XKDR Newsletter - Issue 6
Make vs. buy decision of the government, Informational efficiency of credit ratings, Responses to policy consultation papers, Our commentaries and Events.
The make vs. buy decision of the Union Government
Aneesha Chitgupi and Susan Thomas estimate how much the Union Government spent on procurement, and out of that, on capital procurement, using available CGA annual reports from 2015-2016 to 2019-2020. After adjusting for inflation, they find that procurement spending remains at around 17% of the total spending by the government (not including public sector enterprises).
Key findings:
Within procurement spending, there has been an increase in the share of capital procurement, from 54% in 2015-2016 to 57% in 2019-2020.
Since capital procurement tends to be the spending on longer-term projects, better efficiency in government spending will come from improvements in the processes of government contracting, specifically in monitoring and managing contracts during their implementation.
Informational Efficiency of Credit Ratings
The main criticism about credit ratings is their slow reaction to the deteriorating financial conditions of the borrower. Using data on credit ratings, market price information, firm characteristics, and accounting ratios, Nidhi Aggarwal, Manish Singh, and Susan Thomas examine whether changes in credit ratings can be updated more frequently than the frequency of updates in the accounting data.
Key findings:
Market-based distance to default (DtD) can indicate information about the financial health of a firm much before the rating agencies update credit ratings.
The average DtD level of all the rating categories drops persistently for downgraded firms with a lead time between 1 to 12 months.
Changes in DtD over periods in the immediate past help to update the probability of a downgrade with higher frequency than can be done based on updates of the accounting measures.
Comments on Consultation Papers issued by TRAI and MeitY
In their comments to MeitY on proposed amendments to the controversial Intermediaries Guidelines Rules, 2021, Rishab Bailey and Smriti Parsheera suggest that rules governing intermediaries should not be overly prescriptive, including by establishing a government entity to oversee content removal requests. Click to read.
In another set of submissions to MeitY concerning the draft National Data Governance Framework Policy, Rishab Bailey, Brinda Lashkari, Ameya Naik, and Ajay Shah focus on the need to create an open data ecosystem that can balance the interests of the data economy in a practical manner. In addition to suggestions directed at enhancing the useability of the proposed data access platform, the authors also suggest methods to enhance the accountability and capacity of the institutional mechanisms envisaged under the framework. Click to read.
The comments to TRAI on consultations relating to the Regulatory Framework for Broadcasting and Cable Services by Rishab Bailey, Devendra Damle, Harleen Kaur, and Ajay Shah, argue that TRAI’s policy of fixing tariffs of television channels is an arbitrary and disproportionate intervention that has not worked as envisaged. Accordingly, the authors suggest that TRAI engage in regulatory forbearance, or in the alternative, consider deregulation in specific geographies. Click to read.
In comments to TRAI on Issues Related to Media Ownership, Rishab Bailey and Ajay Shah argue that it is important to avoid excessive government interference in the media space including in the form of a cross-media or digital media regulator. We point to how the existing media framework can be revised to reduce barriers to market entry and thereby promote competition, and also focus on the need to enhance state capacity to regulate competition in the media space. Click to read.
During the last 5 months, the authors have participated in a number of public consultation processes around policies concerning the digital ecosystem.
Commentary
Ajay Shah deliberates on the emergence of a third globalisation in his column in the Business Standard - Dawn of third globalisation? He poses that geo-political issues are likely to take primacy over cross-border integration during this phase and discusses its implications for Indian firms.
Catastrophic events in the past created great skepticism about the safety issues associated with nuclear energy. In his opinion column titled - A new dawn for nuclear energy? in the Business Standard, Ajay Shah shows how in recent years, this approach has changed and there is a growing interest in nuclear energy.
Event
We have been building statistics capabilities for Julia and organised the statistics symposium in Juliacon 2022. View our GitHub page and symposium videos.