The journey of Indian finance

by Ajay Shah.

A great tool for making sense of things is a sense of history. At each point in time, we should wonder: what was the situation, what was the problem that was sought to be solved, what was done, how did it work out? This helps in all fields; e.g. we understand special relativity better when we understand the journey of ideas leading up to Einstein.

In this spirit, economic history is central to understanding economics. One of the great failures of modern economics is the loss of the economic history perspective. Most people in a formal education in economics do more convex optimisations than economic history, and that's unwise.

Latika Chaudhary, Tirthankar Roy and Anand V. Swamy invited me to write for their edited book, the Cambridge Economic History of Modern South Asia (forthcoming). I wrote a paper on the journey of Indian finance, starting at 1947. Many odd features of Indian finance make sense when viewed in this economic history perspective.

There is an important kind of economic history, an epsilon-delta tradition, where data, archival texts and documents are precisely pinned down. Alongside this, it is good to also have a strategic view. The paper has such a high level treatment of the journey of ideas, interests and institutions. It is organised as 10 sections on banking, the equity market, other financial firms, capital controls, bankruptcy, monetary policy, household finance, systemic risk, the working of financial agencies and the policy process.

In each of the 10 areas, I try to offer the birds eye view, a sense of what happened and why, of what got done and what didn't, and the forces at work. There is a unified chronology, evaluation and bibliography. Many epiphenomena are glossed over, so as to focus on the essence of finance: the play of time, risk, information, individual optimisation, and principal-agent problems. Each of the 10 area-essays needs to be turned into a full blown economic history paper, including epsilon-delta style work. This paper can help others get started on such research projects.

There are two ways to interpret the journey of Indian finance: a market failure view, and a public choice view.

On one hand, there was a journey of ideas, with learning (in some areas) about how state coercion can counter the market failures in finance. This is a story of building knowledge about the place of the state in Indian finance, and then building state capacity to try to help with useful interventions. The story contains many crises, some useful feedback loops, and some loss of institutional memory.

And then, there was the power conflict. The financial system constitutes the commanding heights of the economy. The Indian state has tried to control the financial system, and direct its resource allocation in ways that suit the state. There has been an ebb and flow of different degrees of state control, and different methods through which the control is achieved. Alongside this, policy makers have sought praise through isomorphic mimicry.

A lot was done in the two phases identified in the paper. But it is far from finished. The basic machinery of markets and financial firms is quite incomplete. State coercion in finance requires fundamental reorientation towards state capacity in addressing market failure, through clarifying the objectives of financial agencies and establishing their checks and balances. These difficulties are an important source of Indian economic underperformance: finance remains central to the journey of Indian economic development. The future of Indian finance lies in building the knowledge and the community for these tasks.

Announcements

DAKSH is hiring for its Research Team

Responsibilities

• Research and writing on access to justice, the working of the justice system, technology, data and the impact of procedural and substantive law on the administration of courts.
• Collating, cleaning and analysis of data.
• Project management including managing external stakeholders and proactively tracking tasks and project deliverables.
• Developing high-quality knowledge products (reports, white papers, working papers) with research findings and disseminating such products to donors, partners and the general public.
• Developing and implementing advocacy strategies.
• Cultivating relationships and building networks with researchers, practitioners, policymakers and technology experts.
• Engaging in public discourse by publishing articles, blog posts, and op-eds.

Education and skills

• Undergraduate degree in law, any other post-graduate degree desirable.
• At least five years of demonstrable work experience.
• Strong research and writing skills.
• Strong analytical skills and the ability to synthesise complex information into clear, actionable recommendations.
• Good interpersonal skills and ability to work collaboratively.
• Willingness to travel.
• Ability to work with strict deadlines.
• Deep passion to make an impact in the field of judicial reforms.
• Knowledge of Hindi or Kannada with verbal fluency – writing skills would be an advantage.
• Prior working experience in legal practice or a research organisation would be an advantage.

This will be a three-year engagement.

Location: Bangalore

Interested candidates may send their CVs and a writing sample to careers@dakshindia.org

About DAKSH

DAKSH is a non-profit working on law and justice reforms since 2015. We have done original research that highlights ground realities and presents systemic reforms required in the law and justice system from a citizen's perspective. DAKSH works at the intersection of data science, public policy and operations research. We are actively involved in creating sustainable solutions to improve judicial efficiency, process, administration and management.

