Letters from June to November, 2010 sent to/published in daily newspapers, magazines etc.
M G Warrier
2005/1-D, DREAMS COMPLEX
LBS Marg
BHANDUP (WEST)
Mumbai-400078
(Mobile: 09349319479)
A selection from my letters published in dailies
1. Bhopal verdict (Hindu, June 9)
Coming more than 25 years after the Bhopal tragedy, the trial court judgment delivered on June 7 will remain alive for a long time for several reasons. One, for the constraints faced by trial courts in even deciding the charges for which an accused is to be tried. Two, the delay in giving the judgment. God knows, when the legal process will, finally be over in this case. Three, if one is rich and powerful, it is not difficult to avoid getting charge-sheeted. Four, when death is in hundreds and thousands, no one gets hooked. Five, when the matter is ‘international’, less people bother about what happens to compensation received for deaths and injuries.
One wishes, industrial safety norms and legal reforms get some attention from the authorities concerned, at least in the light of such experiences.
2. Interest rates (Business Line, June 21)
The article ‘Freeing up lending rates’ (BL, June 17) traced the evolution of lending rates from the strictly regulated interest rate regime of pre-reform days to the present day and after assessing the present situation concluded that there is a need for further research to better understand the relationship between credit and interest rate cycles and its implications for sustainable growth.
While there is perceptible sympathy towards small borrowers and constant emphasis on financial inclusion, the bias towards bigger borrowers and industries with bulk financial needs offset the policy measures initiated for ensuring timely, adequate and cost-effective credit flow to farmers and rural borrowers.
Even where the shift from informal to formal credit delivery system is evident through interventions by NGOs and SHGs, cost of credit to small borrowers (say with credit needs upto Rs 2, 00,000) has not come down in comparison to those enjoying credit limits or access to bulk funds in the form of corporate deposits or equity contributed by public or by government out of public funds.
The Centre or the Reserve Bank of India could perhaps consider a study of this aspect to understand the real benefits reaped by the three sub-sectors, viz. Agriculture, SSI and Services forming part of the traditional priority sector, vis a vis the much lower cost of funds for financial institutions and cost of credit for big industries and other big users of credit including government.
So long as government and financial institutions enjoy the benefit of access to captive public deposits in various forms, they have a social responsibility to ensure credit flow at affordable costs to the sectors which take care of the basic needs of the society.
3. Financial inclusion (Business Line, July 6)
This refers to the article ‘Challenge of financial inclusion’ by Duvvuri Subbarao (Business Line, July 3).
The recognition of the magnitude and dimensions of the inadequacies in credit flow to weaker sections and sectors with low individual credit needs by RBI Governor is comforting. Perhaps, rural credit is the most talked about and studied subject in our country since late 1950’s and from the establishment of SBI to the current efforts to develop MFIs there has been continuous initiatives to support rural development.
Measures like reviving cooperatives, Lead Bank Scheme which significantly improved the outreach of commercial banks in rural and semi-urban areas and coordinated supports from different agencies involved in rural development, establishment of Regional Rural Banks, NABARD, SIDBI and recent support to encourage MFIs to function more efficiently through increased intermediation have all contributed to improved credit flow to small and medium borrowers in rural and semi-urban areas.
Although UID project, Financial Inclusion Plans and business correspondent (BC) model will all help to improve linkages at the ground level, one cannot think of a substitute for the institutions referred to above, viz. Cooperatives, RRBs, rural and semi-urban branches of commercial banks, NABARD and SIDBI revisiting and focusing on their original mandates, if the desired results are to show up in financial inclusion.
4. Executive interns in RBI (Business Line, July 21)*
This refers to the report ‘RBI to hire 200 executive interns’ (BL, July 20). Although on the face of it, the proposal would look a normal HR initiative at infusing young blood with expertise and enthusiasm at a lower cost, no in-depth analysis may be needed to find that this is a short-term remedy being tried out for a long term problem.
Sooner than later, the RBI, government and public sector organizations will have to wake up to the reality that their recruitment, training, placement and compensation strategies need thorough overhaul and this they have to do taking their existing employees into confidence.
RBI is one institution that has learnt from first principles the negatives of having several categories of employees doing identical or similar jobs, but with varying opportunities in career progression. That recognition had resulted in introduction of combined seniority among all officers of RBI with separate cadres only for certain specialized services in 1972. The proposed 200 interns will have to work in somewhat hostile environment as they will be drawing higher emoluments than those with whom they work with an uncertain future staring at them. The position is not similar to their friends in the private sector where all are similarly placed with opportunity to share market opportunities for job changes and half-yearly or annual review of remuneration including incentives based on performance.
A long-term solution may have to be found for the HR-related problems, including inability to hire experts at market related compensation (this is applicable up to the position of CEO in government and public sector), skills becoming obsolete in short periods, employees’ reluctance to change and trade unionism emanating from job security. There may not be a fit for all remedy, as the issues are as old as the institutions.
The Government and public sector organizations may have to consider how best the ‘Cost to Company’(C to C) principles can be integrated into their existing recruitment, training, placement and career progression policies. This may involve the following:
Taking the existing employees into confidence with an assurance that the changes will only improve the working results of the organization and they will get opportunity to share the benefits and new job opportunities and so long as they are prepared to learn new things/upgrade their skills the infusion of ‘experts’ will not eat into their career progression opportunities.
Inter-mobility of executives in all cadres among comparable organizations. For e.g. a Banking/Financial Sector Service could be evolved for institutions including those in the private sector and regulatory bodies in the financial sector.
A transparent guidance for remuneration package based on paying capacity/need for skills for different sectors. Proposals like the present one by RBI of shifting to C to C to reduce costs will give wrong and unhealthy signals.
5. No work, no pay! (Free Press Journal, July 27)
This refers to your editorial “Will you behave like grown-ups?” (FPJ, July 26). Our legislators, whether they be Rajya Sabha, Lok Sabha or the Municipal Council in some remote area, like lazy school boys on a rainy day, prefer the easy option of taking a holiday at the least provocation. Main reason for this is that they want to avoid home work. Sitting through a day’s parliament session, remain alert and actively participate in the deliberations need a lot of preparation, learning and coordinating with several ministries and people back home in the respective constituencies. All of it can be avoided if during the discussion of some sensitive issue someone makes a great deal of noise, and force the helpless orator back on his chair and have the day’s session adjourned.
Urgent things like passing a Bill or ratifying some actions will be taken care of by ‘babus’ under some routine procedures. Meanwhile, one gets paid, gets the necessary publicity (thanks to an obliging media) and can go to the press and say whatever one wants. The message that comes out is that majority of the members of both ruling party and opposition are happy about the present arrangement. However things will change, if people insist on introducing ‘no work, no pay’ principle for legislators also and make it compulsory for members to attend sessions for a specified number of hours for eligibility of salary (there is a five-fold increase now, one is told!), allowances and sitting fees.
6. Central issue (Business Standard, July 28)
This refers to ‘A spat swallows RBI’s autonomy’ (July27). The discussion over the Ulip Ordinance and the letter written by the RBI governor pointing out the likely unwelcome consequences in case the ordinance is converted into a formal piece of legislation ignores the main point.
The main issue is the refusal on the part of the political authority, which has been in a position to control and manipulate the tripod of legislature, executive and the judiciary, to recognize the emergence of money as the fourth constituent of the power in the emerging world and the importance that institutions in the financial sector are gaining day by day.
The rupee is much more than a mere symbol a symbol and any dilution in the autonomy of RBI may cause irreparable damage to the Indian economy at this stage of development.
RBI has so far shown the maturity to fall in line with North Block and has expressed its serious reservations on policy perceptions only in meetings with officials of the finance ministry or the finance minister himself. But if this mature behavior is mistaken for weakness and the institution is stifled using legislative supremacy, making performance of its mandated functions difficult or redundant, the resultant disharmony in relationships may not augur well for the economic growth of the country. The need of the hour is to have a central bank with a strong balance sheet and a mature head capable of absorbing shocks on the economy from a fiscal policy suffering from external influences and internal pressure unavoidable in coalition politics.
7. FSDC Panel*(Economic Times, July 20)
This refers to the report ‘Irda backs FM panel on regulatory tiffs’ (ET, July 19)). It has these days become a fashion for heads of regulatory bodies and spokespersons of government including ministers to air their personal and private views in public. Media happily carry stories whichever they find spicier. In the process, application of mind by concerned bodies and ministries on issues of vital concern to the nation becomes a routine formality.
The issues which should normally be resolved through mutual discussion, and where necessary, domestic scrutiny of extant legal position and mediation by the controlling ministry/ministries at Centre get dragged to courts or public debate. This leads to persons responsible for resolving issues taking rigid positions or more often, a casual approach, depending on the views aired in public by their masters or colleagues in their ‘constituency’ pushing otherwise easy solutions further away.
The current controversy on FSDC Panel (which was not the right option in the first place) and effort to entrust the responsibility of solving disputes between regulatory bodies to a panel headed by the FM, where one need not doubt whose voice will prevail, do not augur well for the smooth relationship between Centre and RBI which is essential for the country, at this stage of economic growth and development.
Leaving things to courts also is no solution. In a number of cases in higher courts where government, regulatory bodies, quasi government organizations or corporates are parties on either side, where individuals are not accountable for expenditure, one witnesses huge expenditure and long delays, even in filing replies, adding naturally to the delay in final verdict. In all cases, finally the cost is born by the tax payer. Apart from cost aspects, unless more and more alternate routes are tried out for settling disputes, the already over burdened legal system may come to a grinding halt.
8. Leave RBI alone (Economic Times, August 3)
This refers to the article ‘Confused signals’ (ET, August 2). Although it is evident that the Monetary Policy has been caged to fall inline with the expectations of a Finance Ministry which invokes the Government’s ownership rights and legislative supremacy over regulatory organizations including RBI more often than necessary, it is difficult to defend the action of the RBI official in sharing with media his personal perceptions about the monetary policy statement made by RBI governor.
This is so because our expectations about the standards RBI should maintain are much higher than those we expect from the politicians who head ministries or the bureaucrats or ex-bureaucrats who advise those ministers on policy issues. This makes it imperative to protect the RBI and other regulatory arms of government from the vagaries of soft policy options exercised by compulsions of coalition politics.
