Fuel Check, Tyre Pressure Check

 This refers to ' RBI,Get a Green Thumb'  by Arunabha Ghosh and Dhruba Purkayastha (Dec24). Sanjay Malhotra's job will be rendered easy as he will have to only manage the smooth drive expected of him in a very heavy traffic jungle sitting in a very high end vehicle RBI with his vast experience and economic and political influence. The   shocks and risks macro , climate , financial are to a  great extent manageable once the financial system is made strong, stable and resilient to inflation pressures. The  fact that RBI has  successfully survived for 90 years tackling the political economic , social, technological risks would itself provide the confidence  needed to take the economy forward  The new Governor will  learn to drive independently only by following the traffic rules .

T.V.Gopalakrishnan

( This letter appeared in ET dated 26/12/24) 

Budget 2025-26 Some thoughts

 Budget 2025 -26

                  

                     Poverty for many and affluence for a few cannot go together in an Egalitarian society. 

The 7th Budget from the Honourable Finance Minister Mrs Nirmala Sitharaman will be presented in a few weeks and as is always the case, the entire nation would be busy discussing the budget with all speculations , anxieties, expectations,, surprises,  guesses, estimates, calculations on benefits etc for the economy, for various segments, Industry,  agriculture, corporates and individuals etc. From the nation's point of view, all the budgets presented so far by the FM have proved to be very benevolent, prudential, fiscally conservative keeping the fiscal deficit under control and taking  the economy on a fast growth trajectory, though the gap between the rich and the poor has widened in the process and continues to hurt the middle class and the poor.Thanks to the disciplined and conservative fiscal policy of the GOI actively supported by the very accommodative and innovative monetary policy of the RBI, the economy could successfully weather the storm one after another Covid 19 pandemic, geopolitical tensions like Ukraine war and other  economic and social upheavals throughout the world. By any reckoning, the achievements through the budgets  far outweigh the misadventures if any, is the ground reality and the optimism generated to make the economy the fastest growing and dreaming to become the most advanced economy by 2047 is simply marvellous. The whole country is in an enthusiastic mood and very well motivated to realise the dream of an advanced economic status. With this background, the ensuing budget if turns out to be a really dream budget, nothing can stop the country from moving forward fast and from this angle, some practical and simple suggestions or thoughts in budgetary proposals can perhaps  be considered for possible implementation.

Mass Consumption of goods and services is the starting point of the vicious circle Investment, employment, production, demand , supply and consumption. While the need to contain cost of production and inflationary impact at sustainable levels continue to remain paramount to encourage cost of production and consumption, the need for resources for expansion of infrastructure and provision of all ingredients for production and manufacturing at attractive prices cannot be overlooked through fine  balancing of the budgetary proposals. This exercise is a bit arduous but cannot be avoided to realise the dream of Viksit Bharat.        

Review  and Rationalisation of all taxes without losing sight of the need for augmented revenue very badly needed for all planned economic development need very urgent and serious attention.Evasion of taxes of all kinds continues to be a rule rather than an exception and this needs to be diligently and intelligently plugged using Technology, Artificial Intelligence, improved  Regulatory and Supervisory techniques, enhancing improved awareness and enhanced sensitivity to tax compliance through all modes of communications, education, spread of literacy among the illiterates spread over the entire spectrum of agriculture, industry , commerce, trade, and wherever economic activities are held. This is a huge task but it must be taken care of by all means. Participative Management in letter and spirit ,involving professionals of all kinds, academicians, eminent and established people from all walks of life along with all those closely associated with Legislation, Judiciary and Execution can perhaps do the wonders to make the dream a reality.  

The  major concerns to be taken note of while raising taxes .

1 Cost of Production, Cost of Living and Inflation. While Cost of production is the key to encourage Investment and Production of Goods and Services, cost of living and inflation are the keys to keep the people socially, economically and emotionally together, happy and motivated.Continued persistence of  High inflation particularly Food Inflation kills the enthusiasm of the people. Income levels and Inflation have to match for all categories of people in the lower Strata of the society.    

2  Wealth Creation and Wealth Distribution The Country’s wealth and People’s wealth are two totally different concepts and the taxation policies should be more concerned with people’s wealth aiming at bridging the gap between the Ugly Rich and poorest of the poor. The tendency so far seen in the budgets in the creation of wealth seems to be in favour of the Rich, where as , the salaried class and all other middle income group do not seem to benefit proportionately in terms of GDP growth, tax reliefs with all make believe tinkerings and adjustments  without having any regard to the high cost of living, unbearable food inflation, lowering of interest rates in savings having negative impact on the real incme and hikes in wages disproportionate to the inflation,  and national wealth creation.The Cost of freebies, Corruption, black money creations, losses of PSUs and losses on account of Non Performing Institutions, Individuals, losses on account of frauds, fraudulent accounts, all sorts of malpractices seen, practised in and around the country particularly wherever public utility and Public services are involved having not only high  inflationary  impact on the goods and services affecting all segments of the economy but  are also causing a great concern having budgetary implications. 

