M G Warrier's My Page, March 2013



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 fourth week of every month. Please send your responses and views to mgwarrier@rediffmail.com

Vol III, No 3, March 2013



M G Warrier, MLR-116-B, Mangalam Lane, SASTAMANGALAM-695010 (9349319479)

Dear Reader

 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
Regards

M G Warrier

M G Warrier
March 20, 2013

The following articles were published during February-March, 2013 (Till March 20, 2013)

  1. Wage Revision in Banking Sector, March 2013, Business Manager, HR Magazine from Alwar, Rajastan
  2. Succession plans in India need a makeover, March 14, 2013, Moneylife.in
  3. Budget 2013-14, February 2013, Warrier’s Blog
  4. Need to institutionalize behaviour or service audit, February 2013, Moneylife.in
  5. Fiscal deficit: Restore credibility of institutions, February 2013, Global Analyst(A monthly magazine published by Media Five Publications, Hyderabad)
  6. Fast-track justice? The judiciary needs to do more. February 5, 2013, Moneylife.in



Letters/Comments

The Hindu Business Line

Letters

Pension scheme
This refers to the report “Retirement age raised to 60 for new recruits” (Business Line, March 16).
It is intriguing that the Kerala Finance Minister has proposed raising the retirement age of a category of employees who are yet to join the service at a time when his government is struggling for existence. This is likely to be interpreted as a gimmick to divide opinion and divert attention from crucial issues. The ‘innocent’ omission of the relevant proposal while delivering the Budget Speech makes the motives murkier.
M. G. Warrier
e-mail
(This article was published on March 17, 2013)

{For clarifying my position on the subject, unedited version of the letter copied below:



February 28, 2013
The Editor
Hindu Business Line

Letters

NPS challenge

This refers to the report “Rollout of New Pension Scheme in SBI challenged” (February 28). While the Hon’ble court will go into the merits of the prayer limited to application of NPS to employees joining SBI on or after August 1, 2010, it would be prudent for GOI and employees in government (including state governments), public sector organisations and statutory bodies who have been brought under NPS from various dates from January1, 2004 to revisit the pros and cons of introduction of NPS without waiting for the court verdict.
Issues like the legality of commitment taken by IBA from employees’ organisations on introduction of NPS to a category of employees yet to join service and the enforceability of 9th bipartite wage settlement on SBI employees joining service long after the settlement should be gone into by the stakeholders, independent of the present court case. These are matters affecting the legal validity of introduction of NPS by government and various other organisations.
M G Warrier, Thiruvananthapuram}

The Hindu Business Line, March 6, 2013

Letters

RBI appointments

The Reserve Bank is one statutory body in the country which has been able to withstand succession issues for more than seven decades, thanks to the maturity shown by those in charge of governance in New Delhi. Recent developments bring to the fore the need to recall this and give an assurance that the whims and fancies of individuals will not change this image.
In 2011, the timely decision by the Centre to give a two-year extension to RBI Governor D. Subbarao stood apart as a decisive vote for stability at the central bank. A change of guard would have resulted in slowing down of the processes of change in areas such as fighting inflation and forex reserves management.
It would be appropriate now to extend the tenure of Subbarao by another year.
M.G. Warrier
Thiruvananthapuram
(This article was published on March 5, 2013)

{Longer (unedited) version:

Continuity at the top

Reserve Bank of India is one statutory body in the country which has been able to withstand the pangs of succession issues at the top for more than 7 decades of its existence, thanks to the maturity shown by those in charge of governance in Delhi. Recent developments brings to the fore the need to recall this and get a reassurance that whims and fancies of individuals destined to take decisions will not change this image.
In 2011, the timely decision by Centre to give a two-year extension to RBI Governor Dr Subbarao stood apart as a decisive vote for stability at the Central Bank. This ensured continuity of policy perspective at a time when it was needed most and strengthened the RBI to pursue the right course it was following in different areas of its responsibility. A change of guard at that time would have resulted in slowing down of the processes of change in areas like fighting inflation, forex reserves management, financial inclusion and outreach and transparency in policy prescriptions where Dr Subbarao has made perceptible progress.
Recent developments which saw easing out of a Deputy Governor (Subir Gokarn) for no fault of his and compulsions to retain another Deputy Governor for another year calls for a review of the selection and placement procedure at that level. Perhaps the pool from which selection is made and the age profile (raising the upper age limit by 3 to 5 years from the present ‘normal’ at 62 years) need a review. In the circumstances, it would be most appropriate to extend the tenure of Governor Dr Subbarao who is to retire within months, initially by another year at this juncture.
Formulating and implementing succession plans for top government/public sector jobs with professionalism and efficiency in a graceful manner is imperative for allowing the institutions to function with reasonable functional autonomy within the legislative mandates.
M g Warrier, Thiruvananthapuram}


Business Standard  |  New Delhi  March 14, 2013 Last Updated at 21:02 IST

Letters: Responsible charity

This refers to the article “Necessary virtues” (Swot, March 14). Beyond the comfort that corporate social responsibility (CSR) is gaining recognition as a necessary feature of “being rich”, it is soothing to find that entrepreneurs like P N C Menon are leading by example by stating that at least half of his wealth belongs to the society, and individuals who own such wealth have a “trusteeship right” to canalise resources. Such gestures, hopefully, will open a debate that will ultimately redefine CSR.

Spending on social causes, by and large, has remained at the bottom end of priorities of the government and corporations so far. Those rich individuals who have finally started recognising CSR as part of their way of life have done so either too late, or because of “certain compelling circumstances in life” that they had not bargained for. Without struggling to put together a legal definition for CSR, those who are lucky to govern and manage resources that ultimately belong to society should take on themselves the responsibility to alleviate poverty, provide shelter and potable water, promote literacy and ensure reasonably affordable health care. Menon had hogged the limelight in Guruvayur for donating huge quantities of gold to Lord Vishnu, and one expected further follow up of developments in the township in terms of provision of minimum facilities like potable water and a reasonably acceptable waste management system. But I was surprised to discover on a recent visit to Guruvayur that the local middle-class population depended on free food served in temples, and used the money saved to buy bottled drinking water at Rs 15 per litre.
M G Warrier  Thiruvananthapuram


Business Standard  |  New Delhi  February 26, 2013 Last Updated at 21:01 IST

Letters: An innovative Budget

This refers to T N Ninan's column "Nine years later..." (Weekend Ruminations, February 22). With the 2014 general elections approaching, and not much change for the United Progressive Alliance-II in the last one year, the media and economists are not expecting many surprises in the upcoming Union Budget. But the common man continues to hope that the Budget will bring some relief to his mounting woes. From this perspective, the finance minister could factor in some innovative proposals in his Budget speech:
  1. Agriculture deserves more attention from planners and policy makers - not just on the eve of the annual Budget. It is a neglected sector, and the government needs to pay attention to farm-sector production, food security and millions of agricultural labourers who cannot migrate to urban areas. It should be projected as a sector that can graduate to a self-supporting stage, viewed from a "business" point of view. 
  2. The finance minister should propose that the super-rich part with a small portion of benefits that they derived from the liberal government policies of recent years. These include:
    • Steps to price land and other resources "gifted" to corporations and rich individuals under various pretexts at market rates, and plan recovery of costs as and when such "gifts" start giving returns;
       
    • A one-time surcharge on income tax payable by super-rich, and create a rolling fund for financing the social sector;
       
    • According to one assessment, a 10 per cent surcharge on the tax payable by taxpayers, who report an annual income of more than Rs 10 lakh, will fetch Rs 110 crore in a full financial year. A reasonable surcharge on tax payable by this category should be considered.
  3. Abolish the New Pension System (NPS) to absolve employers' commitment to make "matching contributions". As a company's financial position improves, employers should create pension funds to honour future commitments. Simultaneously, the Employees' Provident Fund Organisation should be strengthened, and the scheme made more popular.
     
  4. Stop subsidising interest rates on loans for any purpose, including agriculture, beyond reasonable levels. Kerala has come out with zero-interest rate short-term agricultural loans. If the states do this on their own in such a way, they introduce disincentives.
M G Warrier Thiruvananthapuram
Online comments
VITALINFO, March 19, 2013

On growth and inflation C Rangarajan and Raghuram Rajan have different views:

This comment is limited to the following observation attributed to Raghuram Rajan:
“Rajan however pointed out stagflation is a situation when prices are rising but production growth remains stagnant. With India growing at 5 per cent annually, you cannot say India is facing stagflation. In fact, given the current global situation, a growth rate of 5 per cent annually for a major economy like India is considerable. Most other countries economies are either shrinking or growing at far lower pace. Advanced economies generally are growing, if at all, by just about 2.5 per cent.”
Growth at 5 per cent, and inflation at 10 per cent (overtaking the growth rate by 5 per cent), is as good as ‘stagnant’ growth and 5 per cent inflation. Just to point out that Rangarajan was not ‘off the mark’ and that figures in isolation do not mean much in economics. In politics, such statements help to carry the day. We should avoid comparison with developed economies, as such comparison does not lead us to ‘scientific’ and acceptable conclusions.


Pressure on RBI to ‘cut rates’ (March second week)

This comment is not directed to RBI (RBI knows its job), but to RBI-watchers who get carried away by observations like this from rating agencies and analysts. The continuous pressure on RBI to ‘cut rates’ and the assurance that a rate cut will do wonders in economic growth and the threat of downgrade are tactics being played by vested interests which do not care about the impact of inflation on more than 60 per cent of India’s population who contribute most to the country’s growth and have no voice in deciding the wages they should get or the price they should be paying for their survival needs. RBI should (and will) continue to have a total view of the impact of its policy measures on the common man. The fiscal policy which is caged by the rich and the powerful as also external pressures need a makeover factoring in the concerns expressed by RBI expressed through Monetary Policy statements, almost bi-monthly, these days.

Economic Times Mythili’s Blog, Online comments, March 18, 2013
M G WARRIER says:
March 18,2013 at 06:40 PM IST
I agree with the views expressed in this article. But the distorted priorities in planning and resource deployment from the central pool, especially during the last two decades, call for a re-look at the way we are making allocations to different sectors and different geographical areas. Pulls and pushes from different pressure groups, which are dominating the management of India’s resources are fast taking the country to a position which may raise serious issues affecting its federal character. Unless governments at centre and in states, Planning Commission, political leadership and social activists address this issue from a pragmatic angle, there could be irreparable social and political consequences which will cause a set back to economic development.

On CSR, March 12, 2013(email to ForbesIndia)

ForbesIndia (March 22, 2013) cover feature on Corporate Social Responsibility (CSR), hopefully, will open a debate, which, ultimately will redefine CSR. The government’s and Corporates’ hesitant approach to CSR can turn out to be harmful to the country and in the process to corporates also, in the long run. Spending for supporting social causes, by and large, has remained at the bottom end of the priorities for government and corporates so far. Those rich individuals from certain corporate empires who have started recognizing CSR as part of their way of life have done so either late in life or because of ‘certain compelling circumstances in life’ which they had not bargained for. Without struggling to put together a legal definition for CSR, those who are lucky to govern and manage resources which ultimately belong to the society should take on themselves the responsibility to eradicate hunger and poverty, provide shelter and potable water, promote literacy at least to the school level, ensure reasonably affordable healthcare for those in the ‘command area’ of their governance or business/industry. Fixing a percentage or routing money through PM’s Relief Fund are all niceties which may cover shame but will hardly ensure acceptable quick results.

M G Warrier, Thiruvananthapuram
March 12, 2013

Woman’s Bank, Online comments, VITALINFO, 110313

SEWA is a model that could have been replicated in several districts in India in different times and situations. But successful models which are workable in Indian conditions do not get the needed encouragement from planners and policy makers. I doubt whether the Woman’s Bank announced in the budget is really going to be a Woman’s Bank. FM said, and I quote…”…Can we have a bank that lends mostly to women and women-run business, that supports women SHGs and women’s livelihood, that employs predominantly women, and that addresses gender related aspects of empowerment and financial inclusion? I think we can. I therefore propose to set up India’s first Women’s Bank as a public sector bank….” The proposal is vague enough for interpretation. It is a ‘toy’ PC can ask for. Let India buy it for him
Let us remember PC’s earlier ‘avatar’ when he joked that 50 Local Area Banks with 5 crore capital each catering to 2 crore population will bring banks to every door. And RBI took it seriously and kept some engaged processing license applications. Do not really know what happened to some LABs which were really ‘launched’.”
For solving the real grass-root level problems facing women and other weaker sections of society, Ela Bhats will have to continue their efforts and wait for a mention in passing and a pause for applause while FMs make budget speech.  A public sector bank has a kind of identity which cannot be made over by giving it a ‘gender-focus’. Specialization is more necessary along the delivery line of services and processes, post-credit, rather than in providing capital from the top. From this perspective, there is abundant scope for the government and banks to support formation and sustenance of ‘SEWA’ model organisations for supporting financial inclusion, not necessarily with gender-bias.


Gurumurthy’s article on super-rich, The Hindu

As always, excellent analysis by Gurumurthy. Now that, based on his perception and information he thought correct, FM has revealed there are ‘only’ 42,800 persons in India who admitted to a taxable income exceeding Rs1 crore per year, let us help him to take the issue forward. As privacy and secrecy issues will prevent FM from giving out the names of these 42,800 persons, he should arrange to prepare a district-wise list of these individuals and provide to each District Magistrate/Collector the number (only the number) of rich people in the respective districts who have annual income exceeding Rs1 crore. Collectors should be asked to make ‘discreet’ enquiries and report ‘who’ these persons could be and who all are likely ‘omissions’ in the list. Quite possible, GDP may not grow at the expected growth rate, but, next year (2014), FM will be able to give a decent six-digit figure against the 42,800 he included in the current Budget Speech.





Moneylife, Online comments, March 10, 2013

First let me quote my own comment recorded earlier in response to another article on the same subject @Moneylife itself:
“It is not really Woman’s Bank. FM said, and I quote…”…Can we have a bank that lends mostly to women and women-run business, that supports women SHGs and women’s livelihood, that employs predominantly women, and that addresses gender related aspects of empowerment and financial inclusion? I think we can. I therefore propose to set up India’s first Women’s Bank as a public sector bank….” The proposal is vague enough for interpretation. It is a ‘toy’ PC can afford. Let India buy it.
Let us remember PC’s earlier ‘avatar’ when he joked that 50 Local Area Banks with 5 crore capital each catering to 2 crore population will bring banks to every door. And RBI took it seriously and kept some engaged processing license applications. Do not really know what happened to some LABs which were really ‘launched’.”

Sucheta, you have brought out the controversies that can arise, if GOI goes ahead with this proposal. A public sector bank has a kind of identity which cannot be made over by giving it a ‘gender-focus’. As you rightly said, specialization is more necessary along the delivery line of services and processes, post-credit, rather than in the business of banking. All these, anyone at very junior level in RBI would have explained to those around FM, if only there was a meaningful exchange of views at the appropriate time before budget announcement.

Economic Survey, 2013

Economic Survey 2013 has identified ‘scarcity of resources and competing demands’ as the stumbling block for India’s economic development. Correct diagnosis takes you half way to possible cure. Once the hurdles are identified, there should be conscious efforts to overcome them or where such efforts will take time, to find out and implement alternate medium term solutions for immediate problems. This is where one expects pragmatism in approach from a government which has limited time to show results. No, here the reference is not to the 2014 Election. The eruptive symptoms showing up in recent years are becoming more and more severe and it would be tough to borrow time by telling stories of past glory or making promises about future action.
Government at this stage should wake up to the resources lying idle in the form of black money, accumulations with corporates and other beneficiaries of liberalisation, national assets like gold and real estate remaining unproductive in various corners of the country and also send out a loud and clear message about social responsibility and patriotic approach to extravagance by those who have become rich and super-rich by short-cuts allowed by lax government policies. Otherwise, future Economic Surveys and Budget speeches will become repetitive and boring.
M G WARRIER, Thiruvananthapuram, February 27


On new bank licenses:

Ideal situation in which regulators and supervisors can function with autonomy within the legislative mandate does not exist today. GOI through Finance Ministry has been pulling and pushing RBI ever since the idea of new bank licenses got momentum a couple of years back. RBI had limited options. One, rush through the formalities and give half a dozen bank licenses to those who could ‘manage’ them in the given dispensation. Two, go through some semblance of rational procedures and buy some time when the central bank could convince GOI about the dangers in giving banks to ‘manipulators’. Three, convince GOI that financial sector reforms and consolidation/overhaul of existing banks was a priority and there was no immediate purposes that will be served by allowing new banks. Now, it seems RBI is going for a fourth option, namely, accept applications from all, give licenses to some under pressure, some others whom RBI consider genuine aspirants and bring to the discipline of banking yet others who are already doing several things which normally banks are expected to do. It will be a tough job for the banking industry to come out of the present mess.

Direct cash transfer: Merits and demerits, ET 260213
Online comments

M G WARRIER (THIRUVANANTHAPURAM)
Not long ago, PM made the following observation at a review meeting of progress made in the preparations for launching ‘Direct Cash/Benefit Transfer’ programme: “The twin pillars for the success of the system of Direct Cash Transfers that we have envisioned are the Aadhaar Platform and Financial Inclusion. If either of these pillars is weak, it would endanger the success of the initiative.” Anyone familiar with the happenings on the Aadhaar platform and those who have been following the chase after ‘Financial Inclusion’ since 1970’s (Lead Bank Scheme era) till date will have the same apprehensions briefly coming out in the PM’s observation. Reportedly, government has handed over the electoral rolls to the Public Sector Banks operating in the districts selected for launch of Cash Transfer from January 1, 2013 with instructions to ensure that every household in these districts has at least one bank account. Bank employees may not risk their jobs by not adhering to the ‘instructions’ from North Block. We can only wonder why electoral rolls and not AADHAAR numbers were being used. Someone says, when everything is with Elections 2014 in view, why not start with electoral rolls in the first place! What happens to bank accounts, insurance policies, RDs, accounts with commitments to pay dues in installments by various agencies including Mutual Funds could be easily assessed, if the ‘unclaimed’ deposits in such accounts are subjected to scrutiny.

Rollout of New Pension Scheme in SBI challenged
Vinson Kurian
Kerala High Court admits petition filed by staff union; hearing next month
Thiruvananthapuram, Feb. 27:
The High Court of Kerala has admitted a writ petition filed by State Banks’ Staff Union (Kerala) to quash implementation of the New Pension Scheme (NPS) in State Bank of India.
The writ also prayed for directions to revert those recruited on or after August 1, 2010, back to existing pension scheme.
HEARING POSTED
Justice P. N. Ravindran has posted the case for further hearing after a month.
The interim order directed that amounts contributed by employees towards the pension fund be kept in a separate account and maintained with the trustee bank.
The case was filed by A. Jayakumar, General Secretary of State Banks’ Staff Union, Kerala Circle.
The petitioner recalled that NPS was implemented as part of the industry-level 9th  bipartite wage settlement.
As per this, Defined Contribution Pension Scheme (DCPS)/NPS would apply to those joining services on or after April 1, 2010.
But this settlement between Indian Banks’ Association and unions of other banks would not apply to SBI, the petitioner contended. This is because the bank was not party to this settlement insofar as pension-related matters were concerned.
But central board of SBI on November 8, 2010, decided that all employees joining in permanent scale on or after August 1, 2010, shall be offered only the benefit of DCPS.
The SBI Act did not empower the central board to amend pension fund rules, and that too with retrospective effect, it was contended.
PARLIAMENT NOD
The SBI Act also makes it clear that any regulation framed in this manner will have to be laid before Parliament.
It will take effect in the existing or modified form as decided by both the Houses of Parliament only.
In the present case, the central board has taken a unilateral decision to modify the pension scheme.
Legal recourse was also being sought on grounds that the pension scheme once framed cannot be modified without issuing notice.

Comments:
While the Hon’ble court will go into the merits of the prayer limited to application of NPS to employees joining SBI on or after August 1, 2010, it would be prudent for GOI and employees in government (including state governments), public sector organisations and statutory bodies who have been brought under NPS from various dates from January1, 2004 to revisit the pros and cons of introduction of NPS without waiting for the court verdict. Issues like the legality of commitment taken by IBA from employees’ organisations on introduction of NPS to a category of employees yet to join service and the enforceability of 9th bipartite wage settlement on SBI employees joining service long after the settlement should be gone into by the stakeholders, independent of the present court case.
from: M G WARRIER
Posted on: Feb 28, 2013 at 13:51 IST
Very happy to see that there are still media people who have their eyes
wide open to the hue and cry of the general public in these dark days of
dirty political-corporate-media-judicial axis! Long Live Vinson Kurian!
from: Austin G
Posted on: Feb 28, 2013 at 22:30 IST
Congrats Mr VINSON KURIAN and The Hindu Business Line for such a
fantastic work......
from: Jayakrishnan B
Posted on: Feb 28, 2013 at 23:55 IST

Budget 2013-14: Only 42,800 rich individuals paying income tax!

Pre-budget speculations and post-budget analysis are both indicative of the real mood of the people, who, otherwise, take things in their stride and live a normal life. It would appear, as if, it is the rich who are the only people contributing to country’s GDP. Let economists bother about this.
FM has revealed that there are ‘only’ 42,800 persons in India who admitted to a taxable income exceeding Rs1 crore per year. As privacy and secrecy issues will prevent FM from giving out the names of these 42,800 persons, he should arrange to prepare a district-wise list of these individuals and provide to each District Magistrate/Collector the number (only the number) of rich people in the respective districts who have annual income exceeding Rs1 crore. Collectors should be asked to make ‘discreet’ enquiries and report ‘who’ these persons could be and who all are likely ‘omissions’ in the list. Quite possible, GDP may not grow at the expected growth rate, but, next year (2014), FM will be able to give a six-digit figure against the 42,800 he included in the Budget Speech.


FOR YOUNG READERS

RETIREMENT SAVINGS-1

How much is enough? 
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This is the first part of a two-part retirement savings programme. Retirement Savings – II will focus on how to generate what you need. Date for the second part to be announced shortly.


Debashis Basu, Trustee of Moneylife Foundation and Editor and Publisher ofMoneylife magazine, is a Chartered Accountant by qualification with 29 years of experience as a journalist. He is also the author of several business books like 'The Scam', 'Pathbreakers' and the Plain Truth series. Mr Basu has worked with The Times of India, Business World, Business India, Business Today, Financial Express and has written columns for Business Standard and The Economic Times. He was a member of the Task Force of SEBI on the creation of IndoNext market segment for smaller companies and has also served as a member of the Mutual Fund Advisory Committee of SEBI.

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