9. Banking on infrastructure (Business Standard, August 13)
The discussion paper on new bank licenses released by the Reserve Ban of India (RBI) may bring to the fore the problems and challenges faced by financial sector. The issues raised in the discussion paper go much beyond the government’s intention to give a greater role for private sector in banking, and seem to be aimed at promoting financial inclusion and reduce government’s financial commitments for running banks.
As a regulatory body responsible for the health of the financial sector, RBI’s concerns go beyond the net worth of the promoter or his professional capability to run a bank. RBI’s intention to regularize and ratify the parallel banks which can conform to regulatory norms and rehabilitate some regional rural banks, as also its desire to keep the business of banking trustworthy is evident from the issues raised in the discussion paper.
What is required is a total view of banking needs and institutional infrastructure for meeting those before implementing short term solutions. If this is not done the banking system will continue to ignore small borrowers.
10. Functional Autonomy (Free Press journal, August 17)
In the piece ‘RBI Autonomy is under threat’ (FPJ,August 16), Nantoo Banerjee has observed that on paper, the Reserve Bank Governor enjoys autonomy of a constitutional authority and in practice, he is expected to work like those ‘favored few’. The reasons for this unenviable position are not far to seek. If autonomy has to be functional, the people in position should feel the freedom first.
We all talk highly about the virtues of private sector, but do we really allow public sector imbibe its good features? This is a rarity. How else can one explain the difference in the selection procedures of successors for Ratan Tata and N R Narayana Murthy and those for finding CEOs and top managers of public sector organizations? Another point is that
it will be next to impossible to attract talent to these government positions, given the meager remuneration offered. It is time to revise this factoring in market realities. The present practice has resulted in compromises on quality and the nation can ill-afford this state of affairs.
11. Tangled diplomacy* (Free Press journal, August 20)
This refers to the report ‘Chilling truth about US concern’ (FPJ, August 19). Generally, it is a common practice for the rich and the powerful to link unrelated issues for protecting their selfish interests. Also, irrespective of the rationale, they get support in arguing their case from similarly placed people wherever they are. It is in this context, recognizing the tactics adopted by the British those days, Gandhiji advocated self-reliance. In the present day world inter-dependence is unavoidable. Still, we can avoid accepting a one million dollar ‘aid’ or ten million dollar ‘soft loan’ which comes with ‘conditionalities’ totally unrelated to the purpose of aid or loan. Similarly, when another country makes unreasonable demands or speaks a language of threat, instead of brushing them aside, it is better to be transparent and take the nation into confidence. Even the rich and the powerful do not want adverse publicity. A measure of whatever improvements happened in the ‘Nuclear Deal’ could be attributed to the pressure from the left to make public the hidden ‘conditions’. If negotiation for Bhopal compensation is getting affected by arm-twisting from any quarters at this late stage, it too should be made public. The international community will be on your side. Hopefully, the days of firing your maid’s son who has a job at your workplace or factory when the maid asks for a reasonable rise in Diwali bonus are gone.
12. Dying middle class*(Business line, September 1)
This refers to the article ‘Myth called Indian middle class’ (Business Line, August 30). It was H G Wells who talked about middle class being pushed down or pulled up to create a world which will have only two classes of people, one living above the ground in luxury and the other living underground. More recently, the Railways had demonstrated the intention of getting rid of middle class by offering only first and third class accommodation. Still, the middle class survive in the dreams of the poor (glorified as BPL category), as they hope one day to cross over the poverty line and become part of the middle class and the wishes of the rich who need a healthy middle class to carry out their orders.
The definition of middle class, ADB suggesting daily per capita consumption at $2 to $20, is most vague. Such an approach suits bodies engaged in marketing goods and services and supporting governments in policy formulation. It helps to interpret poverty levels in one way when they want to sell an idea or a product and quite differently when the purpose is comparison among countries for extending benefits or concessions.
Mere growth of the middle class is not a comfort unless there is an upward movement in the percentage of population which is able to access the minimum comforts of life like a house to live, facilities to educate children, food security, healthcare and arrangements for looking after the aged and physically/mentally challenged members of the family.
The Government should consider creation of a fund for poverty alleviation by additionally taxing those who need extra security and those whose wealth grows faster than the rate at which GDP grows. These two categories of people have a vested interest in keeping the majority of people poor and craving even for starvation wages.
13. Osama’s outsourcing worries (Free Press Journal, September 14)
This refers to the report ‘Outsourcing turns Obama poll mantra’ (FPJ, September 10). Head of a nation making a plea for creating/preserving job opportunities within his country, in the normal course, should not be a cause for worry or off the cuff responses outside the country. Without waiting to learn again and again from first principles, as is happening elsewhere, we should take it as an opportunity to refresh our lessons of self-reliance taught by Mahatma Gandhi.
We, instead of giving priority to developing core sectors of the economy like agriculture and processing/manufacturing industries, are trying to extend our survival in a dream world, finding temporary happiness in earning more, more money enabling to improve our lifestyle. We are slowly opting to be permanent ‘service providers’ to the outside world. Even the initial enthusiasm with which we established HAL, coach factories, ship-building facilities and steel processing units, to mention a few, is getting dampened and we are looking out for expertise and technology which multinational business interests are to bring as a consequence of opening up and globalization.
At this late hour, we should introspect and see how best we can avoid the problems Obama is facing now. Realignment of priorities in education, agriculture, industry and services will be necessary if we have to survive with dignity in the changing scenario. The other option would be to ship water from Alaska to Mumbai and ‘boat’ our unemployed youth to other countries as ‘service providers’, which doesn’t augur well for nation’s future...
14. PSB pay structure (Business Standard, September 9)
This refers to the report ‘RBI bats for better pay for govt bank employees’ (BS, September 8). The RBI Governor’s plea for a level playing field for PSU banks with enough freedom to hire executives and employees on competitive terms has to be seen in a wider perspective. Recently, even RBI had to opt for recruiting short term (for 3 years) executive interns on contract basis. One wishes, Dr Subbarao’s present suggestion will make government think in terms of a policy for all public sector organizations encouraging them to evolve a self-regulated mechanism to evolve guidelines for designing remuneration packages for all levels of employees based on paying capacity, need for skills/talent and internal and external relativity within industry and across private and public sectors.
15. Right to privacy *(Free Press journal, September 28)
This refers to the report ‘Bank account holders under terror scanner’ (FPJ, September 27). If the FM has really made the statement that ‘intrusion into privacy of bank depositors is not just acceptable as it will discredit the banking system and the people will start using other modes for securing their funds and carry on transactions’, in the given context, it is really unfortunate. First, right to life should prevail over right to privacy.
Tracking terrorism is primarily to secure life and property of law-abiding citizens. Second, existing provisions of law enable banks to reveal details of accounts, where required under law. Obviously, FM was acting in haste. , as the reference in the report is to a handwritten note.
If the National Intelligence Grid (NatGrid) had approached RBI in the matter, in all probability, the central bank would have explained an acceptable modus operandi for accessing real time status of suspected accounts. Conceding the present advanced stage of technological development, one is not convinced about the operational success of a parallel database of all bank accounts for tracking misuse of funds. It can turn out to be a futile bottom-up exercise. A better option could be asking banks to have an online monitoring system for high value transactions, which will inter alia feed information to NatGrid on call, in times of need. The proposed meeting convened by RBI this week will throw more light on modalities.
16. Base interest rates*(Business Line, September 29)
This refers to the article ‘New initiatives in monetary policy operations’ (Business Line, September 24). Well-argued policy options coming from a seasoned economist should be a guiding light for the RBI in these days, when those responsible to support the central bank, unknowingly weakens its position by inadvertent loud thinking.
The Indian money market has gown much larger in size than its part which gets affected by the policy rates of RBI or the sale or purchase of G-Secs. The effectiveness of monetary policy initiatives in managing inflation will, therefore, be limited, if these are not supported and strengthened by appropriate changes in focus in fiscal policy.
As the components of sources and uses of government’s resources change, there will be changes in the government’s borrowing pattern, which, in turn, will have a direct bearing on availability of government securities in the market. This will impact the effectiveness of changes in repo rate.
As all banks are not equally professional in fund management, time may not be opportune for scrapping reverse repo. The better option would be to legalize remunerating excess CRR, if that is necessary, to remove the inconsistency in paying interest on funds parked by reverse repo when excess CRR is not eligible for interest.
17. We’re All Going to Be Rich (Reader’s Digest, October, 2010)
This refers to the captioned article (RD, August 2010). The thought of a world without money has fascinated me since my childhood days. Of course the reason for hating money during childhood was that I didn’t have money and my friends and neighbors enjoyed making me jealous by showing off the money power they possessed before me and others in my position.
Now, I have completed a somewhat successful career in a bank, have a bank account and have last year gained the status of a senior citizen. Still, I feel, the fellow who invented money and his followers who made it currency have done more harm than that unlucky wise man who invented atom bomb. Of course, now the reasons for my hatred towards money are more mature than jealousy.
For a moment, imagine, as Austin Hill proposes man gets out of the clutches of money, or there is no money in the world. All symbols from $ to the one recently figured out for Rupee vanishes, everything else remaining the same. Yes, science and technology, all results of research so far, literature, agriculture, industry, art and whatever you can imagine remain and continue to perform and help the world to move forward, but money is conspicuous by its absence! This will bring drastic changes.
It will take considerable time to rehabilitate people like those working in the financial sector, as the nature of their jobs will change. They will have to re-skill themselves to manage a world entirely dependent on barter system which will result in revolutionary changes in the power-balance internationally.
So, let Hill continue with his uphill task with Akoha and world adjust itself to a money-less environment where peace prosperity and happiness will not be dependent on bank balances but on the value addition to life and environment each one makes.
Aa No Bhadrah Kratavo Yantu Viswatah
(Let noble thoughts come from al sides)
18. Give and take (Dignity Dialogue, October 2010)
Sakuntala Narasimhan’s take on gracefully accepting what is offered with love and affection by near and dear (Learn to take, DD, June, 2010) should be an eye opener for all those who deny gifts or accept them with a sense of guilt. I consider myself the most gifted person. Because, for me, from the first breath I inhaled to whatever I will be leaving behind when the time comes, are all gifts in one form or the other.