Announcements

Call for Student Research Associate: JDC- Justice Definitions Project

About Judicial Data Collaborative

The Judicial Data Collaborative is a community of researchers, technical experts, academics, organisations and interested people who want to create a platform to exchange ideas and collaborate on judicial data. The Judicial Data Collaborative is convened by DAKSH, a Bangalore-based nonprofit working on judicial reforms and access to justice.

One of the initiatives of the Judicial Data Collaborative is the Justice Definitions Project, in which we are co-creating an interactive, research-oriented wiki. This initiative aims to connect official literature, databases, and research on terms that affect the study of the justice system in India. For more information, visit

Position: Student Research Associate

Project Overview

The Justice Definitions Project aims to compile, organise, and make accessible crucial data about the Indian justice system. This initiative will enhance the understanding of the legal landscape, enabling informed decisions and research. The Student Research Associates will work on the assigned definition terms by collating information relating to it and uploading it on our wiki, in the prescribed format. The Student Research Associates will be guided by the team at DAKSH, and the work will be reviewed by the members of the collaborative. The Student Research Associates will be awarded certificates based on their contribution to the project.

Key Responsibilities:

• Collaborate with a diverse team of researchers, legal experts, and data analysts to curate and validate judicial data.
• Contribute to the creation and maintenance of a comprehensive database related to the Indian legal system and its terminology.
• Engage in data quality control and ensure the accuracy of information.
• Collaborate on data visualization and presentation of research findings.

Qualifications:

• Current enrollment in a recognised undergraduate Law Program. (Third year or Senior).
• Strong analytical skills and a keen interest in legal research.
• Excellent communication and team collaboration skills.
• An inclination towards meticulous and detail-oriented work.

Duration:

This is a part-time position requiring a commitment of approximately 5-7 hours per week, with a flexible schedule to accommodate your academic commitments. The position will be based remotely, allowing you to work from your location.

Benefits:

• Valuable hands-on experience in legal data analysis, research and writing.
• Exposure to the work of a leading public policy research organization.
• Opportunity to contribute to transparency and accountability in the Indian legal system.
• Mentorship and guidance from experienced professionals in the field.

Apply Now

Join us in our mission to drive transparency and accountability within the India by filling out the google form here

Announcements

TrustBridge Rule of Law Foundation and XKDR Forum run a monthly seminar series on "Contracts and Contract Performance". This seminar series builds knowledge and community on the subject of the design and functioning of contracts, both private and public, in the Indian economy.

The first seminar in this series is being held on 28th November, 2023.

Registration

Prior registration required for attendance. Register here.

Venue

TrustBridge Rule of Law Foundation, 2nd Floor, B-40, Voluntary Health Association of India (VHAI), Qutab Institutional Area, New Delhi-110 016

Program

17:00 -- 17:10	Opening remarks
17:10 -- 17:45	Session 1: Mediation as a mechanism for contractual disputes resolution
	Presenter: Karan Gulati and Saurabh Modi, TrustBridge
17:50 -- 18:25	Session 2: Delays in S. 138 NI Act cases: are cheques an effective lever of contract performance
	Presenter: Siddharth Raman, XKDR Forum
18:25 -- 18:30	Closing remarks

Announcements

TrustBridge is an organisation that works on improving Rule of Law for better economic outcomes. We focus on understanding the gaps in the existing legal and regulatory framework, evaluating how they impact economic growth, and studying the various ways that these could be improved upon. We aim to undertake legal, quantitative and policy oriented research and dissemination that will inform principles and evidence-based policy making. We believe that implementing ideas that emerge from our research will help bring us closer to our objective of improving the Rule of Law. Our work is in the areas of Energy Transition, Financial Markets, Contract Performance in government and private contracts, and Governance in the start-up ecosystem.

An area of work for TrustBridge is to understand how contracts function and how frictions in contracting can be reduced to achieve better economic outcomes.

Some of our work in this field includes:

• Improving judgment enforcement: Let judgment creditors file insolvency resolution applications, Karan Gulati and Anjali Sharma, October 2023.

