Post offices and financial inclusion

An expert committee report: Harnessing the India Post network for financial inclusion has been released. This is a joint effort between Department of Post, Department of Financial Services, Department of Economic Affairs and Invest India Economic Foundation. It has some interesting new ideas on the unique role of post offices in financial inclusion, and the way to best harness these strengths while retaining a useful sense of the public/private divide.

Also see:

• Souvik Sanyal in the Economic Times, 29 July 2010.
• Stamps, savings, microloans and more, on the IFMR blog, 10 August 2010.
• Post offices can bring in financial inclusion, by Sanjeev Kumar Patro in the Indian Express, 3 August 2010.
• Irda’s plan to sell insurance products through post offices hits roadblock by Remya Nair and Surabhi Agarwal, in Mint, 28 February 2011.
  

Monetary policy is easy; Financial regulation is hard

I wrote a column in the Financial Express today, titled Monetary policy is easy; Financial regulation is hard, where I contrast the complexity in public administration of doing monetary policy versus the complexity of getting to good financial regulation.

Independence of regulators and independence of the central bank

I have a column When should a government agency have autonomy?, in the Financial Express today. This is a hot subject in India today, in the aftermath of the ULIPs ordinance. While on this subject, also see:

• An editorial in Mint.
• Tamal Bandyopadhyay in Mint.
• Gautam Chikermane in the Hindustan Times.
• Jayanth Varma in the Financial Express.
• K. P. Krishnan in the Economic Times.
• Monika Halan in Mint.
• Monika Halan in Mint
• Monika Halan in Mint

One feature of the ULIPs crisis which has not been widely appreciated is the role of the banks. While much opprobrium has been directed at insurance companies and insurance agents (both individuals or specialised financial distribution companies), banks are big players in selling insurance products. Their misconduct in selling represents a failure of RBI supervision. Most major banks are part of this scandal. The few customers who have protested have been sorted out, with a no-media clause in the resolution agreement that prevents the story from getting out.

Interesting readings

The top selling Indian newspapers according to Amazon's kindle subscriptions.

India's courts may be in a slow process of reshaping India into a liberal democracy. Here is a Supreme Court ruling which blocks the Maharasthra government from interfering with the rights of a citizen to read a certain book. Sadly, it was done on a technicality.

Manish Sabharwal in the Financial Express on an important new initiative of the Ministry of Labour.

Eric Bellman in the Wall Street Journal on the rise of Madras in automobile manufacturing. There is much strength there in electronics manufacturing also.

Dhiraj Nayyar in the Indian Express on the interfaces between mobile telephony and banking. [also see].

Kerala is Number 1 by Mahesh Vyas in the Business Standard.

On the difficulties of ULIPs and the recent ordinance, see Dhirendra Kumar in the Financial Express.

A story by Steve Lohr and John Markoff in the New York Times suggests that low end outsourcing to India could be under attack from new technology.

B. S. Raghavan in the Hindu Business Line on inflation targeting at RBI.

Hindustan Times and Mint have built an interesting new web page : The Indian innovation revolution.

We in India are very convinced that it is good to have a world where every single individual is numbered and trackeable. But there are many nice things about anonymity and the creation of anonymous personas. See this story of _Why, a person who did some amazing things anonymously, and then shut down this life when it looked like his anonymity was under threat. The idea of being able to create and live multiple anonymous invented personas has long been a meme in the hackish community - e.g. see True names by Vernor Vinge.

An interesting interview by Samir Sachdeva with Nandan Nilekani in Governance NOW magazine.

As I read Lose a general, win a war by Thomas E. Ricks in the New York Times, I was struck by this remarkable flexibility of labour contracts, which must work wonders for shaping incentives correctly.

Tarun Ramadorai on empirical analyses of the efforts at banning short selling of recent years.

David Friedman has released a free pdf of the 2nd edition of his important book The machinery of freedom. Hmm, that's a good strategy: authors should open source edition $n$ when they start on edition $n+1$. Also see: a surge in interest in Friedrich von Hayek's The road to serfdom.

Ruuel Marc Gerecht has some interesting ideas in the New York Times on the use of information technology to assist the resistance in Iran. I wonder if similar ideas can be deployed on the problems of China as well.

Tom Wright has an article in the Wall Street Journal about Zeeshan-ul-hassan Usmani, a Pakistani scientist working on explosions and suicide bombings. Also see Pervez Hoodbhoy on Pakistan's existential problems.

Calzolari, Levi, Navaretti, Pozzolo, writing on voxEU, show that multinational banks were a source of stability in the crisis. Also see Internal capital markets and lending by multinational bank subsidiaries by de Haas and van Lelyveld, in the Journal of Financial Intermediation.

Ila Patnaik on the Chinese exchange rate regime and its implications for India.

Inflation targeting turns 20 by Scott Roger, in Finance & Development, March 2010.

Edward Glaeser reviews a book by Joel Mokyr on what made the industrial revolution. It makes you think about the nascent capitalism that we see in India.

Anyone interested in the world of the Internet and computer technology must read:
The State of the Internet Operating System by Time O'Reilly: part 1 and part 2.
John Naughton in the Guardian.
Clive Thompson in the New York Times on IBM's computer that plays `Jeopardy'.
What's the greatest software ever written? by Charles Babcock, in Information Week
The Steve Lohr and John Markoff story about speech recognition, and system-building around it, mentioned above.

Call auctions and their use for the opening price on the stock market

In a SEBI circular today, we have movement on the use of call auctions for the opening price of the stock market. For more in this subject, see Call auctions: A solution to some difficulties in Indian finance by Susan Thomas, June 2010.

Who has the best sources?

Tamal Bandyopadhyay has amazing sources. He got the full text of RBI's letter about the Protect Insurance Companies Ordinance. And, he has got a copy of the elusive MoF FSDC White Paper. Tamal, please release these on wikileaks! Also see Shaji Vikraman in the Economic Times.

And, see C. Rangarajan's comments in the Indian Express.

Opposition moves today

Today, opposition parties are trying to coordinate demonstrations and a `Bharat Bandh' all across India. We've got empty roads of the kind not ordinarily seen:

The focus of these protests is: High inflation.

In many other countries, the political landscape has been one where politicians are relatively reckless about inflation, and the economists and central bankers are the ones preaching the virtues of low and stable inflation, asking for an independent central bank which does only one thing: deliver low and stable inflation.

We find the opposite configuration in India: the RBI (and the economists who run with RBI) criticise inflation targeting, and preach in favour of non-transparency and multiple objectives. I suppose this is a reflection upon the professional skills of economists and central bank staff in India. Most economists in India are brought up on traditional `development economics', which is a different skill set when compared with macroeconomics. Somehow, left wing economists (e.g. the EPW) have come to think that price stability is not that important, and leftist ideas have a remarkably big footprint in India, when compared with what we see in economics worldwide. Another dimension is the self-interest of RBI, which is likely to be pleased at being a central planning agency for Indian finance, and to not be held accountable for anything.

But all is not lost. We might not get central bank reform and inflation targeting through the traditional channel (the pushing by economists and central bankers). But we've got politicians who care deeply about inflation. Indian politicians are convinced that high inflation leads to losing elections. At some point, some team at the Ministry of Finance is going to get sick of the repeated inflation crises, and of having to take responsibility for delivering low and stable inflation.