling companies were such a powerful lobby. Almost everyone in my school including myself had used some form of Kunjis in our preparation for board exams.

Capital infusion into PSBs:

A welcome move by the government to infuse capital into Public Sector Banks (PSBs). As the corporate bond market is very muted  in India, PSBs, which are the largest lenders to corporate play a very important role.

Asset Reconstruction Companies:

With rising NPAs and RBI’s insistence of cleaning up balance sheets these are exciting times to be in Assset Reconstruction business. SBI is setting up a ARC. This article talks about Edelweiss setting up a ARC.

This article talks about increasing number of people setting up their own Alternative Investment Funds (not ARCs).

Survey of services establishment by NSSO

This article talks about NSSO surveying all service sector establishments in India. I am eager to see some interesting statistics from this survey.


GST Bill

A collection of articles on GST.

  • This article provides a reading list of articles on GST published in Mint.
  • This article questions whether if companies are ready for the new tax regime. What about tax authorities?
  • Another article criticizing NDA and Congress for stalling GST.
  • This article talks about how GST benefits the economy.
  • The passage of GST bill in Rajya Sabha, where BJP doesn’t enjoy majority, has occupied headlines for quite some time. But it is only a start. This article gives a picture of the entire process.
  • I am sure everyone has had enough of experts talking about benefits of GST. However this article talks about some practical issues with implementation of GST.

“The most critical cause of the failure of GST will be in the transference of responsibility and liability of tax remittance to the customers of a supplier (Section 16(11)( c)). Basically, the law postulates that if a particular supplier has failed to comply with the law correctly — by furnishing the correct returns (Section 27(3)) and/or making the correct payment(Section 27(2)) — then its customers cannot avail themselves of the input credit; if given, it will be reversed.

The origin of this provision lies in the history of tax avoidance through false representations by a small section of businesses, and the fact that it is not feasible for the Government to systematically contain this problem. With the framing of this law, the Government hopes that the market will itself weed out the bad eggs — which is not wrong in theory. What is wrong is not understanding the cascading consequences of doing this in practice and the mayhem it will create. While the effort for driving compliance will reduce, the consequential effect of businesses shutting down, and therefore collections going down, have not been treated seriously enough.”

 Since I wrote this article yesterday, a new development has taken place. GST was finally passed in Rajya Sabha. An article in mint on the topic.

General Collection

Corporate Bonds:

An excellent article on corporate bonds by Pawan Agarwal of CRISIL ratigs in mint. India’s good macro economic stability, huge demand for investment in infrastructure sector, banks NPA crisis, bankruptcy code etc will act in favor of enabling a vibrant corporate debt market. The author also points at some new measures that RBI and govt should take. Allowing repo in AA rated debt securities, promote CDS, putting restriction on concentration risk which banks can take with large borrowers, removing restrictions of pension funds on investment in SPV’s etc can further enable the cause of developing a vibrant corporate bond market.

Diesel Vehicles Ban:

A good article on the history of debate around diesel vehicles ban in India. Indian cities are rated among the some of the worst polluted cities in the world. It just shocks me to see the laxity of Indian officials with regards to environment and pollution.

Andhra Pradesh state capital – Amaravati

This article talks about a new capital city, Amaravati, being built by Andhra Pradesh state after the bifurcation of the state into Telangana and Andhra Pradesh. Government can spend as much money as it wants but for any new city to be successful a lot of factors, some of which are beyond the control of government, will have to fall in place. Infrastructure like schools, entertainment, hospitals etc follow people. Similarly, people migrate to a new place only if it has good infrastructure. This is like a chicken and egg problem. At least in the initial stages the government has to provide incentives in the form of tax rebates, access to cheap land etc to attract investments. I wonder how the government will be able to manage this especially since Hyderabad, which was the chief source of revenue of undivided Andhra Pradesh, is now part of Telangana after bifurcation. Actually Hyderabad is the chief point of contention in the entire bifurcation process.

Cyber Warfare

This article in financial times points to new type of warfare. Over fears of cyber attacks emanating from Russia, Estonia is planning to create a back up of all its digital files in UK. From voting to birth records almost everything is digitized in Estonia. I have earlier talked about hacking in elections in this blog. With the world rapidly digitizing from smart phones and cars to intelligent lighting for homes, cyber warfare is going to play a very important role in future. One could possibly argue that USA is called as a super power because of its superiority in military hardware. If one goes by this argument then the next superpower would be the country with most sophisticated cyber infrastructure. With its huge information technology industry India has required human resource to develop a robust cyber technology.

No country for poor – Scroll’s “Ear To The Ground” Project

Scroll has started a new project Ear to the Ground where they plan to study six states, including Mizoram, Odisha, Pujab, Bihar, Tamil Nadu and Gujarat. Over the last 13 months they have covered 3 states. Major conclusions of the study:

  • Each of the three states are seeing a concentration of political control
  • There has been a weakening of democratic checks and balances
  • The states are also failing in education and healthcare too
  • States are forgo a lot of revenue in the form of corruption eg: giving mining licenses for almost free
  • This is accompanied by non-productive populist schemes
  • As a result people are turning to costly private players for basic services like health education
  • The people are responding in complex ways. For example, when Mizoram CM’s brother resigned on charges of corruption, he was re-elected. This is because the people wanted a powerful MLA and probable next CM from their constituency.

The most appalling finding in the study is the Halka system in Punjab. Halka in-charges are Akali dal candidates who have lost assembly elections. According to the article these Halka in-charges have more power than actual MLA’s in their constituencies. This is a direct undermining of democracy. Another interesting finding in the study..

“There is a rise in the number of religious babas, and in the number of people flocking to them. Many of these newfound babas have links to politicians – who eye their followers as a vote bank – and people appeared to be turning to them to get their work done in times of an indifferent administration.

There is an intensification of religious, caste and ethnic identity. That again seems to link back to the elite captures we described earlier. As the quantum of public goods – welfare spends, jobs – shrinks, people start looking for groups that can increase their bargaining power. That can be caste, clan or religion. This shows up in the recent protests by the Jats in Haryana, Kapus in Andhra Pradesh, what have you.”

Read the entire article here.

Bank License

A good initiative by RBI by rationalizing the process of issuing bank licenses. Earlier RBI used to open short windows for accepting application for new bank licenses. If you miss the window once you will have to wait for many years before next opportunity arises. However, according to the new rules RBI plans to accept the applications on a continues basis. This is significant shift in policy by RBI. I believe we can give this credit to Prof. Raghuram Rajan, Governor of RBI, for this change.

Find an article on the topic in mint. What’s interesting is the whole article is that large groups have been excluded from setting up banks. A large literature in academic finance talk about how business groups behave opportunistically (use the keyword “Tunneling by business groups” in google scholar to find relevant literature). The 2008 crisis has shown that how banking crisis can affect the whole economy. Hence it makes sense for RBI to not accept applications from large business groups which can have conflict of interests.