• Reducing challenges to arbitration awards: lessons from court data, Madhav Goel, Akshay Jaitly, Renuka Sane and Anjali Sharma, October 2023.

• Litigation in public contracts: some estimates from court data , Devendra Damle, Karan Gulati, Anjali Sharma and Bhargavi Zaveri, May 2021.

TrustBridge is looking for one full time researcher to work on its projects in the contracts space. The position is based in Delhi.

Job requirements for Policy Research Associate position

As a policy research associate, you will work on project deliverables under the supervision of a project lead. You will be expected to review laws and government policies, undertake literature survey and quantitative analysis, write blogs, articles and papers and interface with collaborators and stakeholders.

The requirements for the role are:

• An academic background in the fields of Data Science, Economics, Engineering, Management and/or Public Policy.

• Two to three years of work experience, preferably in a research intensive organisation. Candidates with more experience can be considered for mid-senior level roles.

• You must possess high quality research skills and some understanding of statistics and quantitative analysis.

• You must have demonstrable writing skills, preferably in the public policy domain.

• Coding skills and a functional understanding of any one programming language, such as R and HTML will be an advantage. A working knowledge of LaTeX and Linux are preferred.

• You must be comfortable with working in an interdisciplinary research environment consisting of people from varying backgrounds such as economics, law, public policy and data science. You should be curious and passionate about research and willing to work on outputs independently as well as in teams.

The remuneration offered will be commensurate with your skill and experience and will be comparable with what is found in other policy and impact institutions. Interested candidates must email their resume to info@trustbridge.in with the subject line: Application for "Research Position: Contracts"

Author: Karan Gulati

Karan Gulati is a Researcher at the TrustBridge Rule of Law Foundation, New Delhi.

On this blog:

• Improving judgment enforcement: Let judgment creditors file insolvency resolution applications, 26 October 2023.
• Litigation in public contracts: some estimates from court data, 26 May 2021.
• Grievance Redress by Courts in Consumer Finance Disputes, 23 March 2021.
• Why do we not see class-action suits in India? The case of consumer finance, 3 May 2020.
• India’s low interest rate regime in litigation, 11 March 2020.
• Delays in deposit insurance, 9 April 2019.

On the usefulness of Parliamentary law in achieving fiscal responsibility

by Pratik Datta, Radhika Pandey, Ila Patnaik and Ajay Shah.

Economists in India have long pondered the design of a fiscal rule. It is felt that once that ideal rule is embedded into the FRBM Act, we would solve the long-standing excesses of Indian public finance.

Pratik Datta, Radhika Pandey, Ila Patnaik and I looked under the hood, at the legal mechanisms through which such a Parliamentary law works. In a recent paper, Understanding deviations from the fiscal responsibility law in India, we argue that the difficulty lies not in economics but in the Indian constitutional arrangement. Because the budget is enacted through a `money bill', it can readily contain clauses that amend the FRBM Act. We argue that the problem with the FRBM Act lies not in the economic thinking but in the notion that Parliamentary law can constraint leviathan.

On the subject of public finance, the following design elements are embedded in the Constitution:

1. The executive cannot raise money (tax or borrow) or spend money without the authority of the Parliament.
2. The power to raise money (tax or borrow) or spend money belongs exclusively to the Lok Sabha. The philosophy of checks and balances associated with the presence of the Rajya Sabha, so eloquently described by Suyash Rai in 2016, is absent when it comes to money bills.
3. The Parliament cannot authorize expenditure except on demand by the Executive.
4. The Parliament cannot authorize taxation except on recommendation by the Executive.
5. The Lok Sabha has the power to assent to, reject or reduce but not to increase the amount of any demand made by the Executive under Article 113(2). The Parliament can neither suggest any new expenditure nor propose an increase in demand over and above what the government suggests in the Demand for Grants.

Normative public finance in India needs to grapple with this design of the Constitution. The power of the executive, embedded in this design, should be seen as part of the larger problem of the Indian administrative state. A generation of public finance economists in India have tried to solve the chronic deficits of the union government through Parliamentary law. We suggest that this is not a fruitful line of inquiry.