WEEKEND LIGHTER: RBI will move forward

WEEKEND LIGHTER: RBI will move forward
(August 13/14, 2016, No. 33/2016)
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
Encroaching sanctum sanctorum
This refers to the excellent article on “Retrofitting the Reserve bank” by Pulapre Balakrishnan (The Hindu, August 6). Those who are aware of the evolution and functioning of Reserve Bank of India since the central bank’s inception in India will appreciate the deep understanding of the recent efforts by GOI to make RBI subservient to its temporary political ambitions explained in the article.
Till 2008, to be more specific, till Centre started searching for an ‘obedient’ RBI Governor to succeed Dr Y V Reddy, despite expressions of dissent between GOI and RBI, the assertion of ‘ownership rights’ and encroachment into the sanctum sanctorum of the central bank by the former was never so blatant and transparent. The appointment of the Financial Sector Legislative Commission which concentrated more on clipping the wings of RBI rather than worrying about changes needed in the legislations needed to implement financial sector reforms consistent with the transformation of the global financial market during the last couple of decades almost sealed the possibility of a review of the role of RBI envisaged in the Preamble of the RBI Act in 1934.
RBI is still surviving thanks to the inherent strength of the institution developed during its 75 years of existence and the willingness of RBI to resist pressure from GOI, under the able leadership of two successive governors. It is another matter that the memoirs of Duvvuri Subbarao(“Who Moved My Interest Rate?”) attracted media attention and the “Governor’s Overview”, a new chapter written into the Reserve bank of India Annual report 2014-15 by Raghuram Rajan was blacked out by both electronic and print media in August 2015.
M G Warrier, Mumbai
RBI will move forward*
This refers to the report “In his last policy, Rajan puts onus on banks” (Business Standard, August 10). When Reserve Bank of India came out with the last Monetary Policy Statement during the current tenure of Dr Raghuram Rajan’s governorship, media and even most of the analysts and bankers were engaged in searching for Dr Rajan’s ‘last words’. They didn’t find any of them. The document did not look different in presentation and content from the previous ones during the last three years. There was a difference, which went unnoticed.
One can ignore the allegations from Dr Subramanian Swamy that Raghuram Rajan did not study economics at undergraduate level. Dr Rajan effectively put into use the management lessons he picked up from IIMA and his international experience in monetary management, supplemented by the expertise in teaching what he learnt, from day one at Mint Road, with plans to remain active as Governor till September 4, 2016. His reference during his post-policy interaction with media on August 9 to the slew of measures affecting the financial sector to be announced on August 25, 2016 is proof enough to show that the coming weeks are not going to be spent in late night farewell parties by him or his colleagues in RBI.
The challenge Dr Rajan has thrown out to RBI by leading from the front is not small. He has demystified the central bank’s functioning and has changed the way in which the institutional system in the financial sector in India was functioning. The sector was playing a subservient role for which scripts were being written by corporate and political leadership, with implicit support from the babus in the North Block. RBI will definitely rise to the occasion and move forward.
M G Warrier, Mumbai
*A slightly edited version was published in BS on August11, 2016
Recent responses
Legislator’s salary
The well-researched short piece on MPs’ salaries (The Hindu, Parliament, August 11), hopefully, will open a healthy debate on the whole issue of wages and income across sectors and hierarchies in government and private sector in India. The highest paid Indian ‘employee’ who together with his spouse took home a gross annual salary of over Rs 100 crore for several consecutive years was from a small company in South India.
The RBI governor’s annual salary is a small percentage of the gross emoluments of the CEOs of some of the private sector banks. While in government, public sector and some of the private sector organisations there are transparent norms for deciding wages and career progression, these are conspicuous by their absence for majority of the wage-earners in India.
Comparisons with experiences abroad made in the article may not lead us anywhere. It is a fact that, if we factor in the ‘costs’ for becoming a member of parliament, the salary for the uncertain term during which one will remain as an MP is too low by any standard. Thus, the issue reduces to one of ‘who should be deciding MPs’ salaries?.
GOI may consider setting up a permanent body with required statutory authority to monitor the relationship between the nature of jobs and remuneration paid in Government, public sector and in private sector and make recommendations on broad bands of wages payable for different categories of jobs.
M G Warrier, Mumbai
Sensex story
This refers to the interesting piece “The Sensex story in the 25-year reforms period” by Lokeshwarri SK (Business Line, August 8). Without telling, the story also reveals the dangers inherent in depending on the oscillations of the ‘Sensex pendulum’ to assess the health of the financial market or in a broader sense, or for drawing the growth trajectory of the economy.
The composition of the 30 shares reckoned for computing Sensex keep changing with the fortunes of the sectors or management of companies each one of them represent. As brought out in the report, only seven out of thirty which were there  in the basket are surviving after a quarter of a century. The irrelevance of using Sensex as a benchmark for investment decisions become more glaring, once we factor in the changing fortunes of hundreds of other scrips outside the Sensex basket. Market pundits will scare you with market capitalisation figures. But, how many of those scrips with ‘heavy’ market capitalisation will stand the test of a ‘distress sale’ is anybody’s guess.
M G Warrier, Mumbai
Capital administration
This refers to your editorial “Not a full-fledged state” (The Hindu, August 6). The administrative hierarchy and division of geographical regions for convenient governance should not be considered as permanent features and left only to judicial decisions when disputes arise. If it is a fact that administering Delhi as a separate ‘state’ did not pose major problems for decades only because the political leadership which was in charge of Centre and the state of Delhi was the same for most of the time, the present friction should be solved politically rather than by sweeping discomfort under the carpet of law.
Friction also arises in state capitals when Municipal corporations in state capitals are under the hold of political alignments opposite to the ones ruling the states concerned. A relook to find out whether Delhi should be reverted to its Union Territory status and whether municipal corporations in state capitals should be administered by the state governments taking all stakeholders into confidence may be necessary for sustainable solution for the problems faced now.
M G Warrier, Mumbai

