Articles by M K Datar

A discussion of the announcements pertaining to the financial sector in Budget 2013.

The role of credit rating agencies in the US credit crisis by transferring risks through new structured products has attracted much attention, especially since rating downgrades of these products were much faster than the other products. Improved disclosures in rating methodologies and the performance of rating models, avoiding conflict of interest situations, relevance of issuer to pay models and dealing with the oligopolistic nature of the industry are some of the lines along which new regulatory efforts could be organised. A clear articulation of the conditions for the use of ratings of "new" products by different investor classes may improve regulatory efficiency.

The sheer pace of the fiscal correction envisaged in the Maharashtra budget of 2005-06 is unbelievable, to say the least, and raises doubts about its sustainability over a longer period. The first doubt is inevitably the question of the consistency of the estimated levels of revenue and expenditure. Second, going beyond the numbers, are the larger policy issues underlying budget magnitudes. If there were reasons to believe that the policies culminating in the fiscal crisis would be corrected, it would be reasonable to expect some improvement in the deficit numbers.

Corporate governance must be industry specific in order to deal with the peculiarities of those industries, such as financial institutions. In financial institutions, as in other 'new' types of industry, power is not associated with the ownership of physical assets but rather with access to the use of critical resources. Internal regulatory mechanisms, through suitable HR policies, therefore become important and help to complement the efforts of external regulatory authorities.

In the Budget for 2003-04 the government has sought to underwrite risks faced by different segments of the population. When governments assume additional risks it is necessary to ask whether the mode of risk mitigation proposed is appropriate and who would benefit from such intervention. An attempt is made here to examine these and related questions in relation to the budget.