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
INDEPENDENCE DAY, 2016
I
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
II
Recent responses
1
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
2
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
3
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
III
LEISURE
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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