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Working Papers | 2019

A computational algorithm to analyze unobserved sequential reactions of the central banks: Inference on complex lead-lag relationship in evolution of policy stances

Anindya S. Chakrabarti and Sudarshan Kumar

Central banks of different countries are some of the largest economic players at the global scale and they are not static in their monetary policy stances. They change their policies substantially over time in response to idiosyncratic or global factors affecting the economies. A very prominent and empirically documented feature arising out of central banks' actions, is that the relative importance assigned to inflation vis-a-vis output fluctuations evolve substantially over time. We analyze the leading and lagging behavior of central banks of various countries in terms of adopting low inflationary environment vis-a-vis high weight assigned to counteract output fluctuations, in a completely data-driven way. To this end, we propose a new methodology by combining complex Hilbert principle component analysis with state-space models in the form of Kalman filter. The CHPCA mechanism is non-parametric and provides a clean identification of leading and lagging behavior in terms of phase differences of time series in the complex plane. We show that the methodology is useful to characterize the extent of coordination (or lack thereof), of monetary policy stances taken by central banks in a cross-section of developed and developing countries. In particular, the analysis suggests that US Fed led other countries central banks in the pre-crisis period in terms of pursuing low-inflationary regimes.

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Working Papers | 2019

Between Aastha and Zee:
Mystery of the Missing Market for a Weather Channel

Satish Y. Deodhar and Chayasmita Deka

Until a few decades ago, Doordarshan was the only channel which would broadcast TV programmes in black-&-white and that too for a few hours. It was a pure public good then, offered free of cost by the government. Today, however, from Aastha to Zee there are hundreds of dedicated private channels competing to offer news, sports, entertainment, and spirituality for a price. And still, there is not a single channel which is dedicated to 24-hour weather forecast. This missing market for the exclusive weather channel is the result of the perceived marginal private benefit to viewers being much less than the marginal social benefit accruing to the society as a whole. Every year unanticipated weather patterns cause huge economic losses to agriculture and other industries and cause a great number of fatalities too. Therefore, government and the corporate sector may offer a 24-hour TV channel for weather forecast in the form of public private partnership (PPP). The weather forecasting infrastructure and data may come from government institutions such as IMD, C-DAC, and ISRO; professional content delivery and services of weathermen who deliver the content may come from TV media firms; and the break-even revenue may come through CSR activities of the corporate sector.

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Working Papers | 2019

Right of recourse claims based on latent defects in the nuclear energy sector in India: brace yourself for fact-intensive disputes

M.P. Ram Mohan and Els Reynaers Kini

This working paper is focused on trying to interpret the meaning of "latent defects" and analysing how a case were to unfold if an operator of nuclear installation were to exercise its right of recourse against a supplier in the event of supply of equipment or material with latent defects, as envisaged under the unique Section 17(b) of the Civil Liability for Nuclear Damage Act, 2010 (CLND Act), as adopted by the Indian Parliament. Therefore, this paper presumes and builds on the assumption of some prior knowledge of general nuclear law principles as well as the CLND Act and related debates. We welcome comments on any part of the paper.

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Working Papers | 2019

Buy, Sell or Hold: Entity-Aware Classification of Business News

Ankur Sinha, Satishwar Kedas, Rishu Kumar, and Pekka Malo

Financial sector is expected to be at the forefront of the adoption of machine learning methods, driven by the superior performance of the data-driven approaches over traditional modelling approaches. There has been a widespread interest in automatically extracting information from financial news flow as the signals might be useful for investment decisions. While quantitative finance focuses on analysis of structured financial data for investment decisions, the potential of utilizing unstructured news flow in decision making is not fully tapped. Research in financial news analytics tries to address this gap by detecting events and aspects that provide buy, sell or hold information in news, commonly interpreted as financial sentiments. In this paper, we develop a framework utilizing information theoretic concepts and machine learning methods that understands the context and is capable of extracting buy, sell or hold information contained within news headlines. The proposed framework is also capable of detecting conflicting sentiments on multiple companies within the same news headline, which to our best knowledge has not been studied earlier. Further, we develop an information system which analyzes the news flow in real-time, allowing users to track financial sentiments by company, sector and index via a dashboard. Through this study we make three dataset related contributions - firstly, a training dataset consisting of more than 12,000 news headlines annotated for entities and their relevant financial sentiments by multiple annotators, secondly, an entity database of over 1,000 financial and economic entities relevant to Indian economy and their forms of appearance in news media amounting to over 5,000 phrases and thirdly, make improvements in existing financial dictionaries. Using the proposed system, we study the effect of the information derived from daily news flow in the years 2012 to 2017, over the Indian broad market equity index NSE 500, and show that the information has predictive value.