Right from my early school days, I have tasted the joy of receiving gifts. My monthly school fee of 12 Annas (equivalent of present 75 paise) was paid by different people in different months depending on whom my father who was a temple pujari could convince that my attending school was important. I was moved by Sudha Moorthy’s story which was published by Readers Digest a few years back which spoke of her daughter coming home and requesting her to help a class mate to buy books. I remembered the instance of my neighbor friend who was a year ahead of me pleading with his mother to give his old books to me free when used books had a 50 per cent resale value.
Moving to more recent times, I find people of my generation lacking the gracefulness both in giving and accepting. Sakuntala Narasimhan has vividly brought out the pleasure the giver gets if a gift is accepted with happiness. This applies equally to all kinds of help, be it just an act of kindness in showing the way, helping out a physically/mentally challenged when the person needs support or big donations to organizations involved in charity.
It may not be out of context to remember a couple of principles about a gift someone mentioned to me in a different context. These are:
a) The giver should forget about the gift the moment he parts with it and should never follow up with periodical audit of how the gift is being used.
b) The one who receives a gift should always remember that his right on the gift is that of a trustee.
In recent months Dignity Dialogue has changed its appearance and to a certain extent the format and content to fall in line with other lifestyle magazines of modern times for the better, but without sacrificing its original purpose and vision. Thank you, Team DD!
19. Firm up farming (Business Standard, October 7)
This refers to the report ‘Danger signals crop up’ (BS, October 5). During the last two decades, Agriculture as a sector and food grains cultivation particularly lost the national priority they enjoyed during the pre-reforms days, marked by stagnant food grains production and dwindling share of crops in agricultural GDP. The As a result of this neglect, has resulted in under-utilization of land available for cultivation is being underutilized, the country not taking advantage of modern agricultural practices and inadequate and storage and processing facilities for the agricultural produce are inadequate. While finding comfort in the positive impact of a favorable monsoon, one has to also remember the loss of food grains mainly on account of insufficient storage and processing facilities as revealed by the debate that followed the Supreme Court’s observations about rotting grains.
A change is overdue in our in approach to cropping patterns, agricultural practices, and storage and processing facilities that factoring in the changes in food habits like the urban bias towards processed food, non-availability of traditional food articles in villages and the need to ensure minimum nutritional needs to the under-privileged is overdue. Only a small section of the urban population can afford the prices of imported processed food and bottled drinking water. The well-being of the remaining one billion people are dependent on the food and water available locally and therefore government should give priority to agriculture and water management to prevent catastrophic situations in food and water availability in the country.
20. Schemes and monuments (Free Press Journal, October 10)
This refers to the report ‘No new Indira, Rajiv Schemes: PM’s fiat’ (FPJ, October 9). It is a right decision not to associate the names of successful leaders with programmes pre-destined for failure. Simultaneous efforts must be made to avoid huge waste of precious resources for construction of huge monuments in the names of past and present leaders, for getting publicity at taxpayer’s cost or even in the name of promoting tourism. Such resources should be diverted for productive developmental purposes and it would be in order to associate the names of leaders whose efforts made the project/development possible on successful completion of projects/programmes.
Incidentally, the concluding sentence of the Cabinet Secretary’s letter could undergo some change in these post-reform to cut short the traditional template ‘I have, therefore, been directed to convey that in the light of what is stated above,….’
21. Legalizing corruption! (Free Press Journal, October 14)
This refers to the report ‘Nothing moves without money: laments SC’ (FPJ, October 11). Sometime back, a national newspaper had, side by side, printed views for and views against corruption. One view was that corruption is the oil that lubricates the wheels of progress. Looking around, one is tempted to agree. The SC, though sarcastically, has suggested legalizing corruption and fixing specific amounts for every case. Perhaps, our private sector has implemented this suggestion long back. Service charges levied by the banks are one example that comes to mind. Now there are banks which charge separately for opening of accounts, issue of cheque books, certifying that an account holder is maintaining an account with the bank, for not maintaining minimum balances in deposit accounts and so on. Government could think of similar service charges for every transaction in government offices and passing on a pre-decided percentage of the collection to their employees. This would be in consonance with the spirit of the SC observation concerning legalizing corruption and helping out the poor government officials who are affected by inflation.
22. Wages of neglect (Economic Times, October 15)
This refers to the report ‘Hunger remains despite high growth: US study’ (ET, October 12.). The mess we have made of our agricultural and small industries sector with the emergence of service industries as a result of opening up of the economy is there for all to see. Expert studies may put together facts in a convincing way. But much deep research is not needed to say that the neglect our farm sector suffered due to inadequate attention paid to introduction of modern farming, storage, transportation and processing practices has kept the sector almost stagnant, since 1990’s.
The blame should be shared by the political leadership and the finance sector which jumped to the opportunity to make quick returns from IT and similar other opportunities at the cost of traditional sectors. Both went after the creamy layer of the economy which temporarily paid high dividends. Even our education system has now a pro-industry bias against agriculture and rural sectors and skill development to support traditional activities on which majority of the people are dependent.
Comparison with China (most populous country which has a totally different tradition in management of development) or small neighboring countries with comparatively small population to look after. Our problems are country-specific and solutions cannot be copied from anywhere else.
23. Faster changes (The Hindu Business Line, October 18)
This refers to the article ‘Change is easier than we think’ (Business Line, October 14). The article qualifies to be a preamble for evolving a new policy framework for our development path.
The rescue operations at the Chile mines and the smooth and successful conduct of CWG, in different ways, demonstrate that focused efforts bear fruits, irrespective of the negative thinking a section of the people always entertain.
When 100 things go right, thanks to the devotion to duty and commitment to causes of thousands of people, we magnify failures such as a stray dog trespassing the fences which are not there, or collapse of a fly-over under construction.
These should definitely make news, but the purpose should be to get things corrected and not to bring down the self-esteem of a nation.
If the authorities concerned act upon the suggestions made by Ashima Goyal on punctuality, timely decision-making, coordination among multiple government departments (can we not think of merging some of them doing parallel functions?), level jumping when officials at a particular level are unable to take decisions within a reasonable time, simplification of procedures and handling corruption as a reality (Supreme Court this week lamented that nothing moves in government without money!), changes are bound to come faster than we think.
While on the subject of timeliness, one would like to emphasize the need to decide cases quickly and equitably, (whether they are on the tables of ‘Babus’ or in courts) say within three months where the file is with government and within six months where the case is with a court.
This is especially warranted when the cases involve the sick and the physically/mentally challenged, senior citizens and the poor who cannot pursue their cases for long periods as time and resources are not on their side.
24. The business of NGOs (Business Standard, October 18)
This refers to the news report ‘RBI forms panel to look into MFIs’ activities’ (BS, October 16). This is a welcome move. I would like to suggest that RBI may add the lending activities of NGOs which receive bank credit or external funding also in the terms of reference of the same panel as these organizations also are facing allegations similar to those against a section of non-bank lenders now commonly classified as MFIs.
Non-Governmental Organizations (NGOs) are present in almost every field one can imagine, from spirituality to healthcare and domestic help and Information Technology to charity. Some handle millions of dollars and at the other end most of them carry on with traditional cooperative spirit depending on contribution from members for day to day activities and on donations for maintaining their no profit no loss position. In the process of their evolution, unintentionally some of them have displaced several people from their traditional vocations, vocations they were carrying on for livelihood. Unintentionally, because the process has been gradual and was not as planned or conspicuous as the throwing out of retail business community by shopping complexes in cities.
What were ignored were the existing infrastructure, manpower and practical wisdom abundant in the local people. These NGOs could gloss over the fact that ultimately costs were to be shared by the beneficiaries whether as interest on loans or as erosion of capital or in the form of subsidy from government. Similar situations have arisen in the fields like education and healthcare where again the existing network would have performed wonderfully well with much less support than that the NGOs received, had there been an effort to understand their problems and to upskill their manpower and compensate their normal business losses by allowing cross-subsidizing of costs or by government accepting social responsibility and funding unanticipated losses.
Somewhere, one feels, the glorification of donations (especially if they come in dollars from outside the country) and the aversion to subsidy even where it meant deferred prices or wages are also responsible for the failure of traditional institutions and business including agriculture.
25. Yoga controversy (Free Press Journal, October 22)
This refers to the report ‘Is Yoga incompatible with Christianity?’ (FPJ, October19). Yoga is not incompatible with any religion or religious practices or broadly stated, with theism or atheism. Yogic teachings and practices are much more ancient than all religions and religious practices in their present form. So, the chances are, religious teachings and practices can be inconsistent with the concept of Yoga and not the other way round. It is unfortunate that a pastor’s personal views, which he has every right to hold and correct at his option, when he is better informed, are sensationalized by media. Generalizing statements made by an individual based on wrong information inadvertently carried by stray practitioners of some ‘make believe Yoga’ marketed in some part of the world serves only to mislead genuine practitioners of Yoga.
As any authentic Yoga practitioner will know and tell you, the yogic science has no demonic roots and the whole concept hovers around integrated practices to ensure the physical and spiritual well-being of the practitioner through regular exercises for body and mind. If some religions integrated the yogic practices into their teachings, it is accidental and shows the concern of those who made it possible, in the well-being of their followers. Probably, like politics, Yoga is also getting some blame because of a miniscule percentage of practitioners practicing it with unscrupulous motives.
(* Portion in italics omitted by editor!)
26. Real wage policy ( Business Standard on November 12, 2010)
This refers to the report “Process begins for statutory central minimum wage’’ (November10). It is a welcome move to have a realistic prescribed (enforceable) minimum wage linked to cost of living for ensuring uniform norms for payments for work done on schemes under the National Rural Employment Guarantee Act (NREGA).
But this addresses just one aspect of the anomalies in hiring labour. Other factors include built-in social disparities like uneven development, varying literacy and poverty levels and several geographical and political factors. Enlightened employers in the government, public sector, media and certain groups in the industry factor in the employees’ minimum needs for maintaining a lifestyle commensurate with the jobs they do in the remuneration package and provide social security benefits like pension, provident fund and medical facilities. This, unfortunately, covers a very small portion of the country’s workforce.
