Financial Globalisation and India: Internal and External Dimensions

Azad, Rohit and Bose, Prasenjit and Dasgupta, Zico (2016): Financial Globalisation and India: Internal and External Dimensions.

Abstract

The Research Project seeks to study the implications of financial liberalisation, global financial integration and cross-border capital flows for the Indian economy. The direction of policy change in India over the past two decades and a half has been in this direction. The domestic financial sector has grown significantly in the past decade, which has impacted the trajectory of real sector growth and economic development.

The report contains four chapters. The first one introduces the readers to the Indian macroeconomic scene over the past two decades and the financial aspects of the growth process. The second chapter focuses on the internal dimensions of the growth process and the recent developments in the financial sector, especially the bad loans crisis. The third chapter looks at financial globalisation and its impact on India’s external vulnerability. The concluding chapter presents a theoretical model which seeks to explain the nature and consequences of financial liberalisation and the integration of the Indian economy into the globalised economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate Investment, Debt, NPAs, Riskless Capitalism, Kaleckian Model
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E11 - Marxian ; Sraffian ; Kaleckian; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

References

Ahluwalia, Montek S. (2002), “Economic Reforms in India Since 1991: Has Gradualism Worked?”, Journal of Economic Perspectives, Vol. 16, Number 3 - Summer 2002, pp. 67–88

Bhagwati, Jagdish and Arvind Panagariya (2013), Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for other Developing Countries, Public Affairs, New York

BIS (2014), 84th Annual Report 2013-14, Bank for International Settlements, Basel, 29 June 2014

Bose, Prasenjit (2013), “The Many Perils of Borrowed Prosperity”, The Telegraph, August 20, 2013

Buttiglione, Luigi, Philip R. Lane, Lucrezia Reichlin and Vincent Reinhart (2014), Deleveraging? What Deleveraging?, Geneva Reports on the World Economy Nos. 16, International Center for Monetary and Banking Studies, Geneva

Chandrasekhar, C. P. and Jayati Ghosh (2002), The Market That Failed: Neoliberal Economic Reforms in India, Leftword, New Delhi

Chandrasekhar, C. P. and Parthapratim Pal (2006), “Financial Liberalisation in India: An Assessment of Its Nature and Outcomes”, EPW March 18, 2006, Vol.41, Nos. 11

Chaudhuri, Sudip (2013), “Manufacturing Trade Deficit and Industrial Policy in India”, EPW Vol. XLVIII Nos. 8, February 23, 2013

DeLong, J. Bradford (2003), “India Since Independence: An Analytic Growth Narrative” in Dani Rodrik, ed., In Search of Prosperity: Analytic Narratives of Economic Growth, Princeton University Press, Princeton, New Jersey, pp. 184–204

Drèze, Jean and Amartya Sen (2013), An Uncertain Glory: India and Its Contradictions, Princeton University Press, New Jersey

Ghosh Dastidar, Ananya (2015), “India’s Experience with Export-led Growth”, in Jayati Ghosh, ed., ICSSR Research Surveys and Explorations: Economics Volume 2, India and the International Economy, Oxford University Press, New Delhi

GoI (2005), Report of High Level Expert Committee on Corporate Bonds and Securitization, December 23, 2005, available at the website of the Ministry of Finance, GoI, http://finmin.nic.in/reports/Report-Expert.pdf (accessed on April 12, 2015)

GoI (2015a), Economic Survey 2014-15, Ministry of Finance, Government of India

GoI (2015b), Report of the Committee to Review the Framework of Access to Domestic and Overseas Capital Markets (Phase II, Part II: Foreign Currency Borrowing) Report III, Ministry of Finance, Government of India, February, 2015

Harrod, R. F. (1939), “An Essay in Dynamic Theory", The Economic Journal, pp. 14-33.

IIF (2015), “Corporate Debt in Emerging Markets: Where are the Risks?”, Capital Markets Monitor Research Note, Institute of International Finance, June 1, 2015

IMF (2015), “Corporate Leverage in Emerging Markets - A Concern?”, Chapter 3, Global Financial Stability Report: Vulnerabilities, Legacies and Policy Challenges: Risks Rotating To Emerging Markets, International Monetary Fund, Washington DC, October 2015

Kalecki, M. (1962), “Observations on the Theory of Growth”, The Economic Journal, 72(285), 134-153.

