Tag: Ananth Narayan

FM relief package: No choice but to print money, for the govt to spend for short-term, says SPJIMR professor

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the coronavirus outbreak takes a toll on the economy, the central government has stepped up its efforts to tackle the impact. The Finance Minister Nirmala Sitharaman announced an economic relief package called the ‘PM Gareeb Kalyan Scheme’ of Rs 1.70 lakh crores which would include cash transfers to the poor and a whole host of measures to provide immediate relief to the poorest of the poor.

To discuss the impact of this in detail, CNBC-TV18 spoke to expert economists, statistician and money market experts.

Pronab Sen former chief statistician said, “It is a start, I think one has to accept the fact that government’s ability to reach down to the bottom of the pyramid is adequate in rural India, is practically non-existent in an urban India. But at least a beginning has been made. I think the families of a lot of these people may be taken care of. It isn’t the final solution, it isn’t the perfect solution, but at least it is the start and a good start.”

He further added, “It is difficult to say what is good and what is not, the fact of the matter is that Jan Dhan by itself is not an indication of poverty. A lot of these Jan Dhan accounts were created essentially because banks had to meet targets so complete reliance on them as a targeting framework is misplaced. One would have to use a combination of different instruments to tackle the problem.

According to Ananth Narayan, Professor of SPJIMR, “This is going to be a huge economic shock this 21-day lockdown and we don’t know what the overall cost of COVID -19 is going to be and the brunt will be faced by daily wage workers, by casual workers, by contract workers. This is going to be extremely large, businesses are going to be hurt really hard some of them might not even recover. This is coming on the back of the existing conditions when our economy was already vulnerable. Given the situation and given that we are going to see a shock I think we have no choice but to use the fiscal lever for now. ”

“Fiscal FRBM is already the history, so we have no choice but to use the fiscal lever. For the short run, we have no choice but probably print the money, for the government to spend, for the short run.”

According to economist Haseeb Drabu there is no denying that some help has been given but if you look at it from lives and livelihood, it is very important for us to save life and lives that have been impaired by the virus and also by the consequence of the lockdown. “In terms of both safety and security, the fact that you are earmarking Rs 1.70 lakh crore is a substantial amount. There will be of course question, no matter what you do on how beneficial it will be.”

However, agreeing with Sen, he said that Jan Dhan accounts is not the best way. However the fact that they have increased MGNREGA wages, have done direct transfers, is a good thing. “I would suggest that why don’t they shift the entire MGNREGA budget of Rs 61,000 crore to the DBT,” said Drabu.

A Prasanna of ICICI Sec PD said, “To the extent the cash transfers reach the extended beneficiaries at least some part of the income loss whatever they are sustaining during this lockout will get compensated, and of course we expect that once the lockout ends it trickles down into consumption at the bottom of the pyramid.”

However, it is more of subsistence kind of money which the government is giving and I am bit shocked that the amount which has been given for Jan Dhan should have at least been doubled or tripled; Rs 500 is fairly insulting if you ask me, so that is the scale they should think. “They have to double or triple this amount and probably they have to give some grants to the states for the first three months and then after three months again double this amount. The amount of money which the government should spend between the scale they should be very large. So, this just a very small start if you ask me,” said Prasanna.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Rate cut needed to soothe market nerves; need more fiscal measures to ensure financial stability, say experts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With the markets significantly down, the already slowing economy futher getting impacted by the coronavirus scare, what is it that the country’s central bank and central government can do to help better the situation and more importantly what steps need to be taken to tackle the finance dislocation that is underway in the debt markets is the big question.

To discuss this in detail and get answers to few of the questions, CNBC-TV18 spoke with Ananth Narayan, professor at SPJIMR; market expert V Srinivasan and Neeraj Gambhir, president and head-treasury at Axis Bank.

Gambhir said the market has been asking for a rate cut for a while. The expectations have been built-up. The MPC did not deliver it the last time and there was a disappointment around this. “We do need at least a 50 basis points cut, if not more. This is just to calm the nerves in the market and say that this was expected, this is delivered and the RBI is watching and acting as required,” he added.

“The open market operation of Rs 10,000 crore is quite small. We need a commitment to do more open market operations over the period of next 5-7 weeks as this problem persists and a commitment to say that if required we will do more,” said Gambhir, adding that we don’t need liquidity from central bank because there is plenty of liquidity around.

“Therefore, this open market operations is not to take care of the liquidity aspect of the system. The open market operations is to provide a bid in the market as far as government bond market is concerned, to make sure that the rates do not fly at this point in time and give the confidence to the market,” he further added.

