Indian Economy

Special economic zones in India continue to be seen as vehicles for social and economic development. The article describes how resident communities of an SEZ in Sri City, Andhra Pradesh, experienced a series of livelihood transformations that were mediated strongly by capabilities and aspirations. Divergent social and economic outcomes were created for respondents living in and navigating through a transition–transformation–aspiration continuum. The SEZ creation legitimised precarity by engendering casual, insecure, and unprotected labour relationships. The article suggests that SEZ performance be evaluated by metrics that incorporate an explicit focus on the enhancement of capabilities.

Contrary to several gloomy forecasts, the Indian banking sector has been surprisingly resilient in the face of the pandemic. This is because corporates, which account more than half the loans, are in better shape and banks are well-capitalised. This bodes well for loan growth and bank performance post the pandemic.

A historical trajectory of the evolution of development finance institutions in post-independence India in the context of the renewed interest in them is necessary to draw a few appropriate lessons. They are indispensable for infrastructure development and the incorporation of lessons from past experiences will help to set up robust and well-functioning DFIs.

The finance minister’s Budget speech 2021 revealed the government’s plans to establish an Asset Reconstruction Company to take over bad debt from the books of public sector banks for eventual disposal. That suggests that the ARC route rather than recapitalisation would in the coming months be the main means of refurbishing capital in the public banking system. Since there are as many as 28 ARCs already in existence, the reason why the creation of one more would resolve a problem that is expected to worsen over the coming year is unclear. In fact, past experience indicates that ARCs have not helped enhance the actual recovery of lock-up in stressed assets. This suggests that the move is a means to postpone the problem of bad debt resolution so as to avoid having to recapitalise the banks with budgetary resources, which would widen the central fiscal deficit.

The recently published Report on Currency and Finance, 2020–21 of the Reserve Bank of India reviewed the performance of the flexible inflation targeting regime in India. In the light of stylised facts, cross-country experience, and detailed econometric results, the report seemed to suggest that despite several shocks (like demonetisation or introduction of the goods and services tax), a combination of good policy and luck have worked in favour of the success of the FIT regime in India. Going forward, while advocating some nuanced, subtle changes in the operation and administration of the FIT regime, the report called for its continuation as a strategy of monetary policy in India.