Lane, Philip R. and Gian Maria Milesi-Ferretti (2007), “The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970–2004”, Journal of International Economics, 73, November, pp. 223-250

Mckinsey (2013), Financial Globalization: Retreat or Reset?, McKinsey Global Institute, March 2013

Nagraj, R (2008), “India’s Recent Economic Growth: A Closer Look”, EPW April 12, 2008, Vol. 43, Nos. 15 Nagraj, R (2015a), “Size and Structure of India’s Private Corporate Sector: Implications for the New GDP Series”, EPW November 7, Vol. 1, Nos. 45

Nagraj, R (2015b), “Trends and Patterns in Industrial Growth: A Review of Evidence and Explanations”, in C. P. Chandrasekhar (ed.) ICSSR Research Surveys and Explorations: Economics, Vol. 1, Oxford University Press, New Delhi

Nayyar, Deepak (2015), "Birth, Life and Death of Development Finance Institutions in India", EPW August 15, 2015, Vol. L. Nos. 33

Patnaik, P. (1997), Accumulation and Stability Under Capitalism, Clarendon Press, Oxford.

Planning Commission (2008), Eleventh Five Year Plan (2007–2012): Inclusive Growth, Volume I, Oxford University Press, New Delhi

Planning Commission (2013), Twelfth Five Year Plan (2012–2017): Faster, More Inclusive and Sustainable Growth, Volume I, Sage Publications, New Delhi

Planning Commission (2014), Second Report of the High Level Committee on Financing Infrastructure, Planning Commission, Government of India, June 2014

Prasad, Eswar and Shang-Jin Wei (2007), “The Chinese Approach to Capital Inflows: Patterns and Possible Explanations”, in Sebastian Edwards (ed.) Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, University of Chicago Press, May 2007

Pricewaterhouse Coopers (2007), Infrastructure Public-Private Partnership (PPP) Financing in India, Draft Final Report, September 2007 [http://toolkit.pppinindia.com/pdf/infrastructure-financing-india.pdf accessed on March 3, 2016]

Rajan, Raghuram G. (2014), “Saving Credit”, Speech by RBI Governor at the Third Dr. Verghese Kurien Memorial Lecture at Rao, K.S. Chalapati and Biswajit Dhar (2011), India’s FDI Inflows Trends and Concepts, RIS and ISID, New Delhi

RBI (2004), Report of the Working Group on Development Financial Institutions, Reserve Bank of India, May 2004 [https://www.rbi.org.in/SCRIPTs/PublicationReportDetails.aspx?UrlPage=&ID=3 87#2 accessed on February 8, 2016]

RBI (2015), Financial Stability Report, Reserve Bank of India, June 2015

Rong, Jacqueline (2015), “Does China’s External Debt Pose a Major Risk?”, Barron's Asia, October 14, 2015 [http://www.barrons.com/articles/does-chinas-external-debt-pose-a-major-risk- 1444726980 accessed on April 8 2016]

Sen Gupta, Abhijit and Rajeswari Sengupta (2016), "Capital Account Management in India", EPW March 19, Vol. 51, No. 12

Sen, A. (1970), “Interest, Investment and Growth," in Growth Economics, ed. by A. Sen. Penguin Books.

Sengupta, Rajeswari (2016), “Real GDP is growing at 5%, not 7.1%”, Live Mint, March 14, 2016 [http://www.livemint.com/Opinion/58qihTaOIRd3rPyf1eK09L/Real-GDP-is- growing-at-5-not-71.html accessed on April 6, 2016]

Solow, R. (1956), “A contribution to the theory of economic growth”, Quarterly Journal of Economics, 70, 65-94.

Steindl, J. (1952), Maturity and Stagnation in American Capitalism, Monthly Review Press, 1976 edn.

World Bank and IMF (2005), Financial Sector Assessment: A Handbook, Washington DC