XKDR Newsletter - Issue 23
Financial inclusion measurement • FIMI • Electricity chokepoints • Criminalising cheque bouncing • Strategic fiscal policy • Financial markets' over-optimism • Fintech revolution
Financial Inclusion And Well-Being: Assessing How Retail Digital Lending Has Mattered
There is consensus about the importance of financial inclusion. This has translated into efforts to increase the level of financial access from the financial sector firms as well as through policy initiatives. However, there is no similar consensus on what financial inclusion means, or how it is to be measured. The Dvara-xKDR financial inclusion measurement system was created incorporating the three-part ‘input-output-outcome’ framework of measuring the impact of an intervention. This measure captures the access of the household to all available products, how these are being used, and the impact that they have on the well-being of the household, whose members access the formal financial system.
In their recent report, Natasha D’cruze, Geetika Palta, Misha Sharma, and Susan Thomas assess the impact of retail digital lending utilising this measure.
Read the full report here.
Concerns About Foreign Information Manipulation and Interference (FIMI): An Indian perspective
Along with researchers at the University of Navarra, we at XKDR Forum provide an Indian perspective on the problem of "Foreign Information Manipulation and Interference". The study focuses on FIMI originating from the two countries that the Global North sees as adversaries: Russia and China. While Russian FIMI in India seeks to promote the strength of its economy and its position in the conflict in Ukraine, China seeks geostrategic primacy and influence in the South Asian region and other countries in the Global South.
Read the full study here.
The electricity chokepoint in Tamil Nadu public finance
Indian electricity utilities face significant financial stress on account of unfunded subsidies. In their recent paper, Charmi Mehta, Radhika Pandey, Renuka Sane, and Ajay Shah place the problem of electricity subsidies in the context of a debt sustainability analysis (DSA) for Tamil Nadu. They find the state fails on five out of six indicators for debt sustainability. They integrate the electricity sector into the conventional DSA, giving a “corrected DSA”. These modifications are material in changing our sense of the fiscal situation in the state. There are concerns about the extent to which the current fiscal path is sustainable. Fiscal stress harms investibility in electricity. Resolving the problems of electricity policy is a critical component of the development of the medium-term fiscal strategy for the state government.
Read the blogpost here.
Read the full paper here.
The consequences of criminalising cheque bouncing
Paper cheques continue to be used widely in India despite the proliferation of digital payment modes. A key reason for this trend is the use of cheques as security by creditors. Cheques are being used as security because of the criminalisation of the offence of cheque bouncing. In their recent article, Shubho Roy and Ajay Shah delve into the evolution of the offence of cheque bouncing and the concomitant change in incentives and impact on the economy.
Read the full article here.
OP-ED & COMMENTARY
In his column in the Business Standard, Ajay Shah writes on:
Strategic thinking on fiscal policy. ‘Primary Deficit’ can be a good tool for diagnosing fiscal stress, especially in a country like India where GDP measurement has limitations. He suggests two long-term strategies - moving from forced borrowers to voluntary lenders, and to go from chronic fiscal stress to maintaining a small primary surplus.
The optimism of financial markets. Uncertainty has declined and inflation has gone down in developed markets (DMs) without significant damage to unemployment or GDP growth. He identifies five important threats upcoming in 2024, then summarises the implications from the Indian perspective.
Stocktaking the fintech revolution. While there was much optimism around the “fintech revolution” to improve stability and innovation to better serve the Indian economy, regulatory constraints have limited progress. Banks are structurally unable to innovate. NBFCs also face government limitations, and frequently policymakers protect banks at the expense of NBFCs. Where financial firms can innovate, they face problems around the rule of law and national champions. He argues that finance is ‘the brain of the economy’, but for the fintech revolution to work for India, present financial economic policy must change.
VIDEOS AND PODCASTS
We have started a new series on YouTube called Big Ideas - conversations with some of the leading thinkers of our time. New episodes will be released every Monday and five episodes are out so far:
Reimagining urban planning from an economic perspective in India, with Dr. K.P. Krishnan: Ep 01
Health & Education: Cornerstones of India’s soft infrastructure renaissance, with Bahram N. Vakil: Ep 02
Personal values and decision making, with Professor Matti Keloharju: Ep 03
Addressing the importance of economics in legal education, with Pratik Datta: Ep 04
Banking will evolve due to Big Tech and fintech, with Professor Arnoud Boot: Ep 05
New episodes of Ajay Shah’s YouTube show Everything is Everything with Amit Varma are out:
The UNIX Episode: Ep 32
Public Choice Theory Explains SO MUCH: Ep 33
How Family Firms Evolve: Ep 34
The Hiking Episode: Ep 35
EVENTS
Public Finance & Climate Change
In collaboration with TrustBridge Rule of Law Foundation, we hosted a conference on 'Electricity Reforms in the Economic Strategy of Tamil Nadu', on February 29th, in Chennai. In this event:
Ajay Shah presented on “Electricity Reforms in the Economic Strategy of Tamil Nadu”.
Akshay Jaitly, Trilegal and TrustBridge Rule of Law Foundation, moderated an open discussion.
Legal System
Siddarth Raman was a speaker at a panel on legal system reforms at the Law Economics Policy Conference 2024 hosted by the Gokhale Institute of Politics and Economics on February 16th-18th. The other panelists were Justice Manish Pitale, of the Bombay High Court, Prashanto Chandra Sen, a Senior Advocate at Supreme Court of India and Anand Prasad, from AP & Partners.