Policy

1. Macroeconomic Implications of Global Trade Chokepoints, with M. Shekhar
   
   Abstract: Maritime disruptions—including piracy, armed conflict, climate-related disasters, and geopolitical tensions—represent critical supply shocks for the global economy. Their macroeconomic significance stems not only from the large volume of trade that moves through key maritime routes, but also from the limited availability of viable alternatives when major chokepoints are disrupted. This paper examines India’s exposure to such shocks through the case of the Strait of Hormuz, a strategically important passageway for global energy trade and a major route for Indian imports, particularly crude oil and related energy commodities. We develop a supply-constrained quantitative trade model that combines port-to-port vessel movements, commodity price shocks, exchange-rate movements, and input-output linkages to estimate the impact of maritime disruptions on India’s real GDP and producer prices. The framework allows us to quantify both the direct effects of higher trade costs and energy prices, and the indirect effects transmitted through domestic production networks. The paper further evaluates alternative conflict scenarios, including varying degrees of route disruption, currency depreciation, and commodity price movements, to assess India’s macroeconomic vulnerability to maritime chokepoint shocks.

2. Optimal Credit Weights for Priority Sector Lending, with V. Soundararajan

Abstract: This paper develops a quantitative framework to evaluate directed credit policy in the presence of both efficiency and equity objectives. The motivating application is India’s Priority Sector Lending (PSL) system, which requires banks to allocate a fixed share of credit to targeted borrowers and sectors, especially agriculture and weaker groups. While such mandates may relax credit constraints for underserved households, they may also crowd out credit to more productive uses and increase repayment risk if credit is pushed toward borrowers with lower absorption capacity. The central question of the paper is whether the current design of PSL targets remains well aligned with the structure of the economy and the social objectives the policy is intended to serve. To study this question, the paper develops a static quantitative model in which the planner allocates a fixed block of credit across borrower types while trading off output, employment, equity, and credit risk. The model combines household-level information from the MOSPI Situation Assessment Survey of Agricultural Households with credit and debt data to estimate borrower-type productivity, employment intensity, vulnerability, and repayment-stress proxies. These estimates are then used to calibrate the social returns to credit for each borrower group and to simulate counterfactual allocations under alternative target rules. More broadly, the paper provides a tractable method for rethinking directed credit mandates in economies undergoing structural transformation, where the balance between inclusion, productivity, and financial risk may change over time.

3. CKYCR and the Future of Digital Onboarding: Lessons from International Experience, with V.  Agarwal

Abstract: India's Central KYC Records Registry CKYCR is intended to reduce friction in customer onboarding by allowing regulated entities to retrieve previously submitted KYC records instead of repeatedly collecting the same documents. Yet its adoption remains limited. This paper compares India's model with advanced and emerging jurisdictions and shows that India is distinctive not because it seeks KYC reusability, but because it does so through a centralized repository of institution-uploaded records. Other countries more often rely on verified-attribute sharing, distributed interoperability, national-ID-based verification, or consent-based data portability. The paper argues that India's main challenge is operational rather than legal. Through this international comparison, the paper identifies practical lessons for strengthening CKYCR, including greater use of verified attributes, more dynamic updating, stronger customer-facing controls, and a more seamless digital onboarding architecture.

1. Climate Change and Household Finance. India Finance Report 2025. CAFRAL
   
   Abstract: Climate change presents significant challenges to household finances. Expanding financial access to households is crucial for climate adaptation and resilience. Climate vulnerable areas have seen slower growth in loans such as, business and mortgage loans, especially by traditional financial intermediaries, while microfinance loans have shown notable growth. FinTechs have recently stepped in, demonstrating how technology can enhance financial support to households impacted by adverse climate shocks.

2. Priority Sector Lending in India: Policy Design, Trends and Challenges, with V. Soundararajan, accepted at the Economic and Political Weekly

Abstract: The Reserve Bank of India mandates all credit institutions to allocate a substantial share of their lending to priority sectors such as agriculture, micro firms, loans to weaker sections, etc. in order to promote financial inclusion and equitable access to institutional credit. Priority Sector Lending (PSL) aims to correct credit market failures that arise due to information asymmetries, high transaction costs, and risk perceptions that often exclude disadvantaged borrowers from formal credit. However, directed credit programmes such as PSL also raise an equity-efficiency trade-off: while channelling credit to underserved sectors can generate positive social externalities, it may also risk capital misallocation if they do not adapt to evolving economic conditions and sectoral productivity. This article examines the institutional framework, policy design, and evolution of PSL, and tracks trends in credit allocation across sectors and across banks. It also discusses operational considerations faced by banks, including the constraints in meeting sectoral sub-target mandates, variations in credit demand across sectors, and the practical aspects of reaching last-mile borrowers. We conclude by identifying research gaps that could inform optimal policy design. 

3. Working Capital Constraints and Exports: Evidence from the GST Rollout. Mint Street Memos. Reserve Bank of India (2018)

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