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Asia and Pacific > India

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Cover IMF Working Papers
India’s State-Owned Enterprises
Ruchir Agarwal
,
Ms. Elif C Arbatli Saxegaard
,
Ms. Lesley Fisher
, and
Xuehui Han
India’s recently announced privatization strategy can facilitate a change in the composition of the public sector balance sheet toward high-return public sector investments in infrastructure and human capital where there is a clear role for government, leaving commercially viable companies for the private sector. Against this background, this paper provides a description of the SOE sector in India, consider different criteria which can inform the scope and rationale for privatization. It also highlights takeaways from international experience with privatization, highlights the importance of improved governance and oversight of SOEs and showcases analytical tools that can help analyze risks from SOEs. While this paper focuses on India, the framework for SOEs developed in this paper can be used to evaluate SOEs policy options in other countries.
Keywords:
State-owned enterprises; Privatization; privatization strategy; policy option; privatization policy; privatization plan; privatization rent; Public enterprises; Fiscal risks; Public sector; Financial statements; Global; Central and Eastern Europe; Western Europe; Caribbean
Cover IMF Working Papers
Borrowing Costs and The Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending
Daniel Gurara
,
Mr. Andrea F Presbitero
, and
Miguel Sarmiento
Cross-border bank lending is a growing source of external finance in developing countries and could play a key role for infrastructure financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated loan deals, focusing on loan pricing. The results show that MDBs' participation is associated with higher borrowing costs and longer maturities---signaling a greater willingness to finance high risk projects which may not be financed by the private sector---but it is also associated with lower spreads for riskier borrowers. Overall, our findings suggest that MDBs could crowd in private investment in developing countries through risk mitigation.
Keywords:
WP; loan pricing; term loan; loan term; MDBs' participation; loan maturity; Financial inclusion; microfinance; loan expansion program; credit reference bureau; Loans; Syndicated loans; Multilateral development institutions; Public sector; Bank credit; Global
Cover IMF Working Papers
Indian Financial Sector: Structure, Trends and Turns
Rakesh Mohan
and
Partha Ray
This paper traces the story of Indian financial sector over the period 1950–2015. In identifying the trends and turns of Indian financial sector, the paper adopts a three period classification viz., (a) the 1950s and 1960s, which exhibited some elements of instability associated with laissez faire but underdeveloped banking; (b) the 1970s and 1980s that experienced the process of financial development across the country under government auspices, accompanied by a degree of financial repression; and (c) the period since the 1990s till date, that has been characterized by gradual and calibrated financial deepening and liberalization. Focusing more the third period, the paper argues that as a consequence of successive reforms over the past 25 years, there has been significant progress in making interest and exchange rates largely market determined, though the exchange rate regime remains one of managed float, and some interest rates remain administered. Considerable competition has been introduced in the banking sector through new private sector banks, but public sector banks continue have a dominant share in the market. Contractual savings systems have been improved, but pension funds in India are still in their infancy. Similarly, despite the introduction of new private sector insurance companies coverage of insurance can expand much further, which would also provide greater depth to the financial markets. The extent of development along all the segments of the financial market has not been uniform. While the equity market is quite developed, activities in the private debt market are predominantly confined to private placement form and continue to be limited to the bluechip companies. Going forward, the future areas for development in the Indian financial sector would include further reduction of public ownership in banks and insurance companies, expansion of the contractual savings system through more rapid expansion of the insurance and pension systems, greater spread of mutual funds, and development of institutional investors. It is only then that both the equity and debt markets will display greater breadth as well as depth, along with greater domestic liquidity. At the same time, while reforming the financial sector, the Indian authorities had to constantly keep the issues of equity and efficiency in mind.
Keywords:
WP; bank; market; India; bond market; banking sector; Financial Sector Reforms; Banks; Insurance; Pension Funds; Financial Markets; public sector bank; debt market; call money; investible resource; market capitalization; private sector bank; co-operative bank; payments bank; exchange bank; stock futures; call money market; bank ownership structure; Commercial banks; Insurance companies; Stock markets; Public sector; Global
Cover IMF Staff Country Reports
India: Staff Report for The 2015 Article IV Consultation
International Monetary Fund. Asia and Pacific Dept
This 2015 Article IV Consultation highlights that India’s near-term growth outlook has improved, and the balance of risks is now more favorable, helped by increased political certainty, several positive policy actions, improved business confidence, and reduced external vulnerabilities. Growth is projected at 5.6 percent for FY 2014/15, picking up to 6.3 percent in FY 2015/16, as a result of the revival in industrial and investment activity. However, weaknesses in India’s corporate and bank balance sheets will weigh on credit growth, and fiscal restraint and a tight monetary stance will act as headwinds in the near term, offsetting the positive growth impact of the improved commodity terms of trade.
Keywords:
ISCR; CR; net portfolio investment inflow; statutory liquidity ratio; policy repo rate; inflation expectation; U.S. dollar; Inflation; Commercial banks; State-owned banks; Public sector; Global; Eastern Europe; South Asia; Africa; Asia and Pacific
Cover IMF Working Papers
Pressing the Indian Growth Accelerator: Policy Imperatives
Rakesh Mohan
and
Muneesh Kapur
India’s real GDP growth slipped substantially after the North Atlantic financial crisis. Return to a sustained high growth trajectory is feasible but it will need much more focused attention to the revival of manufacturing and to the acceleration of investment in transport and infrastructure. The immediate priority is to achieve the kind of fiscal quality and low inflation levels exhibited during 2003-08, with focused attention to increasing efficiency and compliance in tax revenue collection. Higher tax revenues can facilitate increases in public investment, which then crowd in private investment. The task ahead will be more difficult in view of the protracted slowdown in global growth and trade.
Keywords:
WP; monetary policy; personal income; exchange rate; economic growth; foreign exchange; Fiscal Policy; Growth; Infratsructure; India; Savings; Taxation; Capital Account; infrastructure investment; GDP ratio; investment rate; base GDP series; per capita income; private sector investment; Infrastructure; Transportation; Public sector; Public investment and public-private partnerships (PPP); Manufacturing; Global; East Asia
Cover IMF Working Papers
Corporate Vulnerabilities in India and Banks' Loan Performance
Peter Lindner
and
Sung Eun Jung
The financial performance of India's corporate sector has been under pressure since the Global Financial Crisis. Balance-sheet data on a large cross-section of Indian non-financial corporates show that the growth in their leverage over the last 15 years has been associated with a notable increase in the vulnerabilities of firms carrying high interest payment burdens. Gauged by the debt carried by the most vulnerable component of firms, the Indian corporate sector’s vulnerability to severe systemic shocks has increased to levels not seen since 2001. Progress on the macroeconomic front, together with improved credit appraisals and stricter impairment standards on the bank side, will be critical to help India's banks resume their role as economic growth drivers.
Keywords:
WP; Gross NPAs; bank; bank asset quality deterioration; India; IMF staff calculation; Financial crisis; firm resilience; bank-corporate dependencies; leverage; corporate performance; primary market equity issuance; return on equity; recapitalization cost; worsening performance; Commercial banks; State-owned banks; Public sector; Loans; Bank credit; Global
Cover Per Jacobsson Lecture
Per Jacobsson Lecture
Society, Economic Policies, and the Financial Sector
International Monetary Fund. External Relations Dept.