It is evident from the pattern of asset-formation that a majority of workers in lucrative sectors like services, construction, mining, IT and processing are paid starvation wages. While everything else can be safely left to the mercy of the market forces, government has a social responsibility to protect employees’ interests of the employees by providing a guidance on minimum wages for unskilled and skilled workers in different sectors, factoring in workers’ minimum needs and employers’ paying capacities. The need of the hour is a national policy on prices, wages and income that looks beyond adverse inflation figures, which are eruptive symptoms of an ailing economy.
This refers to the report ‘BSY dares BJP to sack him’ (FPJ, November 22). Those who are in charge of government, whether at Centre or in states, are busy defending themselves or their colleagues against one corruption charge or the other most of the time. The proceedings of legislatures (when they do happen), are also full of charges and counter-charges relating to allegations against ministers and politicians. This gives an impression that after coalition politics took over the reins of governance in India, the Common Minimum Programme (CMP) is only about making more money while in power, remaining in power. to protect the money made and then being subservient to outside money power for continuing eternally in power. Corrupt individuals, who are exposed, threaten that they would come out with evidence of corruption against those who try to expose them. Perhaps government could think of some legislation by which a certain percentage of wealth accumulated beyond certain limits by individuals and families during the period they or their family-members hold positions in government or political parties would periodically be appropriated to government’s funds. Prime Minister could persuade his coalition partners to accept this idea and include the same in the next CMP of UPA! This would, considering the present growth rate of individual wealth among politicians and their families, may reduce the budget deficits substantially.
DISSECTING CORRUPTION(Sent to Business Standard on November 19)
This refers to the reports ‘SC asks for affidavit from PM’ and ‘SC quashes action against Pepsi over pesticide content’ and Ratan Tata’s letter ‘On fairness’ (November 19).
Going by dictionary meanings, the word corruption is associated with words like bribe, cheating, evil, badness, decayed, stinking, decayed, false, defilement, wickedness, violation, defective, spoilt, faulty, wrong, malignant, offensive, immoral, unchaste, vile and fallen (the list can go on). Going by this, one comes to a position that anyone or any institution/organization having something attributable to any formations out of any of these words can be corrupt. Luckily not so. It is generally accepted that what is legal is not corrupt. Then, like morality, the perception of corruption varies from individual to individual, society to society and country to country. Meaning, what is construed as legal in one context need not be so in another context.
No wonder, eminent statesmen are getting dragged into controversies related to corruption, day in and day out, despite their efforts to maintain high moral and ethical standards in their own lives. Reputed companies like Pepsi are finding themselves running for shelter under inadequacies in legislations. In the deluge of corruption that the world is witnessing today, no Krishna will be able to float on a leaf unaffected by the deluge. The value system which is in disrepair globally needs a shock treatment. The initiative can come from India, if the nation decides to make every embarrassment an opportunity to correct and move forward. This can be done only by handling individual corruption cases on the basis of the facts of the case and not with reference to the impact such action will have on coalition government’s equilibrium. Companies like Pepsi should try to convince people that their finished products are safe for consumption. This is different from winning cases in courts. In an earlier case, the company had argued that ‘use before’ date is different from ‘expiry’ date! For the rich and the powerful, there will always be legal remedies, as, historically, the laws are made and interpreted in their favour.
Lessons in learning(Business Standard, November 22)
This refers to the report ‘Sibal wants new law to boost higher secondary education’ (BS, November 20). Generally, we do not hear much about an ‘Educational Plan’ integrating the needs of various sectors and segments of economy and society except in academic seminars or in meetings on special occasions like convocation. The HRD Minister’s concerns about higher secondary education are well-founded and it will be a boon to next generation, if his dreams about improved Gross Enrolment Ratio (GER) at college level by 2020 come true. Simultaneously, the lopsided priorities of the government in the field of education need immediate attention. The result of leaving the field to market forces is evident in the form of non-availability of talent in various specialized areas including in the faculty positions, where talent combined with dedication and competence to deliver is most needed. The flow of people who can perform better to for-profit organizations has adversely impacted the capacity to deliver results which was the hall mark of our country’s public service in general and educational institutions in particular.
Irrespective of their educational background till graduation, aspiring youth with some analytical ability and ambition today try and transform themselves as managers, IT specialists or any such professionals leaving areas like civil service, teaching and government/public organizations to remain satisfied with the rejected seconds in the employment market. The position can be reversed only by having a National Education Plan which takes care of the needs of every sector of the economy. For this to be effective one will have to accept that market forces will not accept self-regulation and in the national interest, policy guidance has to come from government, to the extent necessary in public interest. Before going ahead with the proposed legislation for making right to education meaningful by extending it to secondary level, one wishes government takes a comprehensive look at the National Education Plan by factoring in, among other things, the following aspects:
i) The need for special skills in areas like IT
ii) Waste of developed skills, like in finance and IT sectors by recruitment of engineers for all types of work including those which can be performed by less qualified people. This has an impact also on the employment opportunities for less privileged class.
iii) Skill development and career-orientation, say from Standard VIII, with the potential employment opportunities and aptitudes in view.
iv) Unemployment level in various age/education groups in different regions
v) Migration pattern of educated unemployed within the country and abroad.
Making money while in power!(Free Press Journal, November 26) Common minimum programme*
This refers to the report ‘BSY dares BJP to sack him’ (FPJ, November 22). Those who are in charge of government, whether at Centre or in states, are busy defending themselves or their colleagues against one corruption charge or the other most of the time. The proceedings of legislatures (when they do happen), are also full of charges and counter-charges relating to allegations against ministers and politicians. This gives an impression that after coalition politics took over the reins of governance in India, the Common Minimum Programme (CMP) is only about making more money while in power, remaining in power. to protect the money made and then being subservient to outside money power for continuing eternally in power. Corrupt individuals, who are exposed, threaten that they would come out with evidence of corruption against those who try to expose them. Perhaps government could think of some legislation by which a certain percentage of wealth accumulated beyond certain limits by individuals and families during the period they or their family-members hold positions in government or political parties would periodically be appropriated to government’s funds. Prime Minister could persuade his coalition partners to accept this idea and include the same in the next CMP of UPA! This would, considering the present growth rate of individual wealth among politicians and their families, may reduce the budget deficits substantially.
M G Warrier
2005/1-D, DREAMS COMPLEX
LBS Marg
BHANDUP (WEST)
Mumbai-400078
Mobile: 09349319479
November 24, 2010
The Editor
The Economic Times
Letters/CHAT ROOM
Back to basics
This refers to the article ‘Getting it right on microfinance’ (ET, November 24). In retrospect, post-reform, chasing out village money lenders and allowing MFIs and new generation banks to suck out the creamy layer of lending opportunities in rural and semi-urban areas have done more harm than good to the system. We should dispassionately examine whether we are under-utilizing the existing financial infrastructure (commercial bank branches, cooperatives, Regional Rural Banks ) which still exist in the formal sector.
Though the suggestion is coming from Dr Reddy, it may be too much to expect from state governments to regulate and oversee MFIs which have grown in size and expanded their area of operation to several states. The sources of funds and activities of most of the MFIs are such that they can be effectively monitored only by RBI or NABARD who have a country-wide presence and adequate supervisory skills.
The main factors that contribute to the poor repaying capacity of those who avail of microfinance are the inadequacies in our pricing and wage policies. Ridiculously low wage levels (Rs 100 per day under National Rural Employment Guarantee Scheme, which becomes a bench-mark even for payment of wages to construction labourers who work for multi-crore projects) and absence of developed rural markets for sale of local products at prevailing market prices support an unacceptably uneven asset-formation pattern. Unless such basic issues are addressed, financial inclusion will remain a subject matter for speeches targeting elite audience.
Time is perhaps opportune for a review of the entire rural credit architecture for an overhaul. The changes necessary may include:
· Reviving the role of Rural Financial Institutions( RFIs) including rural and semi-urban branches of commercial banks, cooperatives and Regional Rural Banks which have strayed away from their mandated responsibilities,
· Identifying costs for financial intermediaries that cannot be factored into interest costs and specifying the agency which should meet them, if the activity has to remain bankable,
· Without going back to the abandoned ‘regulated interest rates regime’, working out and specifying broad bands within which ultimate lending rates should remain when bank funds are sourced for the purpose and
· Reducing the number of bypass routes allowed for priority sector lending to the minimum.
Back to basics( Economic Times, November 27)
This refers to the article ‘Getting it right on microfinance’ (ET, November 24). In retrospect, post-reform, chasing out village money lenders and allowing MFIs and new generation banks to suck out the creamy layer of lending opportunities in rural and semi-urban areas have done more harm than good to the system. We should dispassionately examine whether we are under-utilizing the existing financial infrastructure (commercial bank branches, cooperatives, Regional Rural Banks ) which still exist in the formal sector.
Though the suggestion is coming from Dr Reddy, it may be too much to expect from state governments to regulate and oversee MFIs which have grown in size and expanded their area of operation to several states. The sources of funds and activities of most of the MFIs are such that they can be effectively monitored only by RBI or NABARD who have a country-wide presence and adequate supervisory skills.
The main factors that contribute to the poor repaying capacity of those who avail of microfinance are the inadequacies in our pricing and wage policies. Ridiculously low wage levels (Rs 100 per day under National Rural Employment Guarantee Scheme, which becomes a bench-mark even for payment of wages to construction labourers who work for multi-crore projects) and absence of developed rural markets for sale of local products at prevailing market prices support an unacceptably uneven asset-formation pattern. Unless such basic issues are addressed, financial inclusion will remain a subject matter for speeches targeting elite audience.
Time is perhaps opportune for a review of the entire rural credit architecture for an overhaul. The changes necessary may include:
· Reviving the role of Rural Financial Institutions( RFIs) including rural and semi-urban branches of commercial banks, cooperatives and Regional Rural Banks which have strayed away from their mandated responsibilities,
· Identifying costs for financial intermediaries that cannot be factored into interest costs and specifying the agency which should meet them, if the activity has to remain bankable,
· Without going back to the abandoned ‘regulated interest rates regime’, working out and specifying broad bands within which ultimate lending rates should remain when bank funds are sourced for the purpose and
· Reducing the number of bypass routes allowed for priority sector lending to the minimum.
