Indian Interest Rates Have Overshot

Reserve Bank of India (RBI) governor Subbarao’s decision to hike short term interest rates by 50 basis points on July 26th was a mistake. Monetary policy operates with a lag. Many of the earlier interest rate hikes are yet to filter through to economy.
The RBI is trying to fight inflation by raising rates and squeezing out demand. In the absence of fiscal policy action, the burden of inflation management falls on the RBI. The RBI is, however, fighting a lost battle. Interest rate increases are unlikely to be effective in controlling inflation and may in fact exacerbate the situation by choking investment and supply. More...

Generational Change

India finds itself in the midst of a large generational change. The old guard is making way for the new. In many places where the change has not taken place, it is imminent.

In politics, the two main national parties are the Congress and the Bhartiya Janata Party (BJP). More...

India’s Goods and Services Tax (GST) will be a game changer!

India was founded on the ideology of local self government or panchayati raj as espoused by MK Gandhi. It has a federal political structure similar to the United States and Canada. As per India’s constitution, the federal government has powers over defense, foreign affairs, railways, direct taxation, certain indirect taxation etc. mentioned in the Union List (97 items). The state governments have powers over land, law and order, certain other indirect taxation etc. mentioned in the States List (66 items). There are several other items that are on a Concurrent List (47 items) shared by both the state and the federal governments. More...