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Working Papers | 2019

Does IT work? Information Technology (IT) in Welfare in India*

Reetika Khera and Vineeth Patibandla

The use of information technology (IT) in public administration is viewed as a significant tool for enhancing transparency and accountability. In popular rhetoric, these continue to be heralded as necessary and sufficient conditions for increasing transparency and accountability. This paper studies the use of various forms of IT such as computerization, public management information systems (MIS), digital ID and biometrics in two welfare programmes in India. This paper aims to (a) use government MIS portals to shed light on the performance of welfare programmes, (b) understand whether recent IT applications have been beneficial or detrimental to programme performance and (c) comment on what extent IT has fulfilled its potential to enhance transparency. We find support for two earlier findings: one, there is no automaticity between use of IT and enhanced transparency or accountability and two, the use of IT may reinforce, even exacerbate, existing power imbalances rather than mitigating them. Further, we find some evidence of 'too much' technology being detrimental to improving administration and accountability.

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Working Papers | 2019

Financing Infrastructure in India – Issues and the Way Forward

Sebastian Morris

Optimal approaches that recognize the specific kind of market failure/s, in the policy and design of infrastructure, greatly reduce the financing costs and improves the ability of to attract finance in the private provisioning of infrastructure. When state systems are weak organizationally it is first best to strengthen the state capacity so that it can minimally perform the roles of design, regulation, development of frameworks, and of monitoring, for the private provisioning of infrastructure. This is particularly so in the case where there are dual market failures arising out of both the natural monopoly and the appropriability failure aspect. Thus sewerage and water, city roads, multimodal facilities, solid waste, public health care, the challenges have proven beyond the current ability of the state, despite its large commitment to the use of private capital. The challenges in design and policy are large and with many false starts it is only now barely beginning to be considered in India. Thus infrastructure design rather than debilities in financial markets remain the key problem.
The need to develop capital markets and institutions to lend long is vital, but much of the challenge is really in having good projects that are financed keeping in mind the capacity limitations within banks and financial institutions. The potential to use of foreign capital to finance infrastructure is often overstated. Reform of financial institutions (FIs) and banks is vital today, as also the necessary incorporation of interest rate (change) risks into the project cost to overcome adverse selection. The forces leading to the current mess-up of the Indian banks and FIs in lending to infrastructure are brought in perspective. The key issues in developing state capacity, and the changes required for getting the design of infrastructure right, as also to bring functionality to the role of financial institutions in the private development of infrastructure are highlighted.

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Working Papers | 2019

Does GST in India Hurt Producing Regions?
A New Estimate of the Tax Base Under GST of Select States

Sebastian Morris, Ajay Pandey, Sobhesh Kumar Agarwalla, and Astha Agarwalla

GST as introduced in India being a destination based tax, does not encourage regions to vigorously promote manufacturing and tradable services industries. Being in the midst of its economic transformation, and given the subnational character of most states (regions), it is important that the states engage in locational tournaments to attract investments, not through tax concessions, but through the provision of infrastructure services, governance, and other intangible services. A new consumption based approach that adjusts the detailed consumer expenditure figures of the National Sample Surveys at the state level is developed. This is shown to be robust and is used to estimate the RNR (Revenue Neutral Rate of Taxes) at the State level. This reveals that there are stark differences between the rates for the producing states and the consumption oriented states amounting to as much as 10% of GDP. These differences cannot be bridged by the proposed compensation scheme. As the impact of GST goes on to the next stage of determining the locational choices of new investments, the lack of fiscal incentives for states to attract and nurture investments, unless corrected would have deleterious effects on the investment process.
As much as 50% of the Centre's collection of GST may have to be distributed based on economic activity centered around manufacturing and tradable services production, if the country is not to lose the steam of high and growing investments to take it through its economic transformation. The contrast with China is remarkable, China's GST is only partial covering only manufacturing and associated labour services, allowing states to tax and retain many services irrespective of the location of the consumer of the service. More importantly as much as 25% of the central collections on account of GST( in manufacturing) go to the provinces based on their public goods production.