Friendship Day, 2016
I have a ship-full of friends to remember today, when I am writing about “Friendship Day” for the first time. A memory recall brings before me faces from two primary schools (One at Onchiyam, Vadakara and another at Purameri both in Kozhikode District), Kadathanad Rajah’s High School, Purameri where I studied between 1952 and 1959, Government College, Madappalli (1959-63), Government High School, Meppayur where I worked as a teacher for about a month, Regional provident Fund Commissioner’s Office, Accountant General’s Office and Reserve Bank of India, Thiruvananthapuram (1963 to 1986) and Reserve Bank of India, Mumbai and Nagpur (1986-2003). They are in addition to several others who came in contact and left sweet memories of friendship.
I will not try to measure the value of the support and love I received from my friends by trying to search for words to say “THANK YOU”. Still, I want to acknowledge that without the helping hands of friends, minus the encouragement I received from friends, I would not have survived to record this note.
M G Warrier, Mumbai
Contract Labour: A necessary evil*

The excellent cover story on “Contract Labour: An era of live-in relationship” (BM, May 2016) should be an eye opener for all the beneficiaries and victims of the age-old practice of legalised ‘bonded labour’ in India. In the Indian context, the debate has more relevance, as several social security systems available in other countries are conspicuous by their absence in this country. Allow me to quote a paragraph from Sir Thomas Munro’s December 31, 1824 observations appearing  in East India Papers (Vol iii, London,1826, quoted in Economic History of India, Romesh Dutt, C.I.E):
 “Even if we could suppose that it were practicable without the aid of a single native to conduct the whole affairs of the country both in the higher and in all the subordinate offices, by means of Europeans, it ought not to be done, because it would be both politically and morally wrong. The great number of public offices in which the natives are employed is one of the strongest causes of their attachment to our Government. In proportion as we exclude them from these, we lose our hold on them, and were the exclusion entire, we should have their hatred in place of their attachment, their feelings would be communicated to the whole population, and to the native troops, and would excite a spirit of discontent too powerful for us to subdue or resist. But were it possible that they could submit silently and without opposition, the case would be worse, they would sink in character, they would lose the hope of public office and distinction all laudable ambition, and would degenerate into an indolent and abject race, incapable of any higher pursuit than the mere gratification of their appetites. It would certainly be more desirable that we should be expelled from the country altogether, than that the result of our system of government should be such a debasement of a whole people.”
I found the above thoughts relevant in the context of the treatment meted out to ‘contract labour’ or the workforce on which the present day ‘service providers’ (a brilliant transformation from the ‘contractor’ of 20th Century!) depend for execution of both skilled and unskilled work for their ‘clients’ (again, not masters, they are now clients!). Just substitute PSUs or corporates for public offices and ‘outsourced’ or ‘contract’ employees for natives in the above narrative and you are close to the present day reality.
Until the country is in a position to put in place a realistic and universally acceptable prices, wages and income policy and a reasonably fool-proof social security system for all categories of citizens, we need to encourage regular employment of workforce by all establishments which can afford that dispensation. Those who work on contract today are exploited by all greedy employers, from multi-national companies to village offices.
M G Warrier
*A slightly edited version appears on page 3 of Business Manager, August 2016


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