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French economist Thomas Piketty's bestseller, Capital in the TwentyFirst Century, provocatively claims that the widening income inequalities in the advanced economies (indeed, widening income inequality worldwide), is fundamentally rooted in the exigencies of the capitalist system. Specifically, capitalism operates according to inexorable laws – in Piketty's succinct formulation as r>g. That is, "r" is the rate of return on capital whereas "g" is the rate of economic growth. However, "the central contradiction of capitalism" is that the rate of return on capital (r) will always exceed the rate of economic growth (g). Because the rate of return on capital is higher than the economy's overall rate of growth, widening income inequality is inherent to capitalism. Drawing on Marx's insight that the returns on capital (which to Piketty is mainly wealth in the form of financial assets and equity) tend to be far greater than the growth rate of the economy, Piketty concludes that the owners of equity will always see their wealth grow much faster than those depended on earning income from labour (Table 1). And, since capital tends to be concentrated in fewer hands while income generated from labour is more broadly dispersed, it is hardly surprising that the capital-owning class have seen their incomes and overall wealth grow at an exponential rate, whereas those who sell their labour for a living have seen their incomes either stagnate or decline in real purchasing terms.

India has been a major beneficiary of economic globalisation. Yet, integration into the global economy has also made India vulnerable to the unpredictable swings in market sentiment. Nevertheless, the ultimate effects of cross-border economic forces also depend on the robustness of domestic policies. Potential vulnerabilities such as disruption in trade or financial flows can be mitigated by sound macroeconomic policies. Although 'licence raj' and 'export pessimism' is now a thing of the past, India's quasi-protectionist policies, coupled with the failure to deepen its integration into the global economy, have made the economy increasingly vulnerable to external forces—as seen when the United States Federal Reserve announced its decision to unwind its stimulus programme in mid-2013, resulting in deep sell-offs in emerging economies, especially India's currency, bond and equity markets.

AbstractShadow banks are broadly defined as entities which conduct credit intermediation outside the formal banking system. Poorly regulated, engaging in opaque forms of intermediation, deeply interconnected with the official banking system, and operating with implicit government guarantees, they pose a major source of systemic risk. Yet shadow banks provide an important service by channeling credit to excluded investors, and can complement the formal banking sector. What explains the rapid proliferation of shadow banks in China? How large are they and what forms do they take? What types of risks do they pose to the financial system? And how best can China utilise the services of shadow banks while at the same time ensuring that they do not create systemic risks for the financial system?

Abstract"Global imbalances" manifest in the large current account deficits and surpluses in the global economy and blamed by many for the global financial crisis of 2008 has become a source of much friction and discord among the G-20 economies. Rebalancing the global economy is essential to mitigating the divisions and promoting a more sustainable economic recovery. How and why did these imbalances emerge in the first place, what explains why rebalancing has proven to be so difficult, and what are the implications of failure? This paper addresses these interrelated issues.

AbstractCredit default swaps (CDSs) are contracts between buyers and sellers of protection against default. They are a form of debt insurance, or more precisely derivatives contracts that investors buy to either insure against or profit from a default. In this way CDS contracts act as a form of debt insurance in that they provide a means of protection against credit risk. In the aftermath of the global financial crisis, the CDS earned the reputation of a 'financial weapon of mass destruction'. Why? Is this charge justified? This paper shows that the reality is more complex: CDSs carry benefit as well as costs, and the risks associated with them can be mitigated through prudent supervision.

What began as a downturn in the US housing sector in summer 2007 mushroomed into a global financial crisis by September 2008—the most severe since the Great Depression of the 1930s. Initially, Western European governments, including the Russian government, blamed the crisis on US financial excesses and felt that their economies would remain immune from the contagion. However, this proved to be a false comfort. The subprime-induced contagion spread to Europe with unprecedented ferocity, rapidly engulfing the entire continent. This essay explains why Russia, deemed to be the most immune, succumbed so quickly to the contagion, and includes lessons policymakers can learn from the Russian experience to better insulate their economies from the vagaries of the global financial markets.

Although Sino-Indian relations have greatly improved over the past decade, … [u]nresolved territorial disputes, China's unconditional support of Pakistan, and growing competition for energy resources and regional influence could quickly derail hard-won gains.