WEEKEND LIGHTER: Who Moved My Interest Rate?

WEEKEND LIGHTER: Who Moved My Interest Rate?
(July 16, 2016, No. 29/2016)
Weekend Lighter is posted every Saturday @mgwarrier.blogspot.in
Feel free to mail your views on this edition of WL to mgwarrier@gmail.com
Opening Remarks
Who Moved My Interest Rate?
The highlights from former RBI Governor Dr D Subbarao’s book “Who Moved My Interest Rate-Leading the Reserve Bank of India Through Five Turbulent Years”* flashed across mainstream media on July 15, 2016, may not come as surprise revelations for RBI watchers. Still, Dr Subbarao deserves a special thanks for putting together the thoughts of the well-wishers of India, in a manner that should pierce through the stubborn bureaucrats in the Finance Ministry and the ‘seasoned’ politicians who danced to their tunes during the period covered in the book.
 The fig-leaf that tried to cover shame and give an impression to the outside world that the relationship between GOI and RBI is unlikely to break, come what may, has been removed. The highlights also explain why Dr Rajan is waiting for the end of the current term, to leave Mint Road.
In an article** written on Dr Raghuram Rajan in August 2013, when his appointment as 23rd Governor of RBI was announced, I had suggested Dr Rajan read History of RBI, Volume I. My present suggestion for the prospective 24th Governor is to own a copy of Dr Subbarao’s present book and get back to it whenever the choice is between advice of conscience and the expectations of political leadership or ‘veterans’ in the finance ministry.
S S Tarapore used to write that RBI Governor and his deputies have constraints as their continuance is at the sweet will of GOI. The finance ministry interference does not stop with policy issues affecting economy, but percolate to minor HR-related wage and pension matters governed by independent statutes and regulations. If successive RBI Governors and their deputies are fighting for RBI autonomy and falling, time is opportune for a review of GOI stance on the issue, to restore the prestige of India’s central bank in national interest.
M G Warrier, Mumbai
**Included as Chapter II-5 in my 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India”*, pp 60-64. See page 31ibid to read:
“…Recent years saw several flaws in HR Management in the central bank. Adhoc recruitment of Executive Interns without planning their future deployment or absorption, succumbing to pressure on promotion policies, not being able to convince GOI the need to implement competitive remuneration packages for recruiting and retaining efficient officers, failure to decide on updation of retirement benefits at least on par with GOI are just some examples. When it comes to infusing professionalism in specialised areas like supervision, forex and debt management, RBI is facing several constraints, many of them emanating from its failure to argue with North Block, as Finance Ministry shows an attitude akin to master-servant relationship.”
*These books are marketed by amazon.in also, at discounted prices.
Recent responses
Handling talent deficit
Apropos Shankar Acharya’s article “Economists in India: endangered species?” (Business Standard, A Piece of My Mind, July 14), one appreciates the dispassionate presentation of a serious issue affecting governance and nation’s talent pool in equal measure. The problems are not confined to economists or their deployment in top positions in government, though.
The short term stay of incumbents as Chief Economic Advisor and RBI Governor in the recent past by example must be an eye opener for those handling their selection and posting. As all are not Raghuram Rajans, to be in a position to start swimming the moment they are thrown in troubled waters, a longer tenure for individuals being posted in top positions is a necessity. The earlier we accept this reality, the better for the country.
In India, policy continuity and overall ‘management’ in governance is being ensured by bureaucracy. Part of the credit for this should go to the British who introduced Indian Civil Service and to the political leadership post-independence which ensured continued existence of a reliable and efficient top level bureaucracy. A revamp of Indian Civil Services keeping in view the talent needs of all sectors including commerce and finance is overdue.
Times have changed. Constituency interests of different services within ‘Civil Service’, influence of various denominations of political leadership, the unstated ban on civil servants to express views unpalatable for the ruling coalition and government being forced to recruit candidates who fail to get recruited by reputed corporates or go abroad for higher studies have made government servants less efficient, as a class. This is evident from the struggles GOI goes through whenever a vacancy arises at top level in any of the statutory bodies or PSUs.
The outflow of talent and the return of some of those talented Indians abroad only for improving their CVs or taking up some stop gap assignments before joining another MNC or returning to greener pastures can also be traced to the low remuneration packages offered by GOI.
M G Warrier, Mumbai
 Moving with the times
Apropos “Banking institute turns to mobiles, tablets to teach ‘Gen Y’” (The Hindu Business Line, July 12), it is heartening to see that reputed organisations are making conscious efforts to keep pace with the changing times. If financial sector has to do justice to the rising expectations of society, skill development and improvement of knowledge base has to be an ongoing process for all, from policy makers to the junior-most employee in the branch of a bank. For several decades, IIBF has been carrying out this responsibility in respect of bank workforce, excellently well.
Perhaps, with dependence on brick and mortar offices and teachers in the field getting reduced, organisations like IIBF may be in a position to spread their wings into areas beyond their mandated territories.  May be, to start with, an online class for a foundation course in banking and finance for graduates could be considered. Such a course may be beneficial for students, who may opt for a career in the financial sector and for laymen who would like to improve their financial analysis skills.
M G Warrier, Mumbai
Rent on savings
This refers to the report “Jaitley questions high interest rates on savings” (The Hindu, July 10). As the occasion was a function at which the majority of the audience must have been stakeholders in equity market, a reasonable bias in FM’s speech to promote non-cash savings is understandable. But the questions raised by him need to be answered.
Jaitley is right when he says that a substantial portion of India’s domestic savings that get converted as deposits in banks and post offices which also include savings mobilised by GOI via PPF, National Savings Schemes, EPF and similar routes. A part of these get back into GOI’s resources for investment through government’s market borrowing route which is sustained by statutory provisions (e.g. SLR deposits of banks).
Interest is the rent on the cash savings the saver gets. As the original investment does not appreciate in value as in the case of investment in real estate or gold, the depreciation in value also need to be factored in in the interest rate. Simply put, the depositor is entitled for a positive interest rate, net of inflation. It is easy to confuse common man by comparing interest rates in India with those prevailing in countries where inflation is low or ‘negative’.
The finance minister’s reference to ‘pension funds’ and equity market as an alternative avenue for savers to invest their funds makes a valid point. For that retail investors’ trust has to be built up by making available investor-friendly financial instruments. Small savers in India are more aware of the risks involved in investments in equity market. Incidentally, government is yet to move towards a dependable retail market for its own offerings and GOI’s own organisations like EPFO are not allowed to invest in equity market freely. GOI’s fund management leaves much to be desired.
M G Warrier, Mumbai
Advice From a 104-Year-Old Doctor***
Dr. Shigeaki Hinohara, from Japan, turned 104 recently. One of the world's longest-serving physicians and educators, Hinohara's magic touch is legendary. Since 1941, he has been healing patients at St. Luke's International Hospital in Tokyo and teaching at St. Luke's College of Nursing. He has published around 15 books since his 75th birthday, including "Living Long, Living Good", which sold more than 1.2 million copies.
As the founder of the New Elderly Movement, Hinohara encourages others to live a long and happy life - a quest in which no role model is better than the doctor himself. Nearly 10 years ago, he was interviewed, and gave his advice for a long and healthy life. Dr. Shigeaki Hinohara's main points for a long and happy life are: 

