WEEKEND LIGHTER: RBI focus on National Balance-Sheet
WEEKEND LIGHTER*: National Balance Sheet
(April 8 /9, 2017, No.14/2017)
*Weekend Lighter is
posted every Saturday at www.warriersblog.com
(Please note the change
from earlier mgwarrier.blogspot.in)
Section III: A rose is a ROSE…
I
Cover Story
Reserve Bank of India focus on
National Balance-Sheet
Reserve Bank of India
(RBI) Governor Urjit Patel on
Thursday expressed displeasure over the current spate of farm loan waivers and
said these adversely affect the culture of repayments as well as put a severe
burden on the exchequer.
“I think it
undermines an honest credit culture. It impacts credit discipline. It impacts
incentives for future borrowers to repay. In other words, waivers engender a
moral hazard,” he said, after announcing the first bi-monthly monetary policy
for 2017-18.
The RBI governor
added, “We need to create a consensus that such loan waiver policies are eschewed.
Otherwise, sub-sovereign fiscal challenges in this context could otherwise
affect national balance sheets.”
My Response:
This
refers to Abhijit Lele’s brief report “Urjit Patel slams loan waivers” (Business
Standard, April 7). RBI Governor’s observation “I think it undermines an honest
credit culture. It impacts incentives for future borrowers to repay. In other
words, waivers engender a moral hazard…” echoes the gist of RBI’s consistent
stand on loan waivers which was articulated on several occasions in the past
including at the time of the introduction
of Agricultural and Rural Debt relief Scheme (ARDRS), 1990. Centre and state
governments, on most of the occasions, went ahead with their political agenda
of such waivers which are partly responsible for spread of the malignancy of
financial indiscipline to other sectors.
This
time around, RBI has given the message loud and clear and the reference to
‘national balance-sheets’ should wake up the policy makers and opinion makers to
the reality of the situation. When taxpayers money is diverted to purposes
other than those for which taxes are collected and budgeted, governments will
have to borrow to meet the extra burden which will create imbalances in fiscal
management. Many popular schemes like
‘freebies’, tax concessions to corporates, and refusal to bring certain sectors
like agriculture within tax net are already making the budget exercises at
Centre and states level slip out of the accepted contours of financial
discipline.
While
RBI advice to move towards a consensus to eschew politically motivated
agricultural loan waivers is timely and welcome and needs to be taken
seriously, simultaneous efforts are necessary to provide relief to genuine
borrowers. Such supports would include providing crop insurance, ensuring all
linkages for getting timely inputs at reasonable costs, irrigation facilities,
cost-related farm gate price, storage
and transport facilities for perishable farm products and so on at
reasonable costs.
M G Warrier,
Mumbai
II
Recent responses
RBI
should respond
Apropos
“His Master’s Voice?”(Hindu Business Line, April 5), Government, institutions and individuals need to be seen to be honest
and transparent in the conduct of their "business". More than any time
in the past, this is necessary today because, misinformation can spread much
faster their today through social media. People have become addicted to
negative sensational stories which, of
late are being used even by reputed media houses to remain ‘popular’.
Post-Demonetization, an Economists-sponsored propaganda that
lakhs of crores worth SBNs will not get deposited back to banking system,
making GOI richer has been unleashed by vested interests. Even official
documents like the Economic Survey 2016-17 doled out presumptive figures and
‘proposals’, giving credibility of sorts to the gossips. In such situations,
RBI could have come out and clarified issues, as was being done when Dr
Raghuram Rajan was Governor.
Having said that, RBI has never been secretive about Bank's
or GOI's assets and liabilities figures. All the speculations to the contrary
will come to an end when RBI Accounts for the current year are published in
August 2017. Meanwhile, it is in nation’s interest not to belittle RBI through
media gossips, just because the present Governor and his Deputies are not
media-addicts.
M
G Warrier, Mumbai
Rupee
ruminations*
Latest revision of
petrol/diesel prices by public sector oil companies also has been done with per
litre price changes in rupees and paise. Earlier, there were revisions in fuel prices
in ‘paise’ terms only.
Coins up to 25 paise have been withdrawn from
the market and 50 paise coins have been pushed out of circulation by market. In
the circumstances, GOI and RBI should consider making absence of coins with
denominations below one rupee official and guide the market to fall in line by
pricing all products in rupee terms only.
Now that dollar is accepted as the name of the
currency accepted in international market, and we are in the process of
‘branding’ India, GOI could think in terms of introducing an Indian New
Rupee(INR) worth the present value of Rs50 or so which could be named Indian
Dollar or Bharat Chakra or any other attractive name that could be decided
after conducting a competition.
Better still, India could persuade BRICS to
introduce a common currency for member-countries which could be used for
transactions among BRICS nations. Of course, in such a situation, member
countries will have to retain their own present currencies for domestic
transactions.
M G Warrier, Mumbai
*Letters, The Hindu
Business Line, April 5, 2017
Unnecessary
debate*
This refers to
the report “Infosys defends pay hike for COO Pravin Rao” (Business Standard, April
4).
Read
with this a totally unrelated report on pay rise granted to RBI Governor and
his Deputies effective January 1, 2016. Transparency in norms and openness in
implementation of decisions taken in ‘good faith’ need to become part of
governance in government, public sector and corporates.
According
to the official version, the first one was a decision taken by Infosys Board to
revise the compensation package of COO Rao consistent with the company’s
‘philosophy of aligning the interests of
its leadership team to long term shareholder interests’. The GOI decision to
revise the basic salaries of RBI Governor and his deputies from the level of
Rs90,000 and Rs80,000 (fixed more than a decade back) to Rs2,50,000 and
Rs2,25,000 (merging a major portion of Dearness Allowance), effective January
1, 2016 followed the pattern recommended by VII Pay Commission for comparable positions in GOI. Both should not
have attracted adverse debates.
One
would expect eminent statesmen like Narayanamurty and Tata to now focus on
broader issues of national interest rather than allowing the institutions they
built to hang on to their apron strings for support or themselves peeping into
the board rooms. They should now be talking about policies affecting production
and marketing, economic growth and macro level changes necessary in approach to
prices, wages and income to improve GDP growth and ensure distributive justice.
They
need to guide government in improving social security systems and ensuring
faster eradication of poverty.
M G Warrier,
Mumbai
*Submitted version of
letter published in BS on April 5, 2017
III
LEISURE
A rose is a rose…
The unanticipated response from readers all over the world to my
Blog Post "RBI Pension Revision: No Man, No Problem" makes me humble.
This prompted me to make my blog easily accessible to viewers.
Now you can access it direct at:
One reader told me that while writing about RBI Pension
Revision, my thoughts seemed to be negative. He mentioned, all along he had
taken me as one with a positive approach. I accepted the encouraging words and
criticism with equanimity and thanked him. I will keep his concerns in mind as
a positive guidance for future.
I believe positive thinking cannot be an escape route for being
blind to the negative happenings or rather getting into a pedestrian mood when
they surround us.
A spade
cannot be anything else, even if we get sympathetic and avoid calling it by
name.
And a
rose will remain a ROSE
M G Warrier
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