Articles by Mridul Saggar

Monetary policy in most developed countries is conducted with the system being kept marginally short of liquidity. In contrast, many emerging market monetary authorities have been facing surplus liquidity due to factors such as capital inflows, privatisation programmes or fiscal surpluses. This paper provides a cross-country experience of monetary policy and operations conducted in some of these countries and attempts to draw policy inferences concerning policy stances, operating frameworks and procedures in this regard.

The article delineates the IMF's rationale for its role in the international economy; particularly in helping those countries that are going through balance of payments crises. The authors attempt to decipher whether the actual lending pattern of the IMF conforms to this rationale. This is done in the context of panel data models for several groups of countries. There appears to be some arbitrariness in the lending pattern of the IMF.

Prospects in India Saibal Ghosh Mridul Saggar The narrow banking proposal defining a class of safe and liquid assets (generally sovereign government securities) for investments by weak banks, backed fully by demand liabilities (generally non-interest bearing deposits) has been considered as a means of deposit protection and a possible solution to the banking problems. We seek to explain the theoretical implications of the proposal and examine its implications for the Indian public sector banks facing large non-performing loans. The evidence presented in this paper, based on published and audited annual accounts, shows that even without a directive, narrow banking on the asset side is already being practised as part of the asset-liability management by these banks. However, given the structure of deposit ownership, narrow banking in its strict sense does not afford a solution to reforming weak banks. Strictly practised narrow banking can neither guarantee deposit protection nor turn around the weak banks. On the contrary, it can expose weak banks to immense market and interest rate risks which can make the banking system vulnerable to idiosyncratic and systemic risks arising from macro-economic shocks. Considering the fact that the problem of non-performing loans is not as alarming in India as in some other emerging markets, this paper suggests a cautious Approach to strengthening the banking structure. Pitching excessively restrictive speed limits in this scenario might turn out to be counter-productive. The paper, however, recognises that some contraction in the scale of Operations of the weak banks seems to be an unavoidable by-product of measures which may be necessary to strengthen weak banks.

Inequality and Poverty Estimates Mridul Saggar Indranil Pan This paper employs inequality and poverty measures to consumption expenditure data for SCs, STs, and other households in four eastern states published by NSSO, Inequality and poverty differences among SCs, STs and other households, rural-urban disparities and interstate variations in these respects are considered. The eastern region as a whole suffers from economic backwardness and large incidence of poverty and this is specially true for SCs and STs. Rural-urban disparities in consumption also exist with the urban sector better-off than the rural sector. Also, the SCs were found to be comparatively better-off than the STs, However, the generally held view that large inequalities exist among SCs and STs is ill-founded. State level comparison shows Assam to be performing better than the others, with lower poverty levels and more egalitarian distribution of consumption.