Stock Returns-Inflation Relation in India

This study contributes to the stock returns-inflation relation literature in developing countries by revisiting the issue with reference to the emerging economy, India. More specifically, it tests whether the Indian stock market provides an effective hedge against inflation usingmonthly data on real stock return, inflation and real activity from April 1980 to March 2004 and a two-step estimation procedure. Results of the study indicate that (i) the Indian stock market reflects future real activity; (ii) the negative stock returns-inflation relation emerges fromthe unexpected component of the inflation and (iii) this negative relation vanishes when we control for the inflation-real activity relation, thereby providing a strong support for Famas proxy effect hypothesis. The split sample analyses indicate that the Fama hypothesis is valid only in pre reformperiod. In the post reform period, real stock returns have been independent of inflation, i.e., the Fisher Hypothesis is valid.Stock Return, inflation

Performance of Primary Cooperatives in India: An Empirical Analysis

Cooperatives as an institution in India are more than a century old. With more than a lakh grass root level cooperatives, their presence is formidable. Notwithstanding, impressive gains made by cooperatives in terms of their rural outreach and coverage of small and marginal farmers, their financial health has been a matter of concern. The study is an attempt to enquire into the factors which impact financial health of cooperatives reflected through their recovery performance. The empirical findings suggest that government should allow the cooperatives to evolve in a natural manner rather than through initial official encouragement and subsequent intervention. Government’s contribution to share capital of cooperatives should be stopped. There is also a need to revisit the issue of appropriate member size for a base level cooperative so that cooperative principles are internalized amongst members. Very large cooperatives should be avoided both in principle and practice

Performance of Primary Cooperatives in India: An Empirical Analysis

Cooperatives as an institution in India are more than a century old. With more than a lakh grass root level cooperatives, their presence is formidable. Notwithstanding, impressive gains made by cooperatives in terms of their rural outreach and coverage of small and marginal farmers, their financial health has been a matter of concern. The study is an attempt to enquire into the factors which impact financial health of cooperatives reflected through their recovery performance. The empirical findings suggest that government should allow the cooperatives to evolve in a natural manner rather than through initial official encouragement and subsequent intervention. Government’s contribution to share capital of cooperatives should be stopped. There is also a need to revisit the issue of appropriate member size for a base level cooperative so that cooperative principles are internalized amongst members. Very large cooperatives should be avoided both in principle and practice

Examining Sustainability of Federal Finances in India: An Application of Non-stationary Panel Methods

This paper examines the fiscal sustainability of Indian States during the 1990s on the basis of their budgetary data. Sustainability has been discussed using the inter-temporal budget constraint framework and has been tested by applying the panel co-integration technique. The panel analysis reveals that revenue receipts and revenue expenditures are co-integrated across the States. Further, the insensitivity of the results to the choice of the period of analysis attests the robustness of the result that the State finances in India may not be unsustainable

Examining Sustainability of Federal Finances in India: An Application of Non-stationary Panel Methods

This paper examines the fiscal sustainability of Indian States during the 1990s on the basis of their budgetary data. Sustainability has been discussed using the inter-temporal budget constraint framework and has been tested by applying the panel co-integration technique. The panel analysis reveals that revenue receipts and revenue expenditures are co-integrated across the States. Further, the insensitivity of the results to the choice of the period of analysis attests the robustness of the result that the State finances in India may not be unsustainable

What Drives Profitability: Level or Growth Efficiency?

Examining the impact of ratio-based efficiency metrics, such as cost-to-income-ratio, and multifactor-based level efficiency on profitability can be potentially misleading. Our examination of Indian banks spanning the period from 2006 to 2023 reveals that profitability is significantly influenced by multifactor-based growth efficiency, rather than level efficiency. Notably, this finding remains robust when using either conventional or risk-adjusted measure of market power

Examining Sustainability of Federal Finances in India: An Application of Non-stationary Panel Methods

This paper examines the fiscal sustainability of Indian States during the 1990s on the basis of their budgetary data. Sustainability has been discussed using the inter-temporal budget constraint framework and has been tested by applying the panel co-integration technique. The panel analysis reveals that revenue receipts and revenue expenditures are co-integrated across the States. Further, the insensitivity of the results to the choice of the period of analysis attests the robustness of the result that the State finances in India may not be unsustainable.State Finances; Panel Cointegration

The Performance of Regional Rural Banks (RRBs) in India:Has Past Anything to Suggest for Future?

Since their inception, regional rural banks (RRBs) have taken deep roots and have become a sort of inseparable part of the rural credit structure in India. The financial viability of the RRBs has, however, been a matter of concern since the 1980s, just five years after their existence. A number of committees have gone into the issue of their financial viability and possible restructuring. This study follows a deductive approach. First the extent of the problem of the loss making RRBs has been studied to analyse if the problem is confined to some particular sponsor banks or States. Subsequently, an attempt is made to enquire as to factors that influence the performance of the RRBs and the role-played by the sponsor banks. The empirical analysis has been couched in terms of profit and loss making RRBs for a reasonably long (10-year) period to draw robust policy inferences.RRBs, Restructuring Strategy, Panel GMM, Banking, Economics

Market power and efficiency of Indian banks: does the ‘quiet life’ hypothesis hold?

Purpose This paper investigates the relationship between market power and efficiency for Indian banks in order to test the validity of the quiet life hypothesis (QLH) during 2005-2019. Design/methodology/approach First, the bank-level DEA efficiency scores and three measures of the Lerner index – traditional, efficiency-adjusted, stochastic – are estimated. Then, efficiency scores are regressed on Lerner indices plus a set of banking and economic control variables. Findings We get robust evidence against the QLH. Moreover, the conventional Lerner index suggests that market power of Indian banks, as well as of the different bank groups, increased during the study period, due to a greater reduction in costs compared to that of the price of banking services. The efficiency scores also declined for the banking system as a whole, and for all bank groups except new private banks. Originality This is the first study testing the QLH for the different categories of Indian banks, and also provides robust inferences by using both stochastic and non-stochastic measures of market power

Market power, efficiency and stability of Indian banks

We investigate the relationship between stability and market power in the Indian banking system for the years 2005 to 2019. For this purpose, we employ three different indicators of bank stability and two alternate measures of the Lerner index (traditional and efficiency-adjusted). Our empirical specification takes into account the possibility of a non-linear relationship between competition and stability. We use bank-level cost efficiency scores, obtained from stochastic frontier analysis, in addition to customary control variables. Our results provide support to the competition-fragility view for the whole Indian banking industry as well as for the different bank categories