Weekend Recap, February 9, 2019

Weekend Recap, Friday February 8, 2019

Business Standard, February 6, 2019

Letters

Why delay?

 This refers to “Navy, Air Force modernise; Army still mired in high personnel costs” (BS, February 5). Procurement of modern equipment and adoption of new technologies, which will also result in trimming the unwieldy manpower especially in the Indian Army (with around 1.4 million serving and 1.1 million in reserve), should continue to be a priority for India’s defence forces.

The glaringly low budget provided for the Army, with practically nothing left for modernisation of equipment and ammunition, needs to be reviewed. Such an approach may give credence to the criticism that defence procurement is guided by the lobbying power of companies or countries marketing these products rather than ground-level necessities.

As surveillance power of the Air Force and striking power of the Navy improves, the need to deploy the Army to guard every mile of the border may reduce. Still, because of the kind of threats coming from across the border, the Army should get the same attention in maintaining its personnel and equipment efficiently. The budget for procurement of modern equipment or providing training to personnel should not come down by diversion of money to payment of salaries or pension which itself should get equal priority. Let us not forget the impact the delay in pension revision had on the morale of the serving personnel in the defence services in the not-so-distant past.

M G Warrier Mumbai

*Published on February 6, 2019

February 6, 2019

Interim relief for RBI**

This refers to Somesh Jha’s report “RBI to conduct its first half-yearly audit” (BS, February 6). Last year RBI had succumbed to Centre’s pressure to pay a ‘token interim dividend’ of Rs10, 000  crore before the close of FY 18 overlooking the provisions of RBI Act, 1934. Section 47 of the Act says that “after making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and for all other matters for which provision is to be made by or under this Act or which are usually provided for by bankers, the balance of the profits shall be paid to the central government". Earlier, respecting the statute book, GOI was receiving the surplus income of RBI transferred to government account only after approval of the respective year’s accounts by the central bank. In the fitness of things, pending amendment to the relevant Section, GOI could have resisted the temptation to register a 'win' over RBI, as after all the amount it was receiving as advance payment was not substantial in the context of the fiscal deficit.

The present move to arrive at the amount of interim dividend based on the audited accounts of RBI for the half year ended December 31, 2018 should give RBI some relief while making the advance payment for which there is no provision in the Act.

Perhaps, RBI/GOI may consider regularizing the position by incorporating an enabling proviso in Section 47 of RBI Act, 1934.

M G Warrier, Mumbai

**Published on February 8, 2019

February 7, 2019

Transparent accounting

This refers to the BS interview with Finance Minister Piyush Goyal (BS, February 7). When it comes to transparency in accounting media is over-generous in asking easy questions and the FM is extra-careful in evading direct answers. To the remark “CAG had criticized the government for offline borrowings” Piyush Goyal’s response was that ‘there are only a few things that are offline” followed by the example of long-term borrowings for railway infrastructure.

Perhaps government’s accounts are much more messy than the ‘final’ figures given out. Further delay in taking stock and assessing the damage already caused to public trust may affect the nation’s image and the smooth functioning of the economy. Something similar to what RBI has done in financial sector in recent years, may have to be done on the fiscal front for damage control.

This may involve revising fiscal deficit targets, borrowing temporarily from RBI, finding ways to mainstream domestic resources not accounted yet and changes in approach to direct and indirect taxation. For the purpose setting up a permanent Fiscal Policy Council (with experts from academic research field, banking and monetary policy) as suggested in this paper by a columnist recently could be a necessary beginning.

Patch works and first aid solutions like adjustments in budget figures which are already being resisted by different stakeholders may have to be ‘regularized’ by appropriate changes in accounting practices and legislative changes where necessary.

  The move to arrive at the amount of interim dividend based on the audited accounts of RBI for the half year ended December 31, 2018 is a step in this direction which should give RBI some relief while making the advance payment pending amendment to the relevant provisions in the RBI Act.

M G Warrier, Mumbai