WP2010/07: The Arduous Route to Ensuring Some Minimum Public Shareholding in Listed Companies, K.S. Chalapati Rao, June 2010

Abstract: The main objective of corporates in listing their shares on the stock exchanges is to mobilise resources for investment directly from the investors. And for investors the liquidity provided by the stock market and the monitoring and disciplining mechanism that goes with listing are the main attractions. If most of the risk capital is held by the promoters not only the relevance of listing for resource mobilisation is reduced but it would also have adverse implications for the disciplinary function of the stock market and relevant provisions of company law. Due to various reasons, company promoters in India generally happen to hold/control a large proportion of the shareholding of listed companies. Official attempts to ensure a minimum public shareholding of 25 per cent have been long drawn. The latest attempt in this direction, announced on June 4, 2010, got stalled even before it could be acted upon. The present paper is an attempt to quantify the issue. In the process it throws up evidence to show that the problem is more severe than what is generally perceived and argues that a lot more needs to be done if the objectives of listing are to be met.

WP2010/06: Managing Finance in Emerging Economies: The Case of India, Sunanda Sen, June 2010

Abstract: India has been experiencing rising inflows of overseas capital since the de-regulation of its financial sector. Often looked up as a ‘success story’ among other Emerging Economies, the country has been subject to pitfalls and trilemmas, which deserve attention. Officially recognized by the Governors of RBI that there was the “dirty face’ of trinity and also that volatility in the market was caused by speculative capital in search of profit. Eulogizing policies to combat, Joseph Stiglitz, goes as, “...your policy-makers, particularly the Reserve Bank of India, are already doing a great job. I wish the US Federal Reserve displayed the same understanding of the role of regulation that the RBI has done, at least so far”. A path-breaking move in USA with the recent Bill in US on regulation of Wall Street was passed by a majority in the Senate on 20th May, 2010. We urge upon a need for similar actions in India and other Emerging economies where the recent moves for financial deregulation has rather been in the opposite direction.

WP2010/05: Social Science Research in Globalising India: Historical Development and Recent Trends, T.S. Papola, May 2010

Abstract: Social science research in India has under come serious criticism in recent years for not having met expectations in terms of analysing some basic structural aspects of the economy and society that have emerged, particularly in the wake of the India’s quest for globalisation, meeting some internationally set standards of quality and providing inputs for policy and teaching in higher education. Some of these failures are attributed, for example, by the Fourth Review Committee of the ICSSR, to the increasing trend of lack of resources, commercialisation and privatisation of social science research in recent years. Was social science research meeting these expectations in earlier years? Has there been a qualitative change in the scenario in the recent years? What factors are responsible for this change? What major changes are required to remedy the situation? Are some of the ‘reforms’ being currently advocated likely to improve the situation? These and related issues are examined in historical and contemporary perspectives in the paper.

WP2010/04: Private Industry and the Second Five Year Plan: The Mundhra Episode as exemplar of Capitalist Myopia, Nasir Tyabji, May 2010

Abstract: In a note to Jawaharlal Nehru in 1958, when it became clear that T.T. Krishnamachari would be forced to resign as Finance Minister in the aftermath of the Mundhra case, M.O. Mathai claimed that he had evidence that it was Krishnamachari’s fiscal policies that had led to this denouement. Mathai added that in implementing these policies, Krishnamachari was faithfully operationalising (Nehruvian) socialism. This paper, based on contemporary records, reaches the conclusion that this was, indeed, so. However, the paper argues that more significant than Mundhra in comprehending the reasons for Krishnamachari’s fall from grace was the “Rama Rau affair”of late 1956. Often this is trivialised as symbolising the process of destruction of the RBI’s proud tradition of autonomy in monetary policy making, or even as an entertaining clash of large individual egos. This paper holds that the government, in formulating procedures to mould monetary policy to the requirements of industrial development through the institutional subordination of the RBI, laid the foundations of an effective industrial policy. Finally, the paper concludes that Krishnamachari tripped in attempting more: he tried to force businessmen in control of industry to behave like true industrialists. In this he provided an object lesson in political economy: the deadly limits to the relative autonomy of the state.

WP2010/03: Trading in India’s Commodity Future Markets, Sunanda Sen and Mahua Paul, February 2010

Abstract: Future trading in agricultural goods, and especially in food items has neither resulted in price discovery nor less of volatility in food prices. We observe the steep increases in spot prices for major food items along with a granger causal link from future to spot prices for commodities on which future data was available. We also have noticed a pattern where investments in stock markets have links with those in the commodity market via portfolio adjustments. Moreover, with the opening of cross-border trade, commodity prices have also been guided by the upward movements in prices in international markets. For India further opening of the future market in commodities, and especially of food, needs to be dispensed with and be treated with caution, in order not to let speculators have a wider playground to play with.

WP2010/02: Industry and Services in Growth and Structural Change in India: Some Unexplored Features, Surajit Mazumdar, January 2010

Abstract: This paper briefly presents an analytical description of the twin processes of growth of output and change in its composition in the Indian economy since independence, by looking at the time-paths of the two dimensions simultaneously. It suggests that three turning points located respectively in the mid-1960s, 1980, and the mid-1990s separate the entire period after independence into four sequential phases of growth and structural change. This periodization of India’s post-independence economic history points towards the need to go beyond relating the dynamics of the Indian economy to exclusively the degree to which the prevalent economic policy regime was interventionist or liberal in different periods.

WP2010/01: Does the Current Global Crisis remind us of the Great Depression?, Sunanda Sen, January 2010

Abstract: One identifies strong parallels between what happened during the Great Depression of the 1930s and what the world is passing through this day. While the build up of the crisis shared a similar pattern, subject to payments imbalances and capital flows directed to channels which failed to contribute to real growth in the capital importing debtor nations, official policies as precipitated the crisis also were similar. These included Britain’s move to re-incarnate pre-war gold standard in 1925 with overvalued gold parity for Pound Sterling and a dear money policy, both to attract funds from abroad none of which finally worked. In US free use was made of funds to stimulate the country’s stock market transactions with a boom which finally came to an end in October 1929. Likewise, Alan Greenspan’s strategy of high interest rate and overvalued dollar during the years preceeding the financial crash in 2008 certainly worked as factors precipitating the collapse. Notwithstanding the acceptance of Keynesianism in post-war Europe, policymakers swung back by mid seventies to pre-Keynesian neo-liberal ideas of monetarist variety. The unprecedented boom in stock markets, with leveraged finance supporting the securitized assets, and the continuing flows of capital to finance the trade and fiscal deficits of US had to give way to unfulfilled expectations in the market. Again, as for reactions, the protectionist wave has re-emerged in Europe and USA, with economic nationalism ruling over notions of multilateralism and free trade. Racial discrimination which led to fascist upheavals during the thirties today remain much camouflaged, garbed in the language of economic nationalism. As for the magnitude of the loss in terms of output and employment, the current scene certainly overtakes the thirties in terms of absolute magnitudes. One only hopes that duration of the slump will not be as long as it happened earlier and also that the world will witness the revival of progressive new ideas, as it happened with the Keynesian revolution in the 1930s!

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