Srinivasan said liquidity is not reaching the pockets where it is most needed. “So you need to address pockets which need liquidity right now and try and provide direct assistance and not provide system liquidity because when you are providing liquidity to the system, the system liquidity is abundant but it is not flowing through the pipe to people who need it,” he added.

Speaking about rate cut and liquidity measures, Narayan said, “Rate cuts cannot revive the economy and cannot bring demand at this point in time. The point is that we are not trying to address the economy. Of course the economy requires other steps, largely fiscal to take care at this point in time.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI announces liquidity measures: Here’s what bankers, economists make of it

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a press conference today, the Reserve Bank of India (RBI) governor Shaktikanta Das said the revival plan announced for Yes Bank was a credible one and will work. He also assured that depositors money was safe. With regards to COVID-19, he said they were ready to take necessary steps at the appropriate time.

The RBI announced another round of USD 2 billion dollar-rupee swap on March 23 and up to Rs 1 lakh crore of long-term repo operations as and when the market needs it.

Keki Mistry, VC & CEO of HDFC; HR Khan, former deputy governor of RBI; Ananth Narayan, professor at SPJIMR; Sanjeev Sanyal, principal economic adviser and Jayesh Mehta of Bank of America spoke at length about the announcements made by the RBI governor with regards to liquidity in an interview with CNBC-TV18.

Mistry said, “I don’t think doing a knee-jerk reaction of cutting rates at such short notice would have made that much sense. To my mind this is right. The governor has said that he is going to review this from time to time and he will do whatever it takes to ensure that the system functions properly.”

On Yes Bank he said, “The message to the Yes Bank depositors is very clear that RBI is right behind it and the central bank will ensure, come what may that the money given by the depositor is not going to be lost and the depositor can feel confident. I think this brings a lot of confidence to the depositors.”

According to Mistry, Yes Bank will come out of this situation a lot stronger.

The governor made two important points, one was reassuring Yes Bank depositors and the other was he was right in emphasizing that state governments and state government agencies should be calm and confident about the health of the banks, whether they are private and public and they should not discriminate at this point of time. If the state government official or state government agencies were to withdraw money from private sector banks it would be disastrous because it could have financial stability implications, said Khan, adding that it would not right time for them to take out the plug and create instability.

Principal economic adviser Sanjeev Sanyal said, “As the governor pointed out clearly that using the long-term refinancing operation (LTRO) to keep the quantitative liquidity in the system as easy as possible is what we have done for now but that doesn’t mean anything else has been ruled out and he was quite clear about that.”

According to Mehta, the extra LTRO may not have immediate impact on the yield curve. “So whether it is on April 3rd or maybe before that, if policy rates are going to change then not much impact of 3 year money at this juncture to be borrowed; we don’t even know whether it’s one or two or 5 year swap but it will help at a margin,” he added.

Speaking about rate cut, Narayan said, “I continue to believe there is a good chance we see a rate action before April 3rd but today’s press conference did bring some doubts to my mind; the fact that he (the governor) seemed a little unsure about the timing and the fact that he also mentioned growth might not be impacted in India that much. He didn’t give a straight answer to dollar-rupee linkage to monetary policy question. So, while I still think he is a dove and wants to do as much as possible for the economy, but the confidence has come down; I still think though the rate action will happen before.”

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI announces dollar-rupee swap window: Central Bank is acting proactively, says Narayan of SPJIMR

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The rupee ended the day at 74.22 to the dollar against Wednesday’s close of 73.65 to the dollar. As the rupee continued to depreciate, the Reserve Bank of India (RBI) has announced a six month US dollar sell and buy swaps to provide liquidity to the forex market.

The central bank plans to offer USD 2 billion to forex market on the sixteenth of March. The swaps will be conducted through the auction route in multiple tranches. The RBI has said that it is ready to take all measures to ensure effects of Covid-19 on economy are mitigated.

According to Ananth Narayan, Professor at SPJIMR, the central bank is acting proactively. There is absolutely no sign of any dollar shortage in the system at this point in time. The first indicator of any dollar shortage, even temporary mismatches is when the forward premia or the differential between rupee and dollar interest rates in the forward market would start to come off as people scramble for dollars and therefore the cost of dollar goes up. There is no sign of that.

“The one year forward premia  was close to Rs 3, very similar to what it was in the last few months,” he said.

He further added, “There have been outflows in the recent past from FIIs etc but a lot of that I think has been delivered and supplied by the RBI itself in the spot market. So, there is no dollar shortage as such. It looks like a proactive step by the RBI saying that if there are outflows going through on a temporary basis, let us not even get to the stage where we see shortages, let us be proactive and fill up the coffers of banks with dollars.”