2005/1-D, DREAMS COMPLEX
LBS Marg
BHANDUP (WEST)
Mumbai-400078
(Mobile: 09349319479)
A selection from my letters published in dailies
1. Bhopal verdict (Hindu, June 9)
Coming more than 25 years after the Bhopal tragedy, the trial court judgment delivered on June 7 will remain alive for a long time for several reasons. One, for the constraints faced by trial courts in even deciding the charges for which an accused is to be tried. Two, the delay in giving the judgment. God knows, when the legal process will, finally be over in this case. Three, if one is rich and powerful, it is not difficult to avoid getting charge-sheeted. Four, when death is in hundreds and thousands, no one gets hooked. Five, when the matter is ‘international’, less people bother about what happens to compensation received for deaths and injuries.
One wishes, industrial safety norms and legal reforms get some attention from the authorities concerned, at least in the light of such experiences.
2. Interest rates (Business Line, June 21)
The article ‘Freeing up lending rates’ (BL, June 17) traced the evolution of lending rates from the strictly regulated interest rate regime of pre-reform days to the present day and after assessing the present situation concluded that there is a need for further research to better understand the relationship between credit and interest rate cycles and its implications for sustainable growth.
While there is perceptible sympathy towards small borrowers and constant emphasis on financial inclusion, the bias towards bigger borrowers and industries with bulk financial needs offset the policy measures initiated for ensuring timely, adequate and cost-effective credit flow to farmers and rural borrowers.
Even where the shift from informal to formal credit delivery system is evident through interventions by NGOs and SHGs, cost of credit to small borrowers (say with credit needs upto Rs 2, 00,000) has not come down in comparison to those enjoying credit limits or access to bulk funds in the form of corporate deposits or equity contributed by public or by government out of public funds.
The Centre or the Reserve Bank of India could perhaps consider a study of this aspect to understand the real benefits reaped by the three sub-sectors, viz. Agriculture, SSI and Services forming part of the traditional priority sector, vis a vis the much lower cost of funds for financial institutions and cost of credit for big industries and other big users of credit including government.
So long as government and financial institutions enjoy the benefit of access to captive public deposits in various forms, they have a social responsibility to ensure credit flow at affordable costs to the sectors which take care of the basic needs of the society.
3. Financial inclusion (Business Line, July 6)
This refers to the article ‘Challenge of financial inclusion’ by Duvvuri Subbarao (Business Line, July 3).
The recognition of the magnitude and dimensions of the inadequacies in credit flow to weaker sections and sectors with low individual credit needs by RBI Governor is comforting. Perhaps, rural credit is the most talked about and studied subject in our country since late 1950’s and from the establishment of SBI to the current efforts to develop MFIs there has been continuous initiatives to support rural development.
Measures like reviving cooperatives, Lead Bank Scheme which significantly improved the outreach of commercial banks in rural and semi-urban areas and coordinated supports from different agencies involved in rural development, establishment of Regional Rural Banks, NABARD, SIDBI and recent support to encourage MFIs to function more efficiently through increased intermediation have all contributed to improved credit flow to small and medium borrowers in rural and semi-urban areas.
Although UID project, Financial Inclusion Plans and business correspondent (BC) model will all help to improve linkages at the ground level, one cannot think of a substitute for the institutions referred to above, viz. Cooperatives, RRBs, rural and semi-urban branches of commercial banks, NABARD and SIDBI revisiting and focusing on their original mandates, if the desired results are to show up in financial inclusion.
4. Executive interns in RBI (Business Line, July 21)*
This refers to the report ‘RBI to hire 200 executive interns’ (BL, July 20). Although on the face of it, the proposal would look a normal HR initiative at infusing young blood with expertise and enthusiasm at a lower cost, no in-depth analysis may be needed to find that this is a short-term remedy being tried out for a long term problem.
Sooner than later, the RBI, government and public sector organizations will have to wake up to the reality that their recruitment, training, placement and compensation strategies need thorough overhaul and this they have to do taking their existing employees into confidence.
RBI is one institution that has learnt from first principles the negatives of having several categories of employees doing identical or similar jobs, but with varying opportunities in career progression. That recognition had resulted in introduction of combined seniority among all officers of RBI with separate cadres only for certain specialized services in 1972. The proposed 200 interns will have to work in somewhat hostile environment as they will be drawing higher emoluments than those with whom they work with an uncertain future staring at them. The position is not similar to their friends in the private sector where all are similarly placed with opportunity to share market opportunities for job changes and half-yearly or annual review of remuneration including incentives based on performance.
A long-term solution may have to be found for the HR-related problems, including inability to hire experts at market related compensation (this is applicable up to the position of CEO in government and public sector), skills becoming obsolete in short periods, employees’ reluctance to change and trade unionism emanating from job security. There may not be a fit for all remedy, as the issues are as old as the institutions.
The Government and public sector organizations may have to consider how best the ‘Cost to Company’(C to C) principles can be integrated into their existing recruitment, training, placement and career progression policies. This may involve the following:
Taking the existing employees into confidence with an assurance that the changes will only improve the working results of the organization and they will get opportunity to share the benefits and new job opportunities and so long as they are prepared to learn new things/upgrade their skills the infusion of ‘experts’ will not eat into their career progression opportunities.
Inter-mobility of executives in all cadres among comparable organizations. For e.g. a Banking/Financial Sector Service could be evolved for institutions including those in the private sector and regulatory bodies in the financial sector.
A transparent guidance for remuneration package based on paying capacity/need for skills for different sectors. Proposals like the present one by RBI of shifting to C to C to reduce costs will give wrong and unhealthy signals.
5. No work, no pay! (Free Press Journal, July 27)
This refers to your editorial “Will you behave like grown-ups?” (FPJ, July 26). Our legislators, whether they be Rajya Sabha, Lok Sabha or the Municipal Council in some remote area, like lazy school boys on a rainy day, prefer the easy option of taking a holiday at the least provocation. Main reason for this is that they want to avoid home work. Sitting through a day’s parliament session, remain alert and actively participate in the deliberations need a lot of preparation, learning and coordinating with several ministries and people back home in the respective constituencies. All of it can be avoided if during the discussion of some sensitive issue someone makes a great deal of noise, and force the helpless orator back on his chair and have the day’s session adjourned.
Urgent things like passing a Bill or ratifying some actions will be taken care of by ‘babus’ under some routine procedures. Meanwhile, one gets paid, gets the necessary publicity (thanks to an obliging media) and can go to the press and say whatever one wants. The message that comes out is that majority of the members of both ruling party and opposition are happy about the present arrangement. However things will change, if people insist on introducing ‘no work, no pay’ principle for legislators also and make it compulsory for members to attend sessions for a specified number of hours for eligibility of salary (there is a five-fold increase now, one is told!), allowances and sitting fees.
6. Central issue (Business Standard, July 28)
This refers to ‘A spat swallows RBI’s autonomy’ (July27). The discussion over the Ulip Ordinance and the letter written by the RBI governor pointing out the likely unwelcome consequences in case the ordinance is converted into a formal piece of legislation ignores the main point.
The main issue is the refusal on the part of the political authority, which has been in a position to control and manipulate the tripod of legislature, executive and the judiciary, to recognize the emergence of money as the fourth constituent of the power in the emerging world and the importance that institutions in the financial sector are gaining day by day.
The rupee is much more than a mere symbol a symbol and any dilution in the autonomy of RBI may cause irreparable damage to the Indian economy at this stage of development.
RBI has so far shown the maturity to fall in line with North Block and has expressed its serious reservations on policy perceptions only in meetings with officials of the finance ministry or the finance minister himself. But if this mature behavior is mistaken for weakness and the institution is stifled using legislative supremacy, making performance of its mandated functions difficult or redundant, the resultant disharmony in relationships may not augur well for the economic growth of the country. The need of the hour is to have a central bank with a strong balance sheet and a mature head capable of absorbing shocks on the economy from a fiscal policy suffering from external influences and internal pressure unavoidable in coalition politics.
7. FSDC Panel*(Economic Times, July 20)
This refers to the report ‘Irda backs FM panel on regulatory tiffs’ (ET, July 19)). It has these days become a fashion for heads of regulatory bodies and spokespersons of government including ministers to air their personal and private views in public. Media happily carry stories whichever they find spicier. In the process, application of mind by concerned bodies and ministries on issues of vital concern to the nation becomes a routine formality.
The issues which should normally be resolved through mutual discussion, and where necessary, domestic scrutiny of extant legal position and mediation by the controlling ministry/ministries at Centre get dragged to courts or public debate. This leads to persons responsible for resolving issues taking rigid positions or more often, a casual approach, depending on the views aired in public by their masters or colleagues in their ‘constituency’ pushing otherwise easy solutions further away.
The current controversy on FSDC Panel (which was not the right option in the first place) and effort to entrust the responsibility of solving disputes between regulatory bodies to a panel headed by the FM, where one need not doubt whose voice will prevail, do not augur well for the smooth relationship between Centre and RBI which is essential for the country, at this stage of economic growth and development.
Leaving things to courts also is no solution. In a number of cases in higher courts where government, regulatory bodies, quasi government organizations or corporates are parties on either side, where individuals are not accountable for expenditure, one witnesses huge expenditure and long delays, even in filing replies, adding naturally to the delay in final verdict. In all cases, finally the cost is born by the tax payer. Apart from cost aspects, unless more and more alternate routes are tried out for settling disputes, the already over burdened legal system may come to a grinding halt.
8. Leave RBI alone (Economic Times, August 3)
This refers to the article ‘Confused signals’ (ET, August 2). Although it is evident that the Monetary Policy has been caged to fall inline with the expectations of a Finance Ministry which invokes the Government’s ownership rights and legislative supremacy over regulatory organizations including RBI more often than necessary, it is difficult to defend the action of the RBI official in sharing with media his personal perceptions about the monetary policy statement made by RBI governor.
This is so because our expectations about the standards RBI should maintain are much higher than those we expect from the politicians who head ministries or the bureaucrats or ex-bureaucrats who advise those ministers on policy issues. This makes it imperative to protect the RBI and other regulatory arms of government from the vagaries of soft policy options exercised by compulsions of coalition politics.
9. Banking on infrastructure (Business Standard, August 13)
The discussion paper on new bank licenses released by the Reserve Ban of India (RBI) may bring to the fore the problems and challenges faced by financial sector. The issues raised in the discussion paper go much beyond the government’s intention to give a greater role for private sector in banking, and seem to be aimed at promoting financial inclusion and reduce government’s financial commitments for running banks.
As a regulatory body responsible for the health of the financial sector, RBI’s concerns go beyond the net worth of the promoter or his professional capability to run a bank. RBI’s intention to regularize and ratify the parallel banks which can conform to regulatory norms and rehabilitate some regional rural banks, as also its desire to keep the business of banking trustworthy is evident from the issues raised in the discussion paper.
What is required is a total view of banking needs and institutional infrastructure for meeting those before implementing short term solutions. If this is not done the banking system will continue to ignore small borrowers.
10. Functional Autonomy (Free Press journal, August 17)
In the piece ‘RBI Autonomy is under threat’ (FPJ,August 16), Nantoo Banerjee has observed that on paper, the Reserve Bank Governor enjoys autonomy of a constitutional authority and in practice, he is expected to work like those ‘favored few’. The reasons for this unenviable position are not far to seek. If autonomy has to be functional, the people in position should feel the freedom first.
We all talk highly about the virtues of private sector, but do we really allow public sector imbibe its good features? This is a rarity. How else can one explain the difference in the selection procedures of successors for Ratan Tata and N R Narayana Murthy and those for finding CEOs and top managers of public sector organizations? Another point is that
it will be next to impossible to attract talent to these government positions, given the meager remuneration offered. It is time to revise this factoring in market realities. The present practice has resulted in compromises on quality and the nation can ill-afford this state of affairs.
11. Tangled diplomacy* (Free Press journal, August 20)
This refers to the report ‘Chilling truth about US concern’ (FPJ, August 19). Generally, it is a common practice for the rich and the powerful to link unrelated issues for protecting their selfish interests. Also, irrespective of the rationale, they get support in arguing their case from similarly placed people wherever they are. It is in this context, recognizing the tactics adopted by the British those days, Gandhiji advocated self-reliance. In the present day world inter-dependence is unavoidable. Still, we can avoid accepting a one million dollar ‘aid’ or ten million dollar ‘soft loan’ which comes with ‘conditionalities’ totally unrelated to the purpose of aid or loan. Similarly, when another country makes unreasonable demands or speaks a language of threat, instead of brushing them aside, it is better to be transparent and take the nation into confidence. Even the rich and the powerful do not want adverse publicity. A measure of whatever improvements happened in the ‘Nuclear Deal’ could be attributed to the pressure from the left to make public the hidden ‘conditions’. If negotiation for Bhopal compensation is getting affected by arm-twisting from any quarters at this late stage, it too should be made public. The international community will be on your side. Hopefully, the days of firing your maid’s son who has a job at your workplace or factory when the maid asks for a reasonable rise in Diwali bonus are gone.
12. Dying middle class*(Business line, September 1)
This refers to the article ‘Myth called Indian middle class’ (Business Line, August 30). It was H G Wells who talked about middle class being pushed down or pulled up to create a world which will have only two classes of people, one living above the ground in luxury and the other living underground. More recently, the Railways had demonstrated the intention of getting rid of middle class by offering only first and third class accommodation. Still, the middle class survive in the dreams of the poor (glorified as BPL category), as they hope one day to cross over the poverty line and become part of the middle class and the wishes of the rich who need a healthy middle class to carry out their orders.
The definition of middle class, ADB suggesting daily per capita consumption at $2 to $20, is most vague. Such an approach suits bodies engaged in marketing goods and services and supporting governments in policy formulation. It helps to interpret poverty levels in one way when they want to sell an idea or a product and quite differently when the purpose is comparison among countries for extending benefits or concessions.
Mere growth of the middle class is not a comfort unless there is an upward movement in the percentage of population which is able to access the minimum comforts of life like a house to live, facilities to educate children, food security, healthcare and arrangements for looking after the aged and physically/mentally challenged members of the family.
The Government should consider creation of a fund for poverty alleviation by additionally taxing those who need extra security and those whose wealth grows faster than the rate at which GDP grows. These two categories of people have a vested interest in keeping the majority of people poor and craving even for starvation wages.
13. Osama’s outsourcing worries (Free Press Journal, September 14)
This refers to the report ‘Outsourcing turns Obama poll mantra’ (FPJ, September 10). Head of a nation making a plea for creating/preserving job opportunities within his country, in the normal course, should not be a cause for worry or off the cuff responses outside the country. Without waiting to learn again and again from first principles, as is happening elsewhere, we should take it as an opportunity to refresh our lessons of self-reliance taught by Mahatma Gandhi.
We, instead of giving priority to developing core sectors of the economy like agriculture and processing/manufacturing industries, are trying to extend our survival in a dream world, finding temporary happiness in earning more, more money enabling to improve our lifestyle. We are slowly opting to be permanent ‘service providers’ to the outside world. Even the initial enthusiasm with which we established HAL, coach factories, ship-building facilities and steel processing units, to mention a few, is getting dampened and we are looking out for expertise and technology which multinational business interests are to bring as a consequence of opening up and globalization.
At this late hour, we should introspect and see how best we can avoid the problems Obama is facing now. Realignment of priorities in education, agriculture, industry and services will be necessary if we have to survive with dignity in the changing scenario. The other option would be to ship water from Alaska to Mumbai and ‘boat’ our unemployed youth to other countries as ‘service providers’, which doesn’t augur well for nation’s future...
14. PSB pay structure (Business Standard, September 9)
This refers to the report ‘RBI bats for better pay for govt bank employees’ (BS, September 8). The RBI Governor’s plea for a level playing field for PSU banks with enough freedom to hire executives and employees on competitive terms has to be seen in a wider perspective. Recently, even RBI had to opt for recruiting short term (for 3 years) executive interns on contract basis. One wishes, Dr Subbarao’s present suggestion will make government think in terms of a policy for all public sector organizations encouraging them to evolve a self-regulated mechanism to evolve guidelines for designing remuneration packages for all levels of employees based on paying capacity, need for skills/talent and internal and external relativity within industry and across private and public sectors.
15. Right to privacy *(Free Press journal, September 28)
This refers to the report ‘Bank account holders under terror scanner’ (FPJ, September 27). If the FM has really made the statement that ‘intrusion into privacy of bank depositors is not just acceptable as it will discredit the banking system and the people will start using other modes for securing their funds and carry on transactions’, in the given context, it is really unfortunate. First, right to life should prevail over right to privacy.
Tracking terrorism is primarily to secure life and property of law-abiding citizens. Second, existing provisions of law enable banks to reveal details of accounts, where required under law. Obviously, FM was acting in haste. , as the reference in the report is to a handwritten note.
If the National Intelligence Grid (NatGrid) had approached RBI in the matter, in all probability, the central bank would have explained an acceptable modus operandi for accessing real time status of suspected accounts. Conceding the present advanced stage of technological development, one is not convinced about the operational success of a parallel database of all bank accounts for tracking misuse of funds. It can turn out to be a futile bottom-up exercise. A better option could be asking banks to have an online monitoring system for high value transactions, which will inter alia feed information to NatGrid on call, in times of need. The proposed meeting convened by RBI this week will throw more light on modalities.
16. Base interest rates*(Business Line, September 29)
This refers to the article ‘New initiatives in monetary policy operations’ (Business Line, September 24). Well-argued policy options coming from a seasoned economist should be a guiding light for the RBI in these days, when those responsible to support the central bank, unknowingly weakens its position by inadvertent loud thinking.
The Indian money market has gown much larger in size than its part which gets affected by the policy rates of RBI or the sale or purchase of G-Secs. The effectiveness of monetary policy initiatives in managing inflation will, therefore, be limited, if these are not supported and strengthened by appropriate changes in focus in fiscal policy.
As the components of sources and uses of government’s resources change, there will be changes in the government’s borrowing pattern, which, in turn, will have a direct bearing on availability of government securities in the market. This will impact the effectiveness of changes in repo rate.
As all banks are not equally professional in fund management, time may not be opportune for scrapping reverse repo. The better option would be to legalize remunerating excess CRR, if that is necessary, to remove the inconsistency in paying interest on funds parked by reverse repo when excess CRR is not eligible for interest.
17. We’re All Going to Be Rich (Reader’s Digest, October, 2010)
This refers to the captioned article (RD, August 2010). The thought of a world without money has fascinated me since my childhood days. Of course the reason for hating money during childhood was that I didn’t have money and my friends and neighbors enjoyed making me jealous by showing off the money power they possessed before me and others in my position.
Now, I have completed a somewhat successful career in a bank, have a bank account and have last year gained the status of a senior citizen. Still, I feel, the fellow who invented money and his followers who made it currency have done more harm than that unlucky wise man who invented atom bomb. Of course, now the reasons for my hatred towards money are more mature than jealousy.
For a moment, imagine, as Austin Hill proposes man gets out of the clutches of money, or there is no money in the world. All symbols from $ to the one recently figured out for Rupee vanishes, everything else remaining the same. Yes, science and technology, all results of research so far, literature, agriculture, industry, art and whatever you can imagine remain and continue to perform and help the world to move forward, but money is conspicuous by its absence! This will bring drastic changes.
It will take considerable time to rehabilitate people like those working in the financial sector, as the nature of their jobs will change. They will have to re-skill themselves to manage a world entirely dependent on barter system which will result in revolutionary changes in the power-balance internationally.
So, let Hill continue with his uphill task with Akoha and world adjust itself to a money-less environment where peace prosperity and happiness will not be dependent on bank balances but on the value addition to life and environment each one makes.
Aa No Bhadrah Kratavo Yantu Viswatah
(Let noble thoughts come from al sides)
18. Give and take (Dignity Dialogue, October 2010)
Sakuntala Narasimhan’s take on gracefully accepting what is offered with love and affection by near and dear (Learn to take, DD, June, 2010) should be an eye opener for all those who deny gifts or accept them with a sense of guilt. I consider myself the most gifted person. Because, for me, from the first breath I inhaled to whatever I will be leaving behind when the time comes, are all gifts in one form or the other.
Right from my early school days, I have tasted the joy of receiving gifts. My monthly school fee of 12 Annas (equivalent of present 75 paise) was paid by different people in different months depending on whom my father who was a temple pujari could convince that my attending school was important. I was moved by Sudha Moorthy’s story which was published by Readers Digest a few years back which spoke of her daughter coming home and requesting her to help a class mate to buy books. I remembered the instance of my neighbor friend who was a year ahead of me pleading with his mother to give his old books to me free when used books had a 50 per cent resale value.
Moving to more recent times, I find people of my generation lacking the gracefulness both in giving and accepting. Sakuntala Narasimhan has vividly brought out the pleasure the giver gets if a gift is accepted with happiness. This applies equally to all kinds of help, be it just an act of kindness in showing the way, helping out a physically/mentally challenged when the person needs support or big donations to organizations involved in charity.
It may not be out of context to remember a couple of principles about a gift someone mentioned to me in a different context. These are:
a) The giver should forget about the gift the moment he parts with it and should never follow up with periodical audit of how the gift is being used.
b) The one who receives a gift should always remember that his right on the gift is that of a trustee.
In recent months Dignity Dialogue has changed its appearance and to a certain extent the format and content to fall in line with other lifestyle magazines of modern times for the better, but without sacrificing its original purpose and vision. Thank you, Team DD!
19. Firm up farming (Business Standard, October 7)
This refers to the report ‘Danger signals crop up’ (BS, October 5). During the last two decades, Agriculture as a sector and food grains cultivation particularly lost the national priority they enjoyed during the pre-reforms days, marked by stagnant food grains production and dwindling share of crops in agricultural GDP. The As a result of this neglect, has resulted in under-utilization of land available for cultivation is being underutilized, the country not taking advantage of modern agricultural practices and inadequate and storage and processing facilities for the agricultural produce are inadequate. While finding comfort in the positive impact of a favorable monsoon, one has to also remember the loss of food grains mainly on account of insufficient storage and processing facilities as revealed by the debate that followed the Supreme Court’s observations about rotting grains.
A change is overdue in our in approach to cropping patterns, agricultural practices, and storage and processing facilities that factoring in the changes in food habits like the urban bias towards processed food, non-availability of traditional food articles in villages and the need to ensure minimum nutritional needs to the under-privileged is overdue. Only a small section of the urban population can afford the prices of imported processed food and bottled drinking water. The well-being of the remaining one billion people are dependent on the food and water available locally and therefore government should give priority to agriculture and water management to prevent catastrophic situations in food and water availability in the country.
20. Schemes and monuments (Free Press Journal, October 10)
This refers to the report ‘No new Indira, Rajiv Schemes: PM’s fiat’ (FPJ, October 9). It is a right decision not to associate the names of successful leaders with programmes pre-destined for failure. Simultaneous efforts must be made to avoid huge waste of precious resources for construction of huge monuments in the names of past and present leaders, for getting publicity at taxpayer’s cost or even in the name of promoting tourism. Such resources should be diverted for productive developmental purposes and it would be in order to associate the names of leaders whose efforts made the project/development possible on successful completion of projects/programmes.
Incidentally, the concluding sentence of the Cabinet Secretary’s letter could undergo some change in these post-reform to cut short the traditional template ‘I have, therefore, been directed to convey that in the light of what is stated above,….’
21. Legalizing corruption! (Free Press Journal, October 14)
This refers to the report ‘Nothing moves without money: laments SC’ (FPJ, October 11). Sometime back, a national newspaper had, side by side, printed views for and views against corruption. One view was that corruption is the oil that lubricates the wheels of progress. Looking around, one is tempted to agree. The SC, though sarcastically, has suggested legalizing corruption and fixing specific amounts for every case. Perhaps, our private sector has implemented this suggestion long back. Service charges levied by the banks are one example that comes to mind. Now there are banks which charge separately for opening of accounts, issue of cheque books, certifying that an account holder is maintaining an account with the bank, for not maintaining minimum balances in deposit accounts and so on. Government could think of similar service charges for every transaction in government offices and passing on a pre-decided percentage of the collection to their employees. This would be in consonance with the spirit of the SC observation concerning legalizing corruption and helping out the poor government officials who are affected by inflation.
22. Wages of neglect (Economic Times, October 15)
This refers to the report ‘Hunger remains despite high growth: US study’ (ET, October 12.). The mess we have made of our agricultural and small industries sector with the emergence of service industries as a result of opening up of the economy is there for all to see. Expert studies may put together facts in a convincing way. But much deep research is not needed to say that the neglect our farm sector suffered due to inadequate attention paid to introduction of modern farming, storage, transportation and processing practices has kept the sector almost stagnant, since 1990’s.
The blame should be shared by the political leadership and the finance sector which jumped to the opportunity to make quick returns from IT and similar other opportunities at the cost of traditional sectors. Both went after the creamy layer of the economy which temporarily paid high dividends. Even our education system has now a pro-industry bias against agriculture and rural sectors and skill development to support traditional activities on which majority of the people are dependent.
Comparison with China (most populous country which has a totally different tradition in management of development) or small neighboring countries with comparatively small population to look after. Our problems are country-specific and solutions cannot be copied from anywhere else.
23. Faster changes (The Hindu Business Line, October 18)
This refers to the article ‘Change is easier than we think’ (Business Line, October 14). The article qualifies to be a preamble for evolving a new policy framework for our development path.
The rescue operations at the Chile mines and the smooth and successful conduct of CWG, in different ways, demonstrate that focused efforts bear fruits, irrespective of the negative thinking a section of the people always entertain.
When 100 things go right, thanks to the devotion to duty and commitment to causes of thousands of people, we magnify failures such as a stray dog trespassing the fences which are not there, or collapse of a fly-over under construction.
These should definitely make news, but the purpose should be to get things corrected and not to bring down the self-esteem of a nation.
If the authorities concerned act upon the suggestions made by Ashima Goyal on punctuality, timely decision-making, coordination among multiple government departments (can we not think of merging some of them doing parallel functions?), level jumping when officials at a particular level are unable to take decisions within a reasonable time, simplification of procedures and handling corruption as a reality (Supreme Court this week lamented that nothing moves in government without money!), changes are bound to come faster than we think.
While on the subject of timeliness, one would like to emphasize the need to decide cases quickly and equitably, (whether they are on the tables of ‘Babus’ or in courts) say within three months where the file is with government and within six months where the case is with a court.
This is especially warranted when the cases involve the sick and the physically/mentally challenged, senior citizens and the poor who cannot pursue their cases for long periods as time and resources are not on their side.
24. The business of NGOs (Business Standard, October 18)
This refers to the news report ‘RBI forms panel to look into MFIs’ activities’ (BS, October 16). This is a welcome move. I would like to suggest that RBI may add the lending activities of NGOs which receive bank credit or external funding also in the terms of reference of the same panel as these organizations also are facing allegations similar to those against a section of non-bank lenders now commonly classified as MFIs.
Non-Governmental Organizations (NGOs) are present in almost every field one can imagine, from spirituality to healthcare and domestic help and Information Technology to charity. Some handle millions of dollars and at the other end most of them carry on with traditional cooperative spirit depending on contribution from members for day to day activities and on donations for maintaining their no profit no loss position. In the process of their evolution, unintentionally some of them have displaced several people from their traditional vocations, vocations they were carrying on for livelihood. Unintentionally, because the process has been gradual and was not as planned or conspicuous as the throwing out of retail business community by shopping complexes in cities.
What were ignored were the existing infrastructure, manpower and practical wisdom abundant in the local people. These NGOs could gloss over the fact that ultimately costs were to be shared by the beneficiaries whether as interest on loans or as erosion of capital or in the form of subsidy from government. Similar situations have arisen in the fields like education and healthcare where again the existing network would have performed wonderfully well with much less support than that the NGOs received, had there been an effort to understand their problems and to upskill their manpower and compensate their normal business losses by allowing cross-subsidizing of costs or by government accepting social responsibility and funding unanticipated losses.
Somewhere, one feels, the glorification of donations (especially if they come in dollars from outside the country) and the aversion to subsidy even where it meant deferred prices or wages are also responsible for the failure of traditional institutions and business including agriculture.
25. Yoga controversy (Free Press Journal, October 22)
This refers to the report ‘Is Yoga incompatible with Christianity?’ (FPJ, October19). Yoga is not incompatible with any religion or religious practices or broadly stated, with theism or atheism. Yogic teachings and practices are much more ancient than all religions and religious practices in their present form. So, the chances are, religious teachings and practices can be inconsistent with the concept of Yoga and not the other way round. It is unfortunate that a pastor’s personal views, which he has every right to hold and correct at his option, when he is better informed, are sensationalized by media. Generalizing statements made by an individual based on wrong information inadvertently carried by stray practitioners of some ‘make believe Yoga’ marketed in some part of the world serves only to mislead genuine practitioners of Yoga.
As any authentic Yoga practitioner will know and tell you, the yogic science has no demonic roots and the whole concept hovers around integrated practices to ensure the physical and spiritual well-being of the practitioner through regular exercises for body and mind. If some religions integrated the yogic practices into their teachings, it is accidental and shows the concern of those who made it possible, in the well-being of their followers. Probably, like politics, Yoga is also getting some blame because of a miniscule percentage of practitioners practicing it with unscrupulous motives.
(* Portion in italics omitted by editor!)
26. Real wage policy ( Business Standard on November 12, 2010)
This refers to the report “Process begins for statutory central minimum wage’’ (November10). It is a welcome move to have a realistic prescribed (enforceable) minimum wage linked to cost of living for ensuring uniform norms for payments for work done on schemes under the National Rural Employment Guarantee Act (NREGA).
But this addresses just one aspect of the anomalies in hiring labour. Other factors include built-in social disparities like uneven development, varying literacy and poverty levels and several geographical and political factors. Enlightened employers in the government, public sector, media and certain groups in the industry factor in the employees’ minimum needs for maintaining a lifestyle commensurate with the jobs they do in the remuneration package and provide social security benefits like pension, provident fund and medical facilities. This, unfortunately, covers a very small portion of the country’s workforce.
It is evident from the pattern of asset-formation that a majority of workers in lucrative sectors like services, construction, mining, IT and processing are paid starvation wages. While everything else can be safely left to the mercy of the market forces, government has a social responsibility to protect employees’ interests of the employees by providing a guidance on minimum wages for unskilled and skilled workers in different sectors, factoring in workers’ minimum needs and employers’ paying capacities. The need of the hour is a national policy on prices, wages and income that looks beyond adverse inflation figures, which are eruptive symptoms of an ailing economy.
This refers to the report ‘BSY dares BJP to sack him’ (FPJ, November 22). Those who are in charge of government, whether at Centre or in states, are busy defending themselves or their colleagues against one corruption charge or the other most of the time. The proceedings of legislatures (when they do happen), are also full of charges and counter-charges relating to allegations against ministers and politicians. This gives an impression that after coalition politics took over the reins of governance in India, the Common Minimum Programme (CMP) is only about making more money while in power, remaining in power. to protect the money made and then being subservient to outside money power for continuing eternally in power. Corrupt individuals, who are exposed, threaten that they would come out with evidence of corruption against those who try to expose them. Perhaps government could think of some legislation by which a certain percentage of wealth accumulated beyond certain limits by individuals and families during the period they or their family-members hold positions in government or political parties would periodically be appropriated to government’s funds. Prime Minister could persuade his coalition partners to accept this idea and include the same in the next CMP of UPA! This would, considering the present growth rate of individual wealth among politicians and their families, may reduce the budget deficits substantially.
DISSECTING CORRUPTION(Sent to Business Standard on November 19)
This refers to the reports ‘SC asks for affidavit from PM’ and ‘SC quashes action against Pepsi over pesticide content’ and Ratan Tata’s letter ‘On fairness’ (November 19).
Going by dictionary meanings, the word corruption is associated with words like bribe, cheating, evil, badness, decayed, stinking, decayed, false, defilement, wickedness, violation, defective, spoilt, faulty, wrong, malignant, offensive, immoral, unchaste, vile and fallen (the list can go on). Going by this, one comes to a position that anyone or any institution/organization having something attributable to any formations out of any of these words can be corrupt. Luckily not so. It is generally accepted that what is legal is not corrupt. Then, like morality, the perception of corruption varies from individual to individual, society to society and country to country. Meaning, what is construed as legal in one context need not be so in another context.
No wonder, eminent statesmen are getting dragged into controversies related to corruption, day in and day out, despite their efforts to maintain high moral and ethical standards in their own lives. Reputed companies like Pepsi are finding themselves running for shelter under inadequacies in legislations. In the deluge of corruption that the world is witnessing today, no Krishna will be able to float on a leaf unaffected by the deluge. The value system which is in disrepair globally needs a shock treatment. The initiative can come from India, if the nation decides to make every embarrassment an opportunity to correct and move forward. This can be done only by handling individual corruption cases on the basis of the facts of the case and not with reference to the impact such action will have on coalition government’s equilibrium. Companies like Pepsi should try to convince people that their finished products are safe for consumption. This is different from winning cases in courts. In an earlier case, the company had argued that ‘use before’ date is different from ‘expiry’ date! For the rich and the powerful, there will always be legal remedies, as, historically, the laws are made and interpreted in their favour.
Lessons in learning(Business Standard, November 22)
This refers to the report ‘Sibal wants new law to boost higher secondary education’ (BS, November 20). Generally, we do not hear much about an ‘Educational Plan’ integrating the needs of various sectors and segments of economy and society except in academic seminars or in meetings on special occasions like convocation. The HRD Minister’s concerns about higher secondary education are well-founded and it will be a boon to next generation, if his dreams about improved Gross Enrolment Ratio (GER) at college level by 2020 come true. Simultaneously, the lopsided priorities of the government in the field of education need immediate attention. The result of leaving the field to market forces is evident in the form of non-availability of talent in various specialized areas including in the faculty positions, where talent combined with dedication and competence to deliver is most needed. The flow of people who can perform better to for-profit organizations has adversely impacted the capacity to deliver results which was the hall mark of our country’s public service in general and educational institutions in particular.
Irrespective of their educational background till graduation, aspiring youth with some analytical ability and ambition today try and transform themselves as managers, IT specialists or any such professionals leaving areas like civil service, teaching and government/public organizations to remain satisfied with the rejected seconds in the employment market. The position can be reversed only by having a National Education Plan which takes care of the needs of every sector of the economy. For this to be effective one will have to accept that market forces will not accept self-regulation and in the national interest, policy guidance has to come from government, to the extent necessary in public interest. Before going ahead with the proposed legislation for making right to education meaningful by extending it to secondary level, one wishes government takes a comprehensive look at the National Education Plan by factoring in, among other things, the following aspects:
i) The need for special skills in areas like IT
ii) Waste of developed skills, like in finance and IT sectors by recruitment of engineers for all types of work including those which can be performed by less qualified people. This has an impact also on the employment opportunities for less privileged class.
iii) Skill development and career-orientation, say from Standard VIII, with the potential employment opportunities and aptitudes in view.
iv) Unemployment level in various age/education groups in different regions
v) Migration pattern of educated unemployed within the country and abroad.
Making money while in power!(Free Press Journal, November 26) Common minimum programme*
This refers to the report ‘BSY dares BJP to sack him’ (FPJ, November 22). Those who are in charge of government, whether at Centre or in states, are busy defending themselves or their colleagues against one corruption charge or the other most of the time. The proceedings of legislatures (when they do happen), are also full of charges and counter-charges relating to allegations against ministers and politicians. This gives an impression that after coalition politics took over the reins of governance in India, the Common Minimum Programme (CMP) is only about making more money while in power, remaining in power. to protect the money made and then being subservient to outside money power for continuing eternally in power. Corrupt individuals, who are exposed, threaten that they would come out with evidence of corruption against those who try to expose them. Perhaps government could think of some legislation by which a certain percentage of wealth accumulated beyond certain limits by individuals and families during the period they or their family-members hold positions in government or political parties would periodically be appropriated to government’s funds. Prime Minister could persuade his coalition partners to accept this idea and include the same in the next CMP of UPA! This would, considering the present growth rate of individual wealth among politicians and their families, may reduce the budget deficits substantially.
M G Warrier
2005/1-D, DREAMS COMPLEX
LBS Marg
BHANDUP (WEST)
Mumbai-400078
Mobile: 09349319479
November 24, 2010
The Editor
The Economic Times
Letters/CHAT ROOM
Back to basics
This refers to the article ‘Getting it right on microfinance’ (ET, November 24). In retrospect, post-reform, chasing out village money lenders and allowing MFIs and new generation banks to suck out the creamy layer of lending opportunities in rural and semi-urban areas have done more harm than good to the system. We should dispassionately examine whether we are under-utilizing the existing financial infrastructure (commercial bank branches, cooperatives, Regional Rural Banks ) which still exist in the formal sector.
Though the suggestion is coming from Dr Reddy, it may be too much to expect from state governments to regulate and oversee MFIs which have grown in size and expanded their area of operation to several states. The sources of funds and activities of most of the MFIs are such that they can be effectively monitored only by RBI or NABARD who have a country-wide presence and adequate supervisory skills.
The main factors that contribute to the poor repaying capacity of those who avail of microfinance are the inadequacies in our pricing and wage policies. Ridiculously low wage levels (Rs 100 per day under National Rural Employment Guarantee Scheme, which becomes a bench-mark even for payment of wages to construction labourers who work for multi-crore projects) and absence of developed rural markets for sale of local products at prevailing market prices support an unacceptably uneven asset-formation pattern. Unless such basic issues are addressed, financial inclusion will remain a subject matter for speeches targeting elite audience.
Time is perhaps opportune for a review of the entire rural credit architecture for an overhaul. The changes necessary may include:
· Reviving the role of Rural Financial Institutions( RFIs) including rural and semi-urban branches of commercial banks, cooperatives and Regional Rural Banks which have strayed away from their mandated responsibilities,
· Identifying costs for financial intermediaries that cannot be factored into interest costs and specifying the agency which should meet them, if the activity has to remain bankable,
· Without going back to the abandoned ‘regulated interest rates regime’, working out and specifying broad bands within which ultimate lending rates should remain when bank funds are sourced for the purpose and
· Reducing the number of bypass routes allowed for priority sector lending to the minimum.
Back to basics( Economic Times, November 27)
This refers to the article ‘Getting it right on microfinance’ (ET, November 24). In retrospect, post-reform, chasing out village money lenders and allowing MFIs and new generation banks to suck out the creamy layer of lending opportunities in rural and semi-urban areas have done more harm than good to the system. We should dispassionately examine whether we are under-utilizing the existing financial infrastructure (commercial bank branches, cooperatives, Regional Rural Banks ) which still exist in the formal sector.
Though the suggestion is coming from Dr Reddy, it may be too much to expect from state governments to regulate and oversee MFIs which have grown in size and expanded their area of operation to several states. The sources of funds and activities of most of the MFIs are such that they can be effectively monitored only by RBI or NABARD who have a country-wide presence and adequate supervisory skills.
The main factors that contribute to the poor repaying capacity of those who avail of microfinance are the inadequacies in our pricing and wage policies. Ridiculously low wage levels (Rs 100 per day under National Rural Employment Guarantee Scheme, which becomes a bench-mark even for payment of wages to construction labourers who work for multi-crore projects) and absence of developed rural markets for sale of local products at prevailing market prices support an unacceptably uneven asset-formation pattern. Unless such basic issues are addressed, financial inclusion will remain a subject matter for speeches targeting elite audience.
Time is perhaps opportune for a review of the entire rural credit architecture for an overhaul. The changes necessary may include:
· Reviving the role of Rural Financial Institutions( RFIs) including rural and semi-urban branches of commercial banks, cooperatives and Regional Rural Banks which have strayed away from their mandated responsibilities,
· Identifying costs for financial intermediaries that cannot be factored into interest costs and specifying the agency which should meet them, if the activity has to remain bankable,
· Without going back to the abandoned ‘regulated interest rates regime’, working out and specifying broad bands within which ultimate lending rates should remain when bank funds are sourced for the purpose and
· Reducing the number of bypass routes allowed for priority sector lending to the minimum.
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