M G Warrier's My Page, January 2013

M G Warrier’s
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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 fourth week of every month. Please send your responses and views to mgwarrier@rediffmail.com
Vol III, No 1, January 2013

M G Warrier, MLR-116-B, Mangalam Lane, SASTAMANGALAM-695010 (9349319479)
Dear Reader
My Page is also being posted on Warrier’s Blog 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

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M G Warrier

January 20, 2013

The following articles were published during December 2012-January 2013 (Till January 20, 2013)

1. Taming inflation, December 17, 2012 Moneylife.in

2. Is Direct Cash Transfer good for common man?, Moneylife.in, January 2013

3. Financial inclusion: Surmounting the insurmountable, December 2012, Global Analyst(A monthly magazine published by Media Five Publications,Hyderabad)

4. HRM in banks: Talent deficit is the product of deliberate neglect of HR issues, December 2012, Business Manager, HR magazine.

Book choice


Penguin Books, 2005

Excerpts from introduction:

“This book is about ending poverty in our life time. It is not a forecast. I am not predicting what will happen. Currently more than eight million people around the world die each year because they are too poor to stay alive. Our generation can choose to end that extreme poverty by the year 2025.

**** **** **** **** **** **** **** **** ****

This book will………..help to show the way toward the path of peace and prosperity, based on a detailed understanding of how the world economy has gotten to where it is today…..”


Letters: UPA's last chance?

Business Standard / New Delhi Jan 14, 2013, 00:40 IST

This refers to the debate “Is UID-linked cash transfer a good idea?” (January 10). With every passing day, more inadequacies in the direct cash transfer scheme are surfacing. Reportedly, the government had handed the electoral rolls in respective areas to public sector banks operating in the districts selected for the launch of the scheme, with instructions to ensure that every household has at least one bank account. One wonders about the reason for using electoral rolls, and not Aadhaar numbers. If the Centre’s objective is transparency and fewer leakages in reaching the benefits to the poor, planning should start from the grass-roots level. Local bodies, revenue officials, bank offices and branches, cooperatives, non-banking financial companies and social organisations operating in respective areas should be taken on board while identifying the beneficiaries of the scheme. This programme is different from providing mobile connections, or reaching out with medicine for polio. Banking is a two-way relationship with several changing dimensions. ATMs and hand-machines with banking correspondents cannot substitute for the personal relationship a banker cultivates with his/her clientele over time. But it is quite unlikely that the present political leadership will opt for such a change, since time is running out for them.

M G Warrier, Thiruvananthapuram

Business Standard, January 14, 2013

A K Bhattacharya: Appointments with a purpose

The newfound enthusiasm surrounding the selection of financial services secretary reaffirms the government's intent to oversee state-run banks

A K Bhattacharya / New Delhi Jan 14, 2013, 00:36 IST

Rarely has the appointment of a secretary in the financial services department of the finance ministry generated so much debate and heat within the bureaucracy as with the finding of a successor to the incumbent, Dinesh Kumar Mittal. The secretary in the financial services department is one of five secretaries in the finance ministry. The other four are those in charge of the departments of economic affairs, revenue, expenditure and disinvestment. Some excitement over choosing a successor to any of these five secretaries is understandable, since all of them are quite central and critical to the finance ministry’s task of macroeconomic management and raising resources to bridge the fiscal deficit. Yet, the animated discussion that is going on among civil servants over Mittal’s departure and the choice of his successor is unusual.
There are several reasons for this. Even though Mittal’s role was not as critical as that of his counterparts in the departments of economic affairs, revenue or even expenditure, and until recently he would not even have an independent office in North Block, the ministry’s headquarters, his job per se was not unimportant. Ask any public sector banker or those working for the Reserve Bank of India and they would tell you how Mittal became an important player in India’s financial sector and how he used the financial services department to keep a tight vigil on the way the state-controlled banks functioned or even were regulated.

So when a secretary with such a responsibility leaves the department, questions are bound to be asked about the departure and the choice of his successor. Such questions are likely to be even more intense if that departure date happens to be just a month before the Union finance minister is due to present the annual Budget. Yes, Mittal was to have superannuated by the end of January and, in the normal course, he would have been given an extension for a few months until the Budget exercise was concluded with its passing by Parliament. That, however, did not happen, which gave rise to the speculation over what may have gone wrong.