“RBI has been defending the currency over the last few days. Despite all the bad news globally, and the risk-off that we have seen globally, while other emerging markets have been hit, rupee has not yet hit the lows seen in October 2018 – the 74.38 level,” he said adding that there are reports that RBI has been defending the currency vigorously both in onshore markets and even in offshore markets.

“So to that extent, actually, supplying dollars by way of sell / buy swaps helps them in the cause of controlling the rupee because it pushes up forward premia and therefore makes it a lot more expensive for importers to buy and makes it a lot more attractive for exporters to sell”, he added.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Yes Bank rescue plan: Depositors need not worry, RBI to protect their interests, say experts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) has taken control of the Yes Bank board for 30 days and imposed a moratorium from March 5 to April 3. Frantic depositors thronged Yes Bank branches and ATMs to withdraw their money.

Each depositor will be able to withdraw only up to Rs 50,000 till the moratorium is in place. However, depositors can withdraw up to Rs 5 lakh, or the amount lying in the account, whichever is less, in circumstances such as a medical emergency or marriage

Usha Thorat, Former Deputy Governor of Reserve Bank of India; Ananth Narayan, Professor at SPJIMR; VG Kannan, Former CEO of IBA; Deepak Shenoy, Founder of Capitalmind and Manoj Nagpal, MD and CEO of Outlook Asia Capital discussed what investors and depositors could do.

Thorat said that the depositors should not be worried. “RBI is there to protect the interest of the depositors. That is exactly what we did in the case Global Trust Bank (GTB). There are powers under the RBI Act, RBI has the power and I am sure it will do everything it can to protect the interest of the depositors,” she said.

Concurring with Thorat’s view, Ananth Narayan said that it does not matter whether your deposit amount is Rs 1 lakh or Rs 10 lakh. “RBI has made it extremely clear that depositors’ interest will be protected and so has the government. What Mrs Thorat said is absolutely right that the depositors need not worry. Other parts of the ecosystem might have to think about things, but depositors need not worry at all,” he said.

According to Kannan, RBI has clear plans and there is certainty in place. “This is the first time they have put a moratorium only for a period of one month, which basically means that they have got some very clear plans in mind. Hopefully the entire thing will not last longer. In the case of PMC, it was ‘till further orders’, here some sort of certainty appears to be in place,” he said.

Answering a query on auto debit facility and whether credit cards payments will bounce, Deepak Shenoy said, “From a perspective of debit, the rule applies across the board no matter how that debit happens, whether it is auto debit, a cheque, NEFT transfer or a debit on case of the IPO. The limit is Rs 50,000 and anything more than that will be rejected. I do not know how the implementation will be internally, but that is what RBI has said. So, I do not think any amount more Rs 50,000 will be allowed to leave the account in whichever manner it might choose to be transacted. So, the short answer in both cases is, it is not going to go through if it is more than Rs 50,000.”

Nippon India has written down the entire exposure that they had to Yes Perpetual bonds to zero. They have restricted the subscription. Speaking whether a similar route will be taken by other AMCs as well, Nagpal said, “People who have invested in debt mutual funds, there are approximately around 30-35 mutual fund schemes that have been impacted because of that and it is spread across 6-7 mutual funds. The largest exposure is Nippon Mutual Fund and the problem with them is that the exposure in some of their schemes is as high as 25 percent.”

“The Nippon Strategic Debt Fund has an exposure of almost 25 percent in this particular bond and they have taken a call that they have written it down to zero. In fact some of the other fund houses as well like Franklin Templeton Mutual Fund have written it down to zero yesterday,” added Nagpal.

However, since the exposure to the overall NAV of these bonds is 1-1.5 percent, they have not restricted any fresh inflows. Only, when it becomes a large part of your scheme – more than 10 percent of your scheme, which is the case with Nippon Mutual Fund in one of their schemes and in other schemes also it is almost touching 8-9 percent, hence they have restricted inflows to this entire thing, said Nagpal.

“My view is that out of the 30-35 schemes that will be impacted, almost 20-25 schemes have already taken a hit on this by writing it down to zero as a prudent measure, the valuation agencies have provided a cut down of another 25 percent, Nagpal said.

However,  most of the mutual funds have taken a very prudent view. These kind of bonds have exit clauses for both the existing bank and even if it is amalgamated into another bank, the other bank also has the option of not paying these bonds to the extent that it is there. Hence the risk on such bonds is fairly high of not getting the money back.”