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Working Papers | 2019

Whose Empowerment? National Digital Infrastructure and India's Healthcare sector

Rajesh Chandwani, Saneesh Edacherian, and Mukesh Sud

Patient-centric digital infrastructure can potentially enhance the efficiency of the healthcare systems. Even in developed nations evidence suggests low adoption rates for such infrastructure. The Indian government, piggybacking off biometric identity, is setting up digital infrastructure to enable the provision of universal healthcare. Invoking an information ecology perspective, we investigate the physician's perception to this initiative. We find that, equipped with a unique patient identifier and stakeholders' registry, this initiative is perceived to be a game changer and could significantly impact the power dynamics in the healthcare sector. Physicians, who are the key stakeholders in this initiative, are skeptical about the change in the locus of the power, with power residing in 'data' rather than 'professional expertise'. The changes are expected to manifest through monitoring, controlling and managing the data rather than the provision of knowledge-based services. We present recommendations for the design and implementation of this large-scale patient-centric digital infrastructure.

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Working Papers | 2019

Overestimation in the Growth Rates of National Income in Recent Years? – An Analyses Based on Extending GDP04-05 through Other Indicators of Output

Sebastian Morris and Tejshwi Kumari

Quarterly indices of output like those of Industrial Production, other measures of production like net sales, exports, of companies for which data is available, besides proxies like credit to the sector, and indices of price levels have been used to forward project the growth rates of GDP04-05, for the principal sectors of the National Income Accounts (NAS). These were then compared with the growth rates given by the new Gross Value Added (GVA11-12) at constant price measure. It is very highly probable that some sectors of the National Accounts Statistics (NAS) notably Manufacturing, and Trade, Transport, Storage, Hotels and Communication Sectors were overestimated, especially in periods when the output (economic activity) was slowing down. This questions the use of the new GVA series for macroeconomic (policy) actions, wherein more than extensiveness of coverage, the movements over time of the measure have to be reliable and accurate. This is especially so because manufacturing and its related sector-trade etc., are the core sectors which are responsive to changes in policy and to shocks (that could be countered), wherein there is deep overestimation. Some evening out of the overestimation is noticed over the upswing in the business cycle since 2017:2. However the demonetization which rudely reduced demand did not allow the "phase shifting" and "flattening" aspects, which the new GVA series possibly imposes to be examined in detail, although the same is suggested.

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Working Papers | 2018

Lighting up Lives through Cooking Gas and transforming society

S. K. Barua and Sobhesh Kumar Agarwalla

The study, reported in the form of a case, narrates the story of a major attempt at social transformation through a simple mechanism of providing cooking gas (LPG) to the marginalized in society. Targeting about 100 million households in India who still use dung-cakes, firewood, and coal as the primary fuel for cooking, the Pradhan Mantri Ujjwala Yojana (PMUY) was conceived with the objective of replacing these traditional fuels with LPG which is a clean fuel. The initial target of providing 50 million Below Poverty Line (BPL) families with LPG at the time of the launch of the scheme on May 1, 2016 was increased to 80 million by 2019-20, and as of January, 2018 over 30 million families had already been covered by the scheme.

The key findings are as follows. The scale and speed of implementation were achieved through excellent coordination between the government system, the government-owned Oil Marketing Companies (OMCs) and the banking system. The government system represented by officials from the central government, the state governments, and the village heads (Sarpanchs) helped in identifying BPL beneficiaries and in mobilizing people to canvass the idea of switching over to LPG from traditional fuels for cooking. The OMCs (the three companies involved in the implementation were IOCL, BPCL and HPCL) designed and created the robust logistics system needed for bottling and distribution of cooking gas. They also designed and created the IT platform required for easy transaction and record keeping for the entire logistics system. The banks provided the infrastructure needed for flow of funds, including flow and accounting of subsidies from the government.

PMUY is clearly one of the largest social intervention schemes executed anywhere in the world in challenging environment. Its successful implementation provides insights into management of such interventions. The lessons that can be drawn from the implementation would be of use for similar large-scale social interventions.

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IIMA