By all available indications, Mittal did almost everything that the finance ministry wanted him to do. He kept a tight vigil on the state-owned banks, issuing directives on how the bank managements should do their business. The government as a majority shareholder in public sector banks laying down the broad business and financial goals is one thing, but telling the management how to go about doing the business is quite another. Many bankers privately confessed to disapproving of Mittal’s interventions, which they saw as going beyond the government’s brief as a shareholder.

Yet, Mittal’s successor was chosen almost three weeks before he was due for superannuation. Indeed, Rajiv Takru, the man chosen for the job, is moving in as an officer on special duty this week. For the job of a Cabinet secretary, the system of the successor moving in as an officer on special duty a few weeks before the incumbent’s retirement has been in place. But for the financial services secretary, this is a rare development. Or, has the finance ministry got more efficient in its personnel management?

If questions have been raised over Mittal’s departure on his superannuation, instead of the usual extension for a few months because of the Budget, attention has also been focused on how Takru’s appointment got cleared even though there were two other senior IAS officials in the running for the same job, one of whom had a strong backing of the finance ministry. The point is that the financial services department controls all public sector banks, which still dominate India’s financial sector. Its secretary is, therefore, always a useful tool for the government to have for getting things done its way, particularly in a year or so before general elections are due.

That perhaps is also why some civil servants are debating if the time has come for merging the financial services department with the department of economic affairs. Remember that the creation of a separate financial services department in the finance ministry is a recent development. It used to be a division, functioning under the overall supervision of the economic affairs secretary. It is not a good idea to have an independent secretary of an entire department with a secretary, whose primary job is to oversee the state-owned financial entities like banks and insurance companies (and assuming that there are independent regulators for these sectors).

If the finance ministry is reform-minded and against the government’s interference in the way public sector banks and insurance companies function, it must reduce the size of the financial services department and make it into a division of the economic affairs department. If you can justify the demand for reducing the size of the ministries of steel or civil aviation, because much of what they do in today’s liberalized economic environment is to oversee a few state-controlled public sector units, the finance ministry too should see a lot of merit at least in reducing the size of the financial services department.

Posted by: M G WARRIER January 14 , 2013, 21:06 IST

Though the writer has focused only on the change of guard in the financial services department which has attracted attention for its hyper-activity, the debate should be taken forward as the deficiencies in implementing succession plans at the top in government, PSUs and statutory bodies are costing a fortune for the nation. Last few years have seen half-hearted approach on the part of Centre in filling up vacancies at the top in crucial positions, which has adversely affected institutions like UTI and RBI among others. Instances where the absence of succession plans in place affect even the day-to-day administration of crucial ministries and departments are on the increase. The last minute decision on the Presidential candidate last year left the North Block unguarded for sometime. The hasty decision to shift Home Minister to Finance who has taken on himself the responsibility of completing UPA-II agenda in 2013 is proving to be costly for the political leadership. Of late, coalition partners are reluctant to leave governance to the governments they support and expect much more than their proportionate share in decision-making. This approach also impairs the normal HR management in filling up of vacancies and planning succession giving outsiders an impression that it is political expediency that prevails over public interest in governance. In such a situation, one would wish to see Mittal's probable exit on retirement and appointment of a successor well in advance as a welcome deviation from the extant practice and accept it as indicative of emergence of a new era in the Finance Ministry.
Posted by: ashok January 13 , 2013, 22:36 IST

Additional Secretary, Financial Services has also been replaced within a few months.

Letters: Succession plans

Business Standard / New Delhi Jan 16, 2013, 00:01 IST

This refers to A K Bhattacharya’s column “Appointments with a purpose” (Raisina Hill, January 14). Although the writer focuses on the change of guard in the financial services department, his argument can be extended to deficiencies in implementing proper succession plans at the top in government, public sector undertakings and statutory bodies. The last few years have seen a half-hearted attempt on the Centre’s part to fill vacancies at crucial positions — adversely affecting the Reserve Bank of India and UTI, among others. In fact, the last-minute decision on the Presidential candidate last year left North Block unguarded for sometime. Then, the hasty decision to shift the home minister to finance, who has now taken the responsibility to complete the entire United Progressive Alliance-II agenda in 2013, is proving to be costly for the political leadership. Of late, coalition partners are reluctant to leave governance to the governments they support, and expect much more than their proportionate share in decision-making. This impairs the normal HR management in filling vacancies and planning succession, giving outsiders an impression that it is the political expediency that prevails over public interest in governance.

M G Warrier Thiruvananthapuram

Hindu Business Line, January 14, 2013

When and where the roads of Govt and Reserve Bank will meet?

T. V. Gopalakrishnan

January 13, 2013:

As the Government has decided to walk alone with its fiscal policy measures, the Reserve Bank also seems to have decided to walk alone for some more time with its monetary policy measures till it finds comfort level in the matter of inflation Control.

From the latest policy announcement it has been amply made clear that the RBI prefers to remain highly professional not yielding to market sentiments or the Government pressures either.

On the basis of the current macroeconomic assessment, which has not registered any perceptible change since the last review of the monetary policy, the Reserve Bank has decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.25 per cent of their net demand and time liabilities; and keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.

Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) and the bank rate at 9.0 per cent.

By keeping the status quo on its policy rates through its third quarter monetary policy review on December 18, the Reserve Bank has once again shown its professionalism and determination to fight against inflation even at the cost of growth.

It can be well inferred from its policy statements all these years that low inflation will certainly pave way for sustainable growth and people at large deserve to be protected from ever spiraling inflation.

There are clear indications that the RBI is not comfortable and convinced of the inflation trend seen in the economy. Though the Wholesale Price Index and the core inflation may have a declining tendency marginally, the underlying forces continue to be a threat for inflation to register a fall according to the RBI’s assessment.

The Consumer Price Index which affects the people at large more than 80 per cent of the population has been on the rise touching 9.9 per cent and the risks to contain this are far more than what is generally perceived. It all depends on so many ifs and buts which may not come true according to the past trend. The fact that the deposit growth has not been picking up has been reflective of the poor savings potential of the masses.

While the prices of fruits and vegetables have skyrocketed and become untouchable for majority of the masses, they are also not available in plenty due to low production and supply constraints. Banana, which was available at Rs 2-3 a few months back, is costing above Rs 5 a piece. Likewise, the green vegetable, a very common item consumed by masses, has suddenly become a very high luxury and unapproachable item.

The prices of vegetables and fruits are ranging between Rs 40 and Rs 300 in retail markets.

The RBI has admitted in its policy review that both the external and domestic environment have some positive developments but their continuity and stabilization are not convincing for initiating any relaxations in the policy rates for the present. It cannot and perhaps it does not want to, change the track and relax the policy rates as the macro economic factors have not shown any appreciable or sustainable improvements.

The current account deficit which has been in the range of 4.2 per cent of the GDP has not been in the comfort zone and the imports continue to rule at high level although the value of oil has registered a decline and the benefit of which has been nullified by depreciation of the rupee. The fiscal deficit also remains unchanged at5.3 per cent and how far the positive moves of the Government would help to bring down the deficit at sustainable level cannot perhaps be factored into by the RBI.

These ratios can only aggravate in case the GDP falls further. The GDP is forecast to be below 6 per cent this fiscal and it may take some years to touch the 9 per cent level. In this background, the RBI cannot be but cautious in its measures as once they are relaxed, they cannot be rolled back instantly.

The Growth of GDP is not in the in the hands of the Reserve Bank alone. The maximum the RBI can do is to make funds available towards investment and credit and this has not been adversely affected although the money supply and the deposit growth have come down.

The RBI cannot initiate measures to attract investors by its policies. At best, it can only supplement the measures initiated by the Government in this regard. The interest rate though an important component in the factors of production cannot be said to be deterrent as the growth in industrial production has indicated in October.

The RBI is a better judge and professionally equipped to evaluate and decide the cost of money to attract investment and from this angle inflation which inhibits and brings down the real rate of interest for investors has to be necessarily under control on a long term basis.

Last three years’ efforts of the Reserve Bank have not yielded the desirable benefits in inflation front is a sad commentary as the fiscal and administrative measures were not in tune with the monetary policy measures. However, it is gratifying to note that a sort of assurance has been held out by the Reserve Bank by saying that softening of policy rates would be considered in the last quarter commencing from January if inflation index registers a fall and measures are in place to contain the staggering fiscal deficit.

The economy can perform well only if both the Government and the RBI are on the same road and they take joint efforts mutually respecting each other’s role. Hope the roads they are presently on are not parallel.

The policies they take should meet the aspirations of the majority of the people and their welfare. Inflation which is said to be the worst enemy of the masses needs to be drastically brought down and for that the cooperation of the Government, industrialists and the administrators is very much essential. Once inflation is under control, savings will pick up, liquidity in the economy will improve, interest rate will fall, confidence in the Government and the economy will revive and investment will increase and better GDP growth will be the end result. This is what perhaps the RBI is targeting.

(The author is a Consultant in Bangalore. The views expressed are personal)

the govt is making flawed judgments and it's benefiting the wrong people (the businessmen) when it's supposed to help the masses. i don't understand why the govt has given away 2G, COAL FDI for free.

from: ashwani

Posted on: Jan 14, 2013 at 08:49 IST

Whether walking alone or hanging on to the invisible apron string of corporate lobbies or external prescriptions, GOI has not stopped pursuit of creating hurdles in the smooth functioning of RBI. This is evident in the handling of extension of term for Gokarn, frequent announcements about how RBI should carry on with its functions and ‘direct’ instructions to banks through media. The only silver lining is, while GOI is dependent on certain individuals for its teasing game, RBI is standing as one institution in upholding the tradition of carrying on with its mandated role unperturbed. I have no doubt that Urjit Patel will defend RBI’s right approach to Monetary Policy with the same spirit with which Gokarn had supported it. It is not easy to dent the culture of this institution evolved over time. Sorry to go on record, North Block had several ‘yours obediently’ birds of passage in recent years which adversely affected the health of the Indian Economy.


Posted on: Jan 15, 2013
HBL, January 12, 2013


Retailing G-secs

This refers to “G-secs need more retail investors, says RBI’s Khan” (Business Line, January 10). Government Securities are a ‘neglected’ category, perhaps because they have a captive market as banks have to compulsorily hold huge quantities of G-Sec to comply with Statutory Liquidity Ratio requirements. Both the holding pattern of G-Sec and the ratio of G-Sec in SLR need to change.
The Government should move to a situation where investment in G-Sec is attractive for retail investors as a more secure component in their savings.
Banks also should be given other options to invest their SLR funds (the proposed gold-backed financial instruments could be one such option).
When all these are in a transition phase, the Government should put off the idea of shifting management of public debt from the RBI, at least for a decade.

M.G. Warrier


(This article was published on January 11, 2013)

Responding to an observation by FM that ‘Congress ruled states are giving nine cylinders at subsidized price and non-Congress ruled states should be asked to follow suit.

Online comments:
Let us thank FM for his concern for the less privileged in Non-Congress ruled states which he expressed in the following words:

“Congress-run states have made arrangements to provide nine gas cylinders instead of six as stipulated by the Centre...

Non-Congress governments should also take steps to provide such relief to people.”

Let us also make a prayer to the Hon’ble Finance Minister to use his good offices to prevail upon the central government to consider revising the stipulation of six cylinders to nine so that people will make amends for voting Non-Congress governments in next election.
Asking for trouble

Bank licences to industrial houses are a serious error

Business Standard / New Delhi Jan 09, 2013, 00:35 IST

India has not issued a new bank licence since 2004. There is a persuasive case to be made that India’s banking sector needs to be more open; but aspects of the recent decision to award more licences are, none the less, disquieting. Well-informed voices from across the spectrum of opinion have, in the past few days, been raised against the proposal to allow large business conglomerates to set up banks if they have a “successful track record” – judged, presumably, by the licensing authority – and a minimum capital of Rs 500 crore. The head of the Prime Minister’s Economic Advisory Council, C Rangarajan, has urged the Reserve Bank of India (RBI) to start by issuing licences to “non-corporate businesses” first, and to look elsewhere only if there are no such qualified applicants. The left-leaning Columbia University economics professor and Nobel laureate Joseph Stiglitz said in an interview that it would be “very risky” to allow companies to own banks. It was not allowed in the US, he added, and correctly so; the conflicts of interest that it would open up were “sufficiently great” and regulators would “not be able to circumscribe them easily — or at all”. And the right-leaning economist Percy Mistry has also said allowing industrial houses to run banks would leave “massive scope for malfeasance”. Japan, he pointed out, is one country where banks and industries are enmeshed with each other, and it is still to emerge from a two-decade-old financial crisis.

Three voices as distinct from each other as these, and yet making the same point, should give the government pause in its relentless drive towards granting banking licences to industrialists. Ever since it was announced in the Budget by then finance minister Pranab Mukherjee in February 2010, the government has pushed hard for it, against an obviously unwilling RBI, the apex regulator for the sector, and in spite of prevailing expert opinion. Banking is not like any other sector — the conflicts of interest that can be set up in it have the potential to destabilise the entire economy and eventually cost taxpayers a fortune. As it is, Indian taxpayers are bailing out, through state-owned banks, several companies that have benefited from a cosy relationship with bankers. It is not just possible but probable that banks owned by industrial groups with many and varying interests will use their depositors’ money to keep their owners’ concerns going long after other institutions would have thought it wise to withdraw. Eventually such behaviour will destabilise the financial system, and the government will be forced to step in and write some cheques.

The truth is that India needs more world-sized and world-class banks, as the Narasimham Committee had argued. This will not be achieved by increasing the sector’s complexity and instability, the end result of awarding bank licences to industrial houses. Instead, the sector must be strengthened. State-owned banks need to be gradually privatised – whatever the horrified reactions in the Congress to reversing Indira Gandhi’s decades-old mistake – and foreign banks need to operate with fewer restrictions.

[Disclosure: Kotak Mahindra and associates are significant shareholders in Business Standard Limited]
Discussion Board/User Comments (3)

Posted by: M G WARRIER January 09 , 2013, 20:54 IST

I endorse the observations "The truth is that India needs more world-sized and world-class banks, as the Narasimham Committee had argued. This will not be achieved by increasing the sector's complexity and instability, the end result of awarding bank licences to industrial houses. Instead, the sector must be strengthened." While there may not be an easy way out for RBI to resist the present pressure from FM to somehow issue half a dozen or so new bank licences under prescription, it is open to RBI to pursue Narasimham Committee recommendations for structural changes in financial sector. Dr Subbarao will be doing a service to the nation by opening a debate on this issue and making a beginning for structural reforms envisaged in the report.

Posted by: Bhaskar Sen January 09 , 2013, 12:08 IST
Your comment against steps taken recently by the government to award license to large conglomerates to set up banks in the country must be hailed. If after more than 4 decades of bank nationalization governments want to reverse the scenario, it will simply ignore and negate the very purpose of social and developmental purposes of the banking system in the country. Not only then the present robust exposure of agriculture sector to banking will suffer a huge setback because of the private operators' prioritization in financing their own choice areas, it will also cause an immediate death of what we know as priority sector lending. Incidentally, under priority sector come agriculture, small-scale industry, retail trade, small business and small transport activities. It is a known fact, increase in outlay in the farm sector brought Green revolution that witnessed remarkable increase in foodgrain production in north and northwest region in 1970s and in eastern region in 1980s. The successive financial and banking sector reforms introduced by the government have only made the banks rush to achieve the target and making profitability as the only goal, thereby gradually undermining the real needs of the economy. To retain the characteristics of a welfare state, we have to think of leveraging norms to achieve our social goals. Your suggestion in this context for creating more "world-sized and world-class" banks as Narasimhan Committee had argued, will be relevant in the ever increasing competitive global banking scenario only when the refurbished banks in their new avatar will be able to play a significant role in social banking sector too.

Posted by: ashok January 09 , 2013, 00:27 IST

$ 100 million would barely buy a new bank a decent corporate office in BKC. India should be thinking on a much larger scale for its banking sector.

Rajeev Malik: Silencing the RBI

How can the central bank governor deliver appropriate monetary policy when he can't even get the deputy he wants

Rajeev Malik / Jan 09, 2013, 00:59 IST

Being a central banker is a thankless job. This is especially true in developing economies, such as India, where the central bank is not legally independent. This shortcoming makes the bank vulnerable to government interference at multiple levels, including the formulation of monetary policy. The finance ministry’s recent decision not to extend Subir Gokarn’s three-year term as the Reserve Bank of India’s ( RBI&select=1 target=_blank style=text-decoration:none;cursor:hand;>RBI’s) deputy governor, which ended recently, is a good example.

The handling of the case also highlights the numerous gaps that exist in understanding India’s macro challenges and policy making, and our inability to – or insecurity about – responding adequately to market-driven signals across various indicators. A common fixture through the various gaps is a government with its head in the sand.

Technically, the government is within its rights to not extend Mr Gokarn’s term after it ended. But that is not the issue. The real issue is why, especially since a second term typically comes through in order to maintain continuity. Also, RBI Governor D Subbarao reportedly favoured an extension for his deputy. But there is no clarity on the reasons for the government’s action. Disappointingly, while newspapers and wire services widely reported on the decision, an overwhelming majority felt it was not important to raise an eyebrow. So much for India’s free and fair press.

It is an unpleasant fact in countries where the central bank is not legally independent that any serious difference of opinion on monetary policy will, more often than not, result in the central bank compromising. This often leads to sub-optimal outcomes since the government’s political objectives may not match the economic objectives of an apolitical central bank.

The RBI is not legally independent, but selective independence is often conveyed by the personalities of the governor and his deputy governors. Perhaps Mr Gokarn became the fall guy for resisting calls for interest rate cuts by the government and industry lobby groups, despite uncomfortably high inflation and/or for the handling of the rupee. Under him, monetary policy guidance explicitly – correctly, in my view – identified the pressing need for fiscal correction to regain macro stability and to contain inflation. The irony of his unfair fall is that the government, struggling for credibility and whose actions limited the degree of freedom of the RBI in dealing with massive rupee depreciation and stubbornly high inflation, decided who should pay the price.

It goes without saying that the government would have been far less responsive with its constructive measures since last September had it not been for the palpable public pressure from some sovereign credit rating agencies, the RBI and the several economists. Finance Minister P Chidambaram and his predecessor, Pranab Mukherjee, publicly demanded interest rate cuts from the RBI despite consumer price inflation being off the charts. Interestingly, Mr Mukherjee was promoted to become India’s president despite the damage caused to the economy and investor confidence during his term as finance minister.

Depending on who you talk to, the RBI is criticised either for raising interest rates too much or for not raising them sufficiently. It cannot be guilty of both accusations. Among Asian economies, India’s inflation has the most complicated drivers and these cannot be fixed by monetary policy alone. It requires government actions that have been conspicuous by their absence. The RBI cannot be absolved of its responsibility to deliver low inflation, but the complete story of failure has a significant role played by the government. Even the rupee debacle has the government’s policy inconsistency as the key factor behind it. There was no magic wand with the RBI for a quick fix to deal with an overvalued rupee that was a by-product of the government’s own goals.

Differences of opinion are common in economic policy making and observers on the outside can have a different viewpoint from policy makers, and these views are revised often. But there are no second chances in real-life economic policy making. Consequently, in hindsight, every policy maker can perhaps improve upon the initial policy response. But the twist in India’s macro management in recent years has been the government’s policy incoherence and fiscal laxity — meaningful factors in crippling India’s growth story and which made things difficult for the RBI’s fight against inflation.

In some ways, the government’s decision not to extend Mr Gokarn’s term appears to be a censure of Governor Subbarao. His second term ends in September this year, so he could not be shown the door before without rattling investors. Perhaps it was unfortunate that Mr Gokarn’s term ended when it did; it appears to have made him an easy side target. After all, the current government has not been shy of messing around with institutions — the RBI is just the latest addition to that list.

Strangely, Mr Gokarn’s successor, Urjit Patel, a level-headed economist who has wide-ranging public and private sector experience, has been given only a two-year term compared to the typical three-year term. There will be a new RBI governor in September this year, and (hopefully) by next year we’ll have a new government that is, finally, for the people and for the good of the people.

The government should revisit its opaque search criterion and the practice of appointing RBI governors and deputy governors for two to three years and then considering extensions (former RBI Governor Y V Reddy was an exception: he came in on a five-year term under a different government). This practice might work in favour of the government (principally, the finance ministry) in keeping a tight leash on the RBI personnel so that they don’t get too independent especially if that becomes counter to political goals, which are often myopic and self-serving. But two to three years do not even qualify as half a business cycle. The initial appointments should be at least five to seven years, to offer stability and familiarity.

The last thing India needs is an RBI that caters to the government’s whims. But there certainly is a price to be paid by the RBI personnel for disagreeing with the government to do the right thing. This is hardly the recipe for enhancing the credibility of the RBI and boosting investor confidence, which is often used as a vacuum cleaner by the government.

It is worth asking how Governor Subbarao can undertake appropriate monetary policy for the economy (rather than for politicians) without the government’s sign-off when he cannot even get the deputy he wants. For all practical purposes, he has been reduced to being a sideshow for the remainder of his term. It remains to be seen if he, like a “good” bureaucrat, will silently accept the censure or salvage his legacy by standing up for the institution he represents.

The writer is senior economist at CLSA, Singapore.

These views are personal

Latest Messages

Posted by: M G WARRIER January 09 , 2013, 09:53 IST

Future historians of RBI and perhaps Indian Economy would do well to keep a clipping of this article. Several observations here, like, ? A common fixture through the various gaps is a government with its head in the sand', ?Perhaps Mr. Gokarn became the fall guy for resisting calls for interest rate cuts by the government and industry lobby groups, despite uncomfortably high inflation and/or for the handling of the rupee', and ?There will be a new RBI Governor in September, and (hopefully) by next year we will have a new government that is, finally, for the people and for the good of the people' are all comments worth preserving for posterity. Without dampening the underlying hope in the change 2014 may bring, one is tempted to ask whether this sort of blatant arrogance on the part of those in charge of governance, even if it was prompted by survival instinct, was called for, in handling financial sector and through that the fate of economic development of the country, during the last couple of years. The UPA II leadership and the central government (represented through the central ministers) were selective in showing any respect for institutions like RBI and CAG, which, on their part, have a tradition of upholding constitutional mandate. But, a deeper look at the larger agenda on hand with the Centre, major part of which it expects to execute during the year 2013, will reveal that the abnormalities covered in this article are just symptoms of a chronic malice that is troubling governance at the top. Still, how, where and when the undeclared war that North Block is fighting with Mint Road, in an effort to clip dissent ends, will be decisive in the development of Indian Economy. If the Approach Paper notified by the Financial Sector Legislative Reforms Commission is any indication, economists, statesmen and stakeholders in India Growth Story should raise their voice against the ongoing efforts to stifle institutions.

Posted by: ashok January 08 , 2013, 23:15 IST
Too much is being expected from the rate cuts, as and when - and if - they happen. And if a downgrade happens, a lot of our serious economic dialogue will sound like prattle.

Mint, January 8, 2013: Online comments

I-Neglected class

The protest by passengers at Kurla Terminus on Wednesday ( July 21, 2010) should open the eyes of all marketers and service providers who dump third quality products and services on customers who have no choice in the given situation. Whenever someone points out inadequacies, Railways particularly plead helplessness referring to the increased number of passengers they are made to cater to with limited infrastructure and manpower.

That the problem has reached the breaking point is evident from the increasing number of casualties in accidents caused by bad maintenance, overloading of compartments in suburban locals and lack of concentration on the part of staff who are made to work shift after shift without mandatory breaks for rest.
As regards the Lokmanya Tilak Terminus (LTT) episode, another related issue deserves mention. That is the Railways’ neglect of satellite junctions created for reducing pressure at main stations (in this case, CST, Dadar, Mumbai Central) in the matter of providing services, maintenance and ensuring other linkages. The difference in treatment can be seen even in the routes allotted for such stations.

The protest by passengers on Wednesday should be seen in this backdrop and authorities should provide comparable facilities and comforts for passengers traveling from stations like Kurla Terminus as Railways are charging fares at the same rate whether the train travels between CST and New Delhi or between LTT and H. Nizamudeen.

M G Warrier

June 28, 2010
II-Indian Railways
Indian Railways, with about 70,000 route kilometers and more than 8000 locomotives is one of the largest rail-systems in the world. In accepting modern technology and introducing better safety networks and practices also, Indian Railways have made much headway in the recent past. Konkan Railway and Delhi Metro have become legendary landmarks in its march forward. The massive efforts and deployment of huge funds for providing better transport facilities for the millions of passengers and transporters of goods get shadowed by inefficient handling of on-line supervision of services, inadequate attention to maintenance of tracks, premises and coaches as also loss of lives on the tracks in accidents. When the Railway Budget for 2012-13 will be presented next month, one is tempted to suggest to the Railway Minister to consider a one-time performance appraisal/audit of the working of railways, factoring in the following aspects (the list is only indicative):

• Safety of tracks, bridges and other structures which have outlived their normal life or are giving warning signals. Budget should provide a token allocation for replacement/renovation where necessary.

• Review of accidents during the last, say, five years. Preventive action on the basis of lessons learnt from the accidents, progress in payment of compensation to the survivors of those who lost lives and the injured, rehabilitation measures etc

• With specific reference to Mumbai suburban locals, what best can be done to reduce overcrowding in coaches which also causes death/injury to several passengers daily.

• Amenities that can be considered for smooth flow of passengers to and from platforms and from one platform to another.

• Cleanliness of the premises, inside coaches, availability of water in toilets, quality and cleanliness of linen and food provided/served inside compartments.

This appraisal/audit should be in addition to and not by or through the other ongoing inspections/supervisory arrangements.

M G Warrier, Thiruvananthapuram

January 12, 2012

India's two futures

The crime that shook Delhi clarifies economic policy options

Business Standard / New Delhi Jan 01, 2013, 00:30 IST

Nobody knows the name of the 23-year-old student who died on Saturday after she was brutally raped nearly two weeks ago by six men in a white bus with tinted windows that moved unchecked through South Delhi. But aspects of her biography have been reported. Put together, they build a picture that provides a stark and revealing contrast to what is known about those accused of the crime. In a way, as India enters another year with its growth potential intact but ever further from being turned into reality, the contrast between the young woman and her attackers also shows the two paths that India can take from here on. And, importantly, the choice between those two paths isn’t purely a matter of politics or of social reform — it’s a matter of making the right economic choices.

The young woman who died a few days ago in a Singapore hospital was ambitious and driven. Her father worked as a loader at Delhi’s airport — a job that’s about as far from easy or well-paid as it’s possible to get in the formal sector. Yet he could at least afford, thanks to his hard work, a one-bedroom apartment in southwest Delhi for his family of five. A generation out of the eastern Uttar Pradesh town of Ballia, the girl had worked hard to supplement her family’s income, since she was 13; in order to finance her higher education and professional qualification, her father sold some land — a sadly unusual choice when it’s a girl’s education that needs to be paid for. It has been reported that she was independent enough to go out and watch a movie with a boy; that she left home in order to finish her degree; that she liked to dress well, and was looking forward to buying a new phone for her birthday. This is a story of constant self-improvement, based on a supportive family and the greater options available to younger people.

The men who raped and killed her have biographies that are starkly different. Their families may not have been from backgrounds vastly different from that of the girl’s father; they too were mostly one generation removed from villages in North Indian states. But they fell through the cracks in the Indian system — cracks that are so large that they are the system itself. One of them, reportedly the most violent, is a juvenile who came from a broken home and survived without counseling or employment for many years. They are all unmarried; but more to the point, they had no access to the formal employment that grants security, self-worth and a degree of investment in society. Two drove the private bus on which the crime was committed, work that could vanish overnight; a third was their on-board “helper”. One was a vegetable seller; the other a low-paid instructor at one of the “gyms” that have mushroomed across India that serve as informal meeting places for underemployed young men.

Economic policy, other than ensuring women have access to markets, can do little about the misogyny that shapes such men’s minds. But it can certainly ensure that they have more to lose than these men did. India needs a class of factory workers, not of shifting, rootless, angry young men. The casualisation of India’s labour force has led to its lumpenisation, as well. The self-improvement and drive of the young woman is darkly inverted in the angry alienation of the men who raped her. India’s unwillingness to change its labour laws and its delay in pushing manufacturing growth, thinking that the service sector could somehow compensate, mean the first, hopeful narrative is being undermined by the second, darker one. The task in 2013, and forward, is to reverse that.

Posted by: M G WARRIER January 01 , 2013, 21:39 IST

This editorial is a thesis that can, if deciphered and understood by "We, the people", do wonders during the year 2013 which has dawned almost without even the usual greetings from the country's leadership, which was preoccupied with a face-saving operation. The sentences like "But they fell through the cracks in the Indian system- cracks that are so large that they are the system itself" and "The casualisation of India's labour force has led to its lumpenisation, as well" deserve much deeper look by those who are responsible for the country's governance with a view to making amends in their policy approaches which has brought the country to the present chaotic phase. Legislations and policing are necessary to ensure peaceful life. But they are inefficient in improving sense of belonging, self-worth and respect for fellow-humans in the kind of people, who "?have no access to the formal employment that grants security, self-worth and a degree of investment in society". The accusing finger will again point to the way in which we have handled literacy, employment situation and if one is comfortable with the terms, prices, wages and income. Last month, I concluded an article with the following comments, which I would like to quote here: "The speed with which changes are brought about in the approach to governance and financial sector reforms will define the timeframe within which India will be able to come out of the present impasse. Coming out, India will. Present eruptive symptoms show that ?we, the people' will not show the patience with which they waited for generations to gain independence for realizing basic human rights. Financial inclusion will expedite empowerment towards achieving this goal. The segment of the generation which benefited maximum from Liberalisation-Privatisation-Globalisation (those who were in the age group of 15-35, circa 1991) should take the responsibility to take India out of the mess in which the lazy generation to which I belong has landed the country. It will be in their self-interest."

Posted by: ashok January 01 , 2013, 00:19 IST

In the absence of secure blue collar jobs in manufacturing, partly due to policy choices, anything that helps a man feed himself and his family is to be welcomed. The alternative paths will run for decades. Accepting social realities for what they are, the state must ensure both respect and fear for the law. With you, for you, always must be made to work in practice with whatever is needed.



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