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Yes Bank debacle: Rate cuts and extraordinary measures cannot be ruled out till April 3, says Ananth Narayan of SPJIMR

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government has effected moratorium on YES Bank from March 5 to April 3 on the recommendation of Reserve Bank of India (RBI). The order came into effect from 6 pm March 5. The private lender will not pay depositors more than Rs 50,000 during the moratorium period, irrespective of the number of accounts with the bank.

Discussing the impact of this on the currency market and his expectations from RBI on back of this developments, Ananth Narayan, Professor, SPJIMR said, “I do expect the RBI to be very vigilant on all markets right now. Governor Das has repeatedly told us that he is worried about financial stability, the health of the financial services ecosystem. With the Yes Bank debacle and with the possibility that there are still question marks about some banks and some other non-bank finance companies, I think RBI will be very vigilant.”

“Both rates cuts, as well as extra ordinary measures such as extension of the long-term repo operation (LTRO) can’t be ruled out between now and April 3rd,” he said in an interview with CNBC-TV18.

Let us not forget that we still have Federal Open Market Committee (FOMC) coming up on March 18th, which could see some additional cuts coming through, he said, adding that rate cuts would probably continue to try and give some ease to the system.

He further added, “On the foreign exchange (FX) markets things aren’t looking great despite oil prices coming down and globally soft commodity prices etc. There is an overhang of long rupee carry positions in India. Much of the dollars which have been accreted into RBI’s reserves are either unhedged foreign currency debt or simply speculate a long rupee positions or net exporter selling etc. that nervousness is there. I think the RBI will use its ample reserves to quieten the FX market as well.”

When asked if under current circumstances any  kind of measures would help,  he said, “I don’t think interest rates can help, it will be pushing on a string, the issues are elsewhere but at least in terms of sentiment the RBI will be careful. There are questions marks which are unresolved right now, what happens to the tier II bonds, credit spreads of other NBFCs which have been big issue will probably also go up, so given that kind of nervousness I think they will provide relief . But the solution is not rate cuts or sweet talk. At least now the need to recognise there is the bigger problem and take some severe action in terms of a onetime solution on the non-performing assets (NPAs) as well as banking reforms going ahead I hope they go down that path.”

Speaking about collateral damage of the Yes Bank debacle he said, “Unfortunately, the problem is not or the trust deficit is not limited to Yes Bank, Yes Bank was the most egregious of the lot but there are other banks, and other non-bank finance companies where there are questions marks as well. So all of them as a class could get affected as well. So, you will see the credit spreads going up, you will see question mark coming up. Overall it is not a great situation to be in but solutions do exist, hopefully Delhi will recognise them and take the adequate steps.”

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economic Survey 2020: Here’s what economists, statistician make of it

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government tabled Economic Survey 2020 in Parliament. Indranil Pan, chief economist at IDFC First Bank, Pronab Sen, former chief statistician and Ananth Narayan, professor at SPJIMR shared their views and readings on the survey.

On the fiscal deficit front Sen said, “The point is as far as FY20 is concerned, there will be a breach. The real question is what it is saying about 2021 – that’s more interesting because what you have is 2 statements – one is not mentioning anything about the fiscal deficit but talking about the expansionary fiscal policy. I don’t see how you are going to have an expansion in fiscal policy without some breach of the glide path if not this year’s breach target.”

“All it is saying is that it is going to breach and if it’s going to breach only because of the giveaways that have happened in the last 3 months or so, then it means you are still continuing to hide the problem under the carpet,” said Sen.

When asked about Essential Commodities Act, Sen said, “We have been talking about scrapping the Essential Commodities Act (ECA) for many years now and the subsequent governments have talked about it and have not been able to do anything about it. I see no reason why the same set of issues would not crop up now. The real question is do you want to do away with the ECA or do you want to dilute it in some manner. I think doing away with it is a bad idea because it does have an important role to play, but diluting it and bringing in some discipline is not such a bad thing.”

On 6-6.5% GDP forecast for next year as well as on the hope that growth will pick up in the second half of FY21, Indranil Pan of IDFC First Bank said, “On the growth front we are expecting that there could be a better growth performance for the economy in the second half relative to the first half and that – we were anyway sort of building in our 5 percent model for gross domestic product (GDP) for the current fiscal year. For the next fiscal year, a lot would depend on not only the domestic conditions but even the global conditions, where we see the coronavirus issue affecting the financial markets and therefore we need to look at that perspective also.”

SPJIMR’s, Ananth Narayan said, “There is no doubt that we need to get the credit chugging in the system again and for a variety of reasons banks and financial services ecosystem is no shape right now to fund India’s growth. I think a big part of that is actually  two-fold. First is there is this overhang of non-performing assets, a lot of it is in real sector particularly for NBFCs but it is not limited to real estate alone. It is whole series of sectors. Something has to be done to quarantine these non-performing assets, and the full recognition is not done as yet.”

