We reflect on the issues raised by the recent faceoff between the Reserve Bank of India (RBI) and the Indian government over the short-term interest rate. Our conclusion is that the policy space must be enlarged and the set of outcomes specified in order for meaningful dialogue to be conducted between the two entities.

We offer an explanation, drawn from first principles, of the belief that the consumption needs of the asset-poor are best met by debt contracts, whereas equity arrangements are tailored to the financing requirements of poor entrepreneurs.

Varieties of institutional economics are available to evaluate varieties of capitalism. These methodologies dig behind preferences and technology to arrive at the ground on which agents make choices. The individual is at the foundation of these edifices, neoclassical and otherwise. Consequently, the denouement of all these models is that the market knows best in the absence of effective counterfactuals. A natural corollary is that the task of the government is to set effective mechanisms in place in order to approach the best outcomes. In contrast, we propose a framework which contends with the modern economy as an aggregate that evolves in historical time. Problems like effective demand failures are endemic to capitalist economies. Therefore, systematic State intervention is essential to their functioning. In particular, political economy teaches us that intervention must be in the interest of wage earners. In contrast to the earlier model, the fabric of norms and conventions that facilitate the growth and development of economies must emerge from the consciousness and practices of the working class.Keywords: New Developmentalism. JEL Classification: B52; E02; E12. OVERVIEWMainstream economics has been extended to mainstream political economy by developing elaborate concepts to contend with the malfunctioning of markets. Hitherto, market failures were dealt with by the theory of externalities and public goods. Now, notions like institutions, governance, property rights, and the like are

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We adopt the Post Keynesian input-output framework pioneered by Wynne Godley to delve into both the causes and consequences of financialization. The distinction between National Income accounting and stock-flow-consistent modelling is showcased. Also, the political economy foundations of financial economics are unearthed. Constructively, the elements of a planned strategy to reinvent the accumulation of capital are sketched. Also, we show how “asset-based reserve requirements” and the issue of government bills and bonds can be “creatively manipulated” by the state to deliver superior and stable social outcomes.