1. All people who live long regardless of nationality, race or gender share one thing in common: None are overweight.
For breakfast I drink coffee, a glass of milk and some orange juice with a tablespoon of olive oil in it. Olive oil is great for the arteries and keeps my skin healthy. Lunch is milk and a few cookies, or nothing when I am too busy to eat. I never get hungry because I focus on my work. Dinner is veggies, a bit of fish and rice, and, twice a week, 100 grams of lean meat.

2. Always plan ahead.
My schedule book is already full until next year, with lectures and my usual hospital work.

3. There is no need to ever retire, but if one must, it should be a lot later than 65.
The current retirement age was set at 65 half a century ago, when the average life-expectancy in Japan was 68 years and only 125 Japanese people were over 100 years old. Today, Japanese women live to be around 86 and men 80, and we have 36,000 centenarians in our country. In 20 years we will have about 50,000 people over the age of 100...

4. Share what you know.
I give 150 lectures a year, some for 100 elementary-school children, others for 4,500 business people. I usually speak for 60 to 90 minutes, standing, to stay strong.

5. When a doctor recommends you take a test or have some surgery, ask whether the doctor would suggest that his or her spouse or children go through such a procedure.
Contrary to popular belief, doctors can't cure everyone. So why cause unnecessary pain with surgery? I think music and animal therapy can help more than most doctors imagine

6. To stay healthy, always take the stairs and carry your own stuff.
I take two stairs at a time, to get my muscles moving.

7. My inspiration is Robert Browning's poem "Abt Vogler."
My father used to read it to me. It encourages us to make big art, not small scribbles. It says to try to draw a circle so huge that there is no way we can finish it while we are alive. All we see is an arch; the rest is beyond our vision but it is there in the distance.

8. Pain is mysterious, and having fun is the best way to forget it.
If a child has a toothache, and you start playing a game together, he or she immediately forgets the pain. Hospitals must cater to the basic need of patients: we all want to have fun. At St. Luke's we have music and animal therapies, and art classes.

9. Don't be crazy about amassing material things.
Remember: you don't know when your number is up, and you can't take it with you to the next place.

10. Hospitals must be designed and prepared for major disasters, and they must accept every patient who appears at their doors.
We designed St. Luke's so we can operate anywhere: in the basement, in the corridors, in the chapel. Most people thought I was crazy to prepare for a catastrophe, but on March 20, 1995, I was unfortunately proven right when members of the Aum Shinrikyu religious cult launched a terrorist attack in the Tokyo subway. We accepted 740 victims and in two hours figured out that it was sarin gas that had hit them. Sadly we lost one person, but we saved 739 lives.

11. Science alone can't cure or help people.
Science lumps us all together, but illness is individual. Each person is unique, and diseases are connected to their hearts. To know the illness and help people, we need liberal and visual arts, not just medical ones.

12. Life is filled with incidents.
On March 31, 1970, when I was 59 years old, I boarded the Yodogo, a flight from Tokyo to Fukuoka. It was a beautiful sunny morning, and as Mount Fuji came into sight, the plane was hijacked by the Japanese Communist League-Red Army Faction. I spent the next four days handcuffed to my seat in 40-degree heat. As a doctor, I looked at it all as an experiment and was amazed at how the body slowed down in a crisis.

13. Find a role model and aim to achieve even more than they could ever do.
My father went to the United States in 1900 to study at Duke University in North Carolina. He was a pioneer and one of my heroes. Later I found a few more life guides, and when I am stuck, I ask myself how they would deal with the problem.

14. It's wonderful to live long.
Until one is 60 years old, it is easy to work for one's family and to achieve one's goals. But in our later years, we should strive to contribute to society. Since the age of 65, I have worked as a volunteer. I still put in 18 hours a day, seven days a week, and love every minute of it.

15. Energy comes from feeling good, not from eating well or sleeping a lot
We all remember how as children, when we were having fun, we often forgot to eat or sleep. I believe that we can keep that attitude as adults too. It's best not to tire the body with too many rules such as lunchtime and bedtime.

***Source: An email forward from Dr T V Gopalakrishnan


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