“The National Company Law Tribunal (NCLT) and Insolvency and Bankruptcy Code (IBC) is working well but it is in no position to handle this huge stock of non-performing assets (NPA) that we have. It is important therefore that something be done as a onetime exercise to remove the burden of non-performing assets from the financial services ecosystem.”

“It sounds like a bad idea to have a troubled asset relief program (TARP) or a bad bank because it sounds like throwing good money after bad which is why it is essential that alongside that there has to be accountability and more importantly reform,” added Narayan.

When asked about ‘Assemble In India’ concept, Narayan said, “I am all for investments. I thought the last year’s Economic Survey which focused a lot on investments, struck the right tone. I know the debate today is about consumption, but funnily India tends to consume when there are investments going through.”

“Unfortunately, there are only two avenues for investment, one is of course the government. Given the lack of fiscal space and the lack of track record on successful government investments beyond roads for instance, that is not a very promising area. Second area of course has to be on foreign direct investments (FDI) and anything to push up FDI is great. ‘Assemble in India’ as a phrase sounds great because if you are moving supply chains of telecom, etc. from China and Taiwan into India, you will start with assembly because the entire supply chain down to chips, etc. will take a long time develop in India. So, starting as assembly, it strikes the right note. However, a phrase, a catchphrase and a slogan is not just enough, there are plenty of things that go along with it – land laws, labour laws, actual ease of doing business on the ground and not the World Bank number, contract enforcement, predictability of policy, and of course the point about you need to open up imports; if you want re-export, you have to open up your imports in a big way and not put tariffs and trade barriers around that,” said Narayan, adding that  it is a whole ecosystem which has to be addressed. It does sound like boiling the ocean and a lot of people will say that this cannot be done, but I think India frankly has no other option but to go down this path, otherwise we are looking at a demographic dividend which is just not being reaped at this point of time,” he further added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Economists pitch for big-bang reforms to fix Indian economy’s structural problems

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The economic slowdown and the search for solutions to rev up growth have now taken centre stage with more and more companies announcing shutdowns owing to piling up of inventories. Last week, the finance minister met the prime minister for a detailed debrief on the economy, while the week before, several industrialists, financial investors, bankers and real estate industry representatives met the finance minister to present their problems.

In CNBC-TV18’s special series ‘Going for Growth’, Latha Venkatesh spoke with former chairman of National Statistical Commission Sudipto Mundle, Chief Economist of Citi Samiran Chakraborty and Professor at SPJIMR Ananth Narayan to get their take on the problems facing the Indian economy.

According to Mundle, the country has been hit adversely by several shocks on the demand side at the same time. “The external demand growth is very low and that has been reflecting on our exports. On the internal story, there has been a huge decline in investment demand and on top of that, something people have not really taken much note of is an adverse shock in terms of expenditure compression. There is a relatively benign picture of slight slippage on the fiscal deficit but underlying that, there is a very large compression of expenditure to offset the large decline in tax revenue. So, all these are looking very negative. I am not at all surprised that growth rate went down and it is likely to go down even further this year,” he said.

Chakraborty says the consumption demand in the last few years have not been supported by better jobs or higher income growth but more by falling savings and higher borrowings by consumers. “So, if you are already on a somewhat weaker footing, then all these shocks that Mundle explained have made the economic slowdown much faster than what a normal cyclical slowdown would tend to suggest,” he observed.

Narayan thinks a lot of India’s problems are structural. “Cyclical problem suggests if you just wait it out and may be a few nudges here and there, it will all come back to normalcy, I don’t think that is the case at all. There could be a cyclical component but there are large structural issues,” he opined.

To clarify his view, Narayan said: “The structural issues fall into two categories; one is stressed specific structures and second is the need for more reforms before investments can take place. Take sectors such as banking and NBFCs — the entire financial services ecosystem, take the power sector, take airline and shipping, take telecom, real estate, construction, there are plenty of sectors which seem to be beset with deep structural issues right now. On banking and NBFCs there is a need for full capitalisation for both of them, there is need for recognition of bad assets in the case of NBFCs and there is a need for solution of the bad assets plus a focus on fresh businesses, all of which require a lot of deep reform and that is not forthcoming as of now. Power sector is another big mess which requires to be sorted out.”

On investments, Narayan pointed out that there was no confidence at the moment that investment in India on a greenfield basis makes sense. “And that goes back to the need for the next stage of
big-bang reforms on factors of production — land, labour and capital,” he observed.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow