M G Warrier's My Page, November, 2012

M G Warrier’s

My Page



A monthly bulletin from M G Warrier incorporating select published letters/articles (and some stray thoughts based on what he read/saw and wrote during the month). Mailed during the first week of every month. Please send your responses and views to mgwarrier@rediffmail.com



Vol II, No 11, November 2012







M G Warrier, 2005/1-D, DREAMS, Bhandup(West), Mumbai-400078 (9349319479)



Dear Reader



Since September 2012, My Page is being posted on Warrier’s Blog accessible at mgwarrier.blogspot.com Links to articles and important comments are posted at the blog as and when they are published. Those esteemed readers who have difficulty in accessing blog can contact mgwarrier@rediffmail.com



(Exrbites members can access Warrier’s Blog by clicking at "Visit Your Group" in the bottom most line of any group mail and then at "Links". All others can cut and paste the link in their browser. You can also Google search "M G Warrier" to see the blog).



Regards



M G Warrier



The following articles were published during 2012 so far:



1. Men in khaki did the police proud: Hindu, March 4, 2012

2. Gold management needs a makeover: Business Line, April 13, 2012

3. What ails new pension scheme: July 2012, Moneylife.in

4. Poor human resources management in public sector: July 2912, Moneylife.in

5. Corruption: A challenge for managers: August 2012, Moneylife.in

6. A finishing school for politicians: September 2012, Moneylife.in

7. Strengthen RBI’s reserves: September 2012, Moneylife.in

8. Middleclass at crossroads: September 2012, Moneylife.in

9. Emerging Kerala: Submerged priorities: September 2012, Moneylife.in

10. Money grows underground: September 2012, Moneylife.in

11. Eradicating Corruption: Power to the People, September 29, 2012, Moneylife.in

12. SC verdict on CAG: A step in the right direction, October 2, 2012, Moneylife.n

13. Impact of reforms on food security, October 9, 2012, Moneylife.in

14. Human Development Indicators: Need for a National Education Plan, October, 2012, Moneylife.in

15. Banking Sector Reforms is the need of the hour, October 22, 2012, Moneylife.in

16. Monetary Policy and interest rates, October 29, 2012, Moneylife.in









Select Letters/Online comments, October, 2012



Comments in Mint on extension of term for Subir Gokarn



It is high time GOI thought of continuity and longer tenure at these levels in statutory organisations and PSUs. Though it may serve the purpose of making the incumbents ‘yours obediently’ to a regime which itself is struggling for existence, the practice of short-term postings and extensions or keeping top levels vacant do not augur well for mature thinking and balanced policy formulation at this stage of economic development.



On Monetary Policy (October 2012 review)

We are all being misled by what Sucheta dalal calls ‘nexus’ in some other context. The ‘rate cut’ by RBI can do precious little, if there is no political will to help the small savers, small investors, small entrepreneurs, small farmers and the workers and employees struggling to make both ends meet. I have said it earlier, but worth repeating the net interest margins(NIMs) in India are higher than the base interest rates in some other countries. Not that NIMs can be brought down overnight. But there should be some effort to bring down operational costs, increase costs of credit where profit margins are high (this principle is being applied only to microfinance today!), plough back resources being hoarded by individuals, corporates and institutions (accumulation of cash and bank balances, surplus SLR maintained by banks, availing bank credit while sitting on huge cash are all symptoms which need correction) and so on.



Ref: Hindu/HBL

This is a balanced view, at a time media, economists, analysts and academicians are taking one side or the other in what is being made out to be a struggle between economic growth and inflation management with GOI and RBI on respective sides. The FM by some fast moves as late as on October 29, gave an impression that he was pressing for a cut in the base rates by RBI on October 30. Outsiders have been given an impression that RBI didn’t oblige. The sound and fury about interest rates and CRR are perhaps affecting the coordinated efforts by GOI and RBI to flush out the funds available in the form of excess SLR maintained by banks, huge amounts of cash with PSUs and corporates which should be prudentially deployed to reduce liquidity constraints in the system. Perhaps such measures may make available more funds than that released by the present CRR cut.



Ref: Articles on the eve of Monetary Policy announcement by RBI(October 2012):



It is comforting to find at least a mention of excess SLR maintained by banks while on liquidity in the system. Somewhere someone has to start talking about it. Similar is the case of PSUs and corporates sitting on huge amounts of cash. Ignoring excess SLR and huge cash hoarded by corporates while system needs liquidity is a problem similar to domestic stock of gold not being productively exploited, while allowing outflow of precious forex for import of gold. Spokespersons of GOI, analysts and media commentators are getting over-exercised about CRR and repo rates, even to the extend of not allowing any thoughts about other measures by GOI and RBI for realignment of fiscal and monetary policies considering the changing needs.





Such sporadic thoughts should be welcomed. The idea of even substantial reduction in SLR requirements may send shock waves through the spines of government finance managers in Delhi as North Block will have to be further dependent on Mint Road. This is not an insurmountable problem. Issue is throwing up in the air another dimension to the handling of SLR at a time some negotiations are under way to link maintenance of SLR with capital adequacy needs, there could be negative implications to the bargain. But, let us be proud. Freedom of thought and expression is the only thing we are carrying forward and therefore: aa no bhadrah kratavo yantu vishatah (Let noble thoughts come from all sides)



HBL, October 24, 2012:



I read this article and BL editorial today (October 24) together. Enjoyed the concluding sentences in both: “Who is more socially relevant: sons of the soil or Princes in their towers?”(this article)... “It is up to the governments at the Centre and the states to weigh the trade-offs” (BL edit). Ashoak Upadhyay would have let off Dr Chakrabarty, if only he had read the speech on the web and seen the credits to those who helped out in putting together such a long speech on a subject very familiar since 1969. Remember Lead Bank Scheme, Service Area Approach, Local Area Banks invented by present FM (he had announced 50 local area banks serving a population of 2 crore each will ensure what is called ‘financial inclusion’ today- at that time the country’s population was near about one billion only!). One wishes AADHAAR will have a ‘bottom-up’ approach, taking up and covering BPL category first. Does anyone has the details of income-strata-wise



Safety of deposits is important. Insurance cover ceiling is Rs1 lakh per account. While I agree that the comfort level will improve if the ceiling is raised, normally it may not be of much significance to small savers as our country has not been allowing many bank failures in the recent past and the position may not change for the worse unless we mimic developed countries in banking practices. Most of the small savers are with public sector banks. A hike in the ceiling may mean higher outgo of fee and lead to cost escalation for banks. I am for status quo.



October 23, 2012

TOI commentlive email alert

THE TIMES OF INDIA

Dear Reader,

Your comment on the article ''The great Malayali paradox'' is now displayed on timesofindia.com.


''Binoo, you have several aspects right to become a good writer. Your mastery over language, your ability to observe and remember and recap at the appropriate time, your speed and all will take you forward. Develop some ability to compare, notice the positive things that meet your eyes and give credit where it is due. Writing like this you cannot become a Parappurath Sanjayan (Oh, you may not know M R Nayar who made fun of everything and everybody!). Keralites all over the world are behaving the way they do because that state has almost 100 per cent literacy and a record of democratic functioning. Sorry, Kerala may not allow the kind of exploitation possible elsewhere. Good luck and good day to you Binoo, take it easy!''

To reply to this comment , or see the whole conversation, click here.


Thanks for sharing your thoughts, and keep up the good work!

Regards,

Team TOI



Letters: Follow the rules of the game

Business Standard / New Delhi Oct 17, 2012, 00:29 IST

This refers to the report “Amend Fema regulations: SC” (October 16). Despite accepting the prima facie position that the government’s policy on foreign direct investment (FDI) in multi-brand retail didn’t have legal sanction, the Supreme Court has suggested to regularise the position by requesting the Reserve Bank of India (RBI) to amend the Foreign Exchange Management Act (Fema). This was all the apex court could do to salvage the situation for a government that is already in the dock. UPA-II’s fire-fighting team should take the message of the Supreme Court ruling, that is, to follow the rules of the game in what it wants to do. The court must have been sadly aware that it might be odd to ask RBI to amend regulations in the Fema to regularise an executive decision of the government — which should have been issued after consultation with RBI.

The government should also review its action on other issues like the introduction of the New Pension Scheme (NPS), where legislative sanction is pending. Enforcing measures that need legislative sanction through executive order and then going to appropriate authorities/Parliament to regularise these when there seems to be no “emergent” situation warranting such action sends out disturbing signals. In the absence of necessary numbers in both the Houses, this method may become a rule rather than exception in days to come.

M G Warrier Mumbai



Business Line, October 12, 2012



Letters



S&P ratings

This refers to the report “Again, S&P warns of lowering India’s rating” (Business Line, October 11). The Indian media should have understood the game agencies like this play.

The release of this report, about which Standard & Poor’s later clarified to media that “….we did not issue or announce anything on India sovereign rating today. We simply published our regular Asia-Pacific sovereign report card, which does not have any new information on India’s rating”, coincided with the visit of Fed chief and US Treasury Secretary to India. Despite the clarification, the release dampened the mood of India Inc. and the bourses in India.Dwelling on the politics and economics of UPA II, the rating agency laments about matters which an external agency should not be worrying about.

M.G.Warrier

Mumbai

Economic Times, Online comments on the same S&P warning, 11/12, October, 2012:



M G WARRIER (MUMBAI)



High time rating agencies, or for that matter whosoever judges the performance of economies changed their parameters to factor in the inherent strengths and weaknesses of nations. Countries like India with huge resources including human resources and much less consumption needs as compared to ‘developed’ countries and nations which are permanently dependent on outside markets for sustenance and perennially building up capacities for unproductive purposes like war and journey to Mars are measured on the same scale. This is unacceptable. To counter this tendency, India should set up a purely research-based rating agency with expertise of international standard. Geographical area, population, resources, potential for development, sovereign debt and all should be factored in while making comparisons.



Agree (1)Disagree (0)Recommend (0)Offensive

bemused (Chennai) replies to M G WARRIER



Mr Warrier, when was the last time India set up anything of world class? maybe 2 decades ago. And when you talk of huge resources, please put it in perspective. Per capita resources in India are pitifully scarce - whether it be food, land, money, power, human development indicators or minerals. No rating agency worth its' salt can give so much weightage to reported but unharnessed natural resources. Otherwise countries like Iraq, Russia, Kuwait would be topping the charts.

M G WARRIER replies to bemused



Thanks, bemused! Both of us are talking sense. Reduce the war-industry gains,cost the inputs costs of their industries at international prices,price their products at ex-factory-costs, make them pay wages @ rates they pay at home in their factories abroad and make some more such similar changes and then compare the achievements of developed nations. You call it envy and jealousy, but some exposure to facts and figures will bring about changes in attitude.



ET Online comments, October 10, 2012



M G WARRIER (MUMBAI)



High time rating agencies, or for that matter whosoever judges the performance of economies changed their parameters to factor in the inherent strengths and weaknesses of nations. Countries like India with huge resources including human resources and much less consumption needs as compared to ‘developed’ countries and nations which are permanently dependent on outside markets for sustenance and perennially building up capacities for unproductive purposes like war and journey to Mars are measured on the same scale. This is unacceptable. To counter this tendency, India should set up a purely research-based rating agency with expertise of international standard. Geographical area, population, resources, potential for development, sovereign debt and all should be factored in while making comparisons.



High time rating agencies, or for that matter whosoever judges the performance of economies changed their parameters to factor in the inherent strengths and weaknesses of nations. Countries like India with huge resources including human resources and much less consumption needs as compared to ‘developed’ countries and nations which are permanently dependent on outside markets for sustenance and perennially building up capacities for unproductive purposes like war and journey to Mars are measured on the same scale. This is unacceptable. To counter this tendency, India should set up a purely research-based rating agency with expertise of international standard. Geographical area, population, resources, potential for development, sovereign debt and all should be factored in while making comparisons.





At last, some clarity is emerging. The loud thinking as to how things otherwise need legislative sanction can be done through executive action is a welcome sign. GOI has been doing exactly this in the case of introduction of New Pension Scheme. But in that case, no one will protest as the affected parties were yet to join service and where was the ground for them to protest? Here GOI has to be cautious, as the stakeholders are big!





Online comments: High time RBI bought more gold: S S tarapore, HBL October 5, 2012



HBL published my letter and two (almost identical) online comments on your article.

Just for your information

Regards



M G warrier



Comments:

This is a timely suggestion. The initiative taken two years back to augment gold component in forex reserve by a purchase of 200 tons of gold from IMF should have been followed up with periodical purchases. RBI should simultaneously review its entire forex portfolio with expert support for reshuffling with a view to make it robust and ensure better return without compromising safety of investment. Domestic stock of gold is not getting the attention it deserves. GOI may now take a view on this and take measures to bring to the mainstream and standardize a portion of the domestic stock of gold estimated at 18,000 tons. This will help reduce the gold import bill also.



from: M G WARRIER

Posted on: Oct 5, 2012 at 23:05 IST

This is a timely suggestion, which should be pursued further by RBI and GOI.

The initiative taken two years back to augment gold component in forex reserve by a purchase of 200 tons of gold from IMF should have been followed up with periodical purchases. RBI should simultaneously review its entire forex portfolio with expert support for reshuffling it with a view to make it robust and ensure better return without compromising safety of investment.

Incidentally, domestic stock of gold is not getting the attention it deserves. Perhaps, some vested interests are preventing canalization of hidden stocks of gold from coming into the surface where normal regulations will apply. GOI may now take a view on this and take measures to bring to the mainstream and standardize a portion of the domestic stock of gold estimated at 18,000 tons. This will help reduce the gold import bill also.





from: mgwarrier

Posted on: Oct 8, 2012 at 09:42 IST



Business Line, October 9, 2012



Letters

Gold management

This refers to the article “High time RBI bought more gold” (Business Line, October 5). This is a timely suggestion, which should be pursued by the RBI and the Government. The initiative taken two years back to augment gold component in forex reserves by purchasing 200 tonnes of gold from the IMF, should have been followed up with purchases.

The RBI should simultaneously review its entire forex portfolio with expert support, for reshuffling it to make it robust and ensure better returns without compromising safety of investment. The Government could perhaps standardise a portion of the domestic stock of gold estimated at 18,000 tonnes. This will help reduce the gold import Bill.

M. G. Warrier

Mumbai

Succession plans:



Succession plan for top levels (it is important at meddle and lower levels also!) should become a priority in HR Management by GOI. Top positions in Government, statutory organisations like RBI, CAG and Election Commission, Chief Justices of High Court and upwards in judiciary should be of a much longer tenure than they are now. The age barrier fixed long back should be reviewed. It does not augur well for a country like India to have even the highest post in the judiciary with around one year tenure when the incumbent takes charge, especially when all these individuals are later found to be ‘fit’ for being considered for positions with similar or higher responsibilities. These positions including the CEOs of PSBs and nominees on boards should have a minimum tenure of 5 years at the time of appointment.



High time RBI bought more gold: S S Tarapore, HBL, October 5, 2012



Online Comments:

This is a timely suggestion, which should be pursued further by RBI and GOI.

The initiative taken two years back to augment gold component in forex reserve by a purchase of 200 tons of gold from IMF should have been followed up with periodical purchases. RBI should simultaneously review its entire forex portfolio with expert support for reshuffling it with a view to make it robust and ensure better return without compromising safety of investment.

Incidentally, domestic stock of gold is not getting the attention it deserves. Perhaps, some vested interests are preventing canalization of hidden stocks of gold from coming into the surface where normal regulations will apply. GOI may now take a view on this and take measures to bring to the mainstream and standardize a portion of the domestic stock of gold estimated at 18,000 tons. This will help reduce the gold import bill also.

from: mgwarrier



On price rise:



It is high time GOI thought in terms of a predictable pricing policy. The uncertainty about prices of essential articles and services becomes a breeding ground for unethical practices. Changes in costs for services and prices of articles which are pre-decided and declared as in the case of petroleum products, food articles and milk through public delivery system and so on should be made, say, once a quarter, may be, effective from the last Friday of each quarter.



On FM and Guv



Both P Chidambaram and Dr Subbarao have created an impression among people that each of them talk openly and known for transparency in performing their duties. Some may argue that FM has more clarity about what RBI Governor should do but gets frightened when someone talks about treasury functions. That is not true. In recent times this is the best time for North Block and Mint Road, as whatever they speak outside (FM to the press and Governor when he gets opportunities to speak to intelligentsia or simply put, elite audience) when they meet they share the same wave length. Who makes adjustments is anybody’s guess. All said and done, we expect a lot from these two and wish both of them extended tenures in the present capacities at least till the turn of this decade, when FM may become PM and Governor may fill the vacancy left by FM!



Business Standard, October 4, 2012



Letters: Gross salaries

Business Standard / New Delhi Oct 04, 2012, 00:15 IST

This refers to Shyamal Majumdar’s column “Much ado about CEO pay” (Human Factor, September 28). When it comes to income and wealth, there is an urge to resist transparency after a certain level. The effort people make to justify the accumulation of wealth in certain pockets gives an impression that this resistance has roots in some real fear of exposure. The frequent averments about things being “legal” confound the confusion.

Kapil Sibal’s observation that “the government can now take decisions without fearing action by any other constitutional body”, in response to the apex court’s opinion on the presidential reference, gives an impression that once an act is cleared as “legal”, no power under the sun can raise an accusing finger against the person performing that act.

Last year, a CEO along with his wife accepted a total salary of Rs 128 crore. Another company that finds it difficult to manage its borrowings in thousands of crores has a CEO who spends in crores to maintain his lifestyle. Maruti increased the pay for its Manesar unit employees by 50 to 75 per cent in September. Nurses in several hospitals in India are paid starvation wages, while the hospitals for which they work make huge profits.

Put these stray issues together and it’s easy to endorse the view of the Stakeholders Empowerment Services that there is a governance and ethical issue hovering around the remuneration structure across the government, the public and private sector and the unorganised sector in India. It’s time for a National Commission on Remuneration Practices. The Commission should go into the adequacy of wages, minimum and maximum remuneration across sectors, their relationship to lifestyle needs of employees and paying capacity of employers, and the need to factor in social security needs like health care and old-age needs in wages.

M G Warrier Mumbai

...and cash facts

It may be a good idea to compute a new ratio of CEO pay by dividing it by market capitalisation of the company.

Companies with managements that are transparent will have a higher price/earnings ratio, hence a higher market capitalisation. Thus, the percentage of CEO pay will reduce and vice versa. If the writer computes this new ratio, he may find a new league table. We all know that the “profit” of a company depends on the accounting policies being followed, which vary from company to company. Managements have much leeway to swing this figure by playing around with depreciation, capital work in progress, inventory valuation policies, provisions for contingent liabilities, deferred tax computation and so on. Hence it is said profit is an “opinion”, while cash is a “fact”.

Tarnindar Singh Mumbai

Top positions in Government, statutory organisations like RBI, CAG and Election Commission, Chief Justices of High Court and upwards in judiciary should be of a much longer tenure than they are now. The age barrier fixed long back should be reviewed. It does not augur well for a country like India to have even the highest post in the judiciary with around one year tenure when the incumbent takes charge, especially when all these individuals are later found to be ‘fit’ for being considered for positions with similar or higher responsibilities. These positions including the Deputy Governor of RBI should have a minimum tenure of 5 years.



Memories of an unsung war: Hindu Magazine, September 30, 2012: Online comments



Most of the time, memories of war are awesome. Except in mythology, till today, wars are fought between nations or armies which never enjoy a ‘level playing field’. 1962 war was thrust upon India, at a time this country was not prepared for a war in any sense. Patriotism of an army and preparedness of a nation to defend its freedom and geography at any cost were the only factors that kept India ‘going’, those days. More tragic is the refusal of those who are destined to have a say in governments today to remember history and the marks (scars) wars have left on the face of humanity. Even at this moment, somewhere in the world, preparations for a war, much more disastrous than the 1962 war is in full swing. Developed nations improve their GDP by marketing war. Reminders like this article should open the eyes of those who are closing their eyes to lessons from the past, lest some of us will be the victims, and today, no bodies will remain to be dug out.



September 29, 2012

When World Heart Day gets submerged in purified sunflower oil, it is soothing to find that Moneylife finds space for covering issues like this. The election of India as a non-permanent member of the UNSC this time was with a massive support from the UN members, with 187 votes out of 192, and now, all BRIC countries namely, Brazil, Russia, India and China are represented on the UNSC. India taking advantage of the present status and its better rapport with major powers represented on the UN, thinking beyond India’s own permanent membership on the UNSC, should take the present opportunity to play the lead role to reform and democratize the UN. The world body invented veto power to enable powerful nations to protect their self-interests when majority forms a cartel and work in collusion to cause damage to individual nations. As the circumstances have changed, in the interest of infusing credibility in the functioning of the world body, India along with like-minded nations should persuade the UN, to think in terms of evolving some rational and acceptable norms for exercise of veto power, if the five nations vested with veto power are not immediately willing to part with the veto power they have been enjoying for long. As most of the world leaders talk democracy these days, it should not be difficult for United Nations to move towards democratic functioning. Its funding and membership should also reflect the size of GDP and population respectively of the member nations.

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