Abstract

The future of finance, and in particular saving it from a popular backlash against the global financial crisis and related crisis management policies, has become a matter of great concern. In this brochure, which presents in written form a lecture from the Per Jacobsson Foundation’s lecture series, former Reserve Bank of India Governor Y. V. Reddy explores three interrelated issues of particular concern to central bankers in the search for good finance for the future: how to ensure that the financial sector serves the society better, how to integrate financial sector policies better with national economic policies, and how to ensure that the financial industry functions as a means and not as an end in itself. The question-and-answer session following the lecture is also included in the brochure.

Keywords:
PJ; bottom; reserve bank of India; W. Randolph burgess; Founding honorary chairman; chairman of the board; R.v. Fieandt; Financial sector; International monetary system; Public sector; Public expenditure review; Global; South Asia
Cover Navigating the New Normal in Industrial Countries
Navigating the New Normal in Industrial Countries
International Monetary Fund

Abstract

This paper discusses about the fact that longer the recognition problems persist, the greater the risk of continued “active inertia” and disappointing outcomes. The possibility of policy mistakes and business accidents will increase further, it will become harder for industrial country governments to convince their citizenry (as well as decision makers in emerging economies) to participate fully in the formulation and implementation of the required solutions, and multilateral institutions will not be able to fill the growing void at the core of the international system. The innovative financial instruments were potent in lowering barriers to entry to many markets, including important segments of the US housing market. As a result, too many households purchased homes that they could not afford, using exotic mortgages they did not fully understand, and too many small companies took on debt they could not sustain. Prior to the crisis, key industrial countries had embarked upon a multiyear, serial contamination of balance sheets.

Keywords:
MISC PERIOD; Misc.; country; Mohamed A. El-Erian; industrial country; financial crisis; market; developing world; mean reversion; country society; market accident; Financial statements; Unemployment; Public sector; Debt burden; Global financial crisis of 2008-2009; Global
Cover IMF Research Bulletin
IMF Research Bulletin, March 2007
Mr. Antonio Spilimbergo
Research summaries on (1) globalization and macroeconomic volatility (by M. Ayhan Kose), and (2) international financial integration and domestic financial systems (by Thierry Tressel); country study on Germany (by Stephan Danninger); book summary of China and India--Learning from Each Other; listing of contents of Vol. 54, Issue No. 1 of IMF Staff Papers; listing of recent external publications by IMF staff; listing of recent IMF Working Papers; and listing of visiting scholars at the IMF during September 2006-April 2007
Keywords:
IRB; emerging markets finance; donor country; policy reform; debt-service saving; IMF credit lines; market economy; policy; price index number formula; Oxford development; liberalization policy; policy option; aggregate demand demand shock; capital mobility; Financial integration; Emerging and frontier financial markets; Capital flows; Sudden stops; Global; North America; Central and Eastern Europe; Middle East; Eastern Europe; West Africa
Cover IMF Working Papers
India's Pattern of Development: What Happened, What Follows?
Mr. Arvind Subramanian
,
Raghuram Rajan
,
Mr. Ioannis Tokatlidis
,
Ms. Kalpana Kochhar
, and
Mr. Utsav Kumar
India has followed an idiosyncratic pattern of development, certainly compared with other fast-growing Asian economies. While the importance of services rather than manufacturing is widely noted, within manufacturing India has emphasized skill-intensive rather than laborintensive manufacturing, and industries with higher-than-average scale. Some of these distinctive patterns existed prior to the beginning of economic reforms in the 1980s, and stem from the idiosyncratic policies adopted after India's independence. Using the growth of fastmoving Indian states as a guide, we conclude that India may not revert to the pattern followed by other countries, despite reforms that have removed some policy impediments that contributed to India's distinctive path.
Keywords:
WP; private sector; labor intensity; India indicator; industry effect; NSDP growth; Manufacturing; Services; Diversification; Decentralization; Liberalization; Skill Intensity; Scale; labor-intensive industry; Income; Public sector; Employment; East Asia