3  Mass  demand for Consumption for all goods and services is the key to kickstart the economy. Juggles of words and figures have their own limitations to have any visible impact on the consumption, investment, employment and growth of GDP with price stability and reasonably justifiable distribution of wealth. Time has come to have out of the box thinking and taking very innovative steps using technology optimally, Artificial Intelligence, market intelligence inputs, and services of human resources having talents, expertises, proven competence  either on a voluntary basis or on a minimum cost benefit analysis basis, to involve, and give a kickstart to boost the economy. The Financial system particularly banking system has to be dynamic, innovative, creative, opportunistic to find  ways and means to expand credit and augment employment and income in different segments of the economy taking advantage of the Financial Inclusion, enhanced economic activities thanks to intensified digital transactions and growing market for vegetables, fruits and rural products of all kinds. The bankers should get a feel of the people and the opportunities available for  increased economic activities and accordingly need to be proactive in the service of the people and enhance their own business opportunities and that of the people.Budget can think of introducing some  incentives to provide  some reliefs for financiers and borrowers.     .             

4 Many a drop will make an Ocean should be the guide to augment the revenue of the Government. All the 140 crores or so people should be participating in Nation’s progress and enjoying the fruits of the development. From this angle, the taxation policies pursued so far do not seem to  do any justice either to the entire nation or to all the population.The need for augmentation of revenue, compliance of tax laws and image building in line with all ethical practices worthy of emulation  for the prosperity of the nation and welfare of the people is paramount. A comprehensive taxation policy minimising the number of taxes and maximising collection of taxes spreading the tax net as wide as possible without any gaps / loopholes but at the sametime making every citizen a participant in nation building by contributing his might  with pride towards strengthening the economy. The very number of taxes and the rates of taxes need a relook and rationalisation.The people  should feel  comfortable that  taxes levied  are  highly justifiable , badly needed for building the nation, developing the economy and achieving the welfare status for all as talked about In Rama Rajya.   

5 Crowd Management and Collection of taxes should be well knitted and the administration of collection of taxes and their allocations should be simplified , traceable, accountable and beneficial both to the people and the Government. This is a herculean task and it requires a very strong bureaucracy, transparent mechanism to collect taxes and their distribution justifying the requirements of different states and the central allocations for nation’s security, physical and other infrastructure, legislative machinery, judiciary and things like that. Result oriented Governance is the only key to ensure growth and enjoy the fruits.    

6 The nomenclatures for tax should be very minimum. There should be only a transaction tax covering all receipts and payments at all levels through the Financial system, supported by a very comprehensive   GST covering all segments of factors of production, distribution without leaving any segments of the economy and if necessary only Income tax as supplementary resource . 

7 Widespread collection of GST without rationalisation of  both rates and goods and services  from the entire population gives room for despondency, manipulation, evasion and leakage without any trace. This is a tough exercise but with technology, AI and a meaningful Governance mechanism, this should be manageable and acceptable. The acceptance of GST and its implementation should make tax compliance 100% fool proof and transparent. No evasion by hook or crook should be possible through vigilance and technology based supervision. 

8 With increasing frauds, poor customer service due to laxity in governance, greedy pricing, surge pricing, exploitation of people given a chance in service oriented areas like tourism, hospitality, travels, insurance, hospitals etc  the necessity  for ensuring  highest  ethical standards in all institutions and service providers  to enhance the image of the country, demonstrate the good culture, heritage and civilisation as the strong foundation for the welfare of humanity anywhere and everywhere throughout the universe is paramount and should be aimed at to achieve through meaningful Social audit involving established and eminent social reformers and men of proven competence in public life. Ethics which is Central to Sanatan Dharma should be the guiding spirit for all  Institutions and Individuals engaged in the build up of the Nation and an enviable  strong economy.The ensuing budget should provide for built in incentives and disincentives for compliance of all tax laws and  Evasion of taxes. Likewise, the share of states should be directly or indirectly linked to provision of freebies from tax payers money which cannot have any approval from taxpayers.     

Loka Samastha Sukhino Bhavanthu.   

     

T V G Krishnan

Well wisher of the Economy and welfare of the People

( Personal Views )     .               

    

Bring Down Food Inflation - Let the people be happy and Motivated

                                      Bring down Food Inflation -Let the people be happy and motivated.

                                                       Annadatha Sukhi Bhava. 

 President-elect Donald Trump says Americans not being able to afford groceries will be a relic of the past. “They’re going to be affording their groceries very soon,” he said Thursday before ringing the opening bell at the New York Stock Exchange, where he was honored as Time’s “Person of the Year.”

 The  belief  Annadatha Sukhi Bhava is in practice for ages and this is considered to be the most satisfying and fulfilling experience of  both the giver and the taker of food  equally. "Nothing can substitute feeding of hungry" is true to the core and this only can help the people to remain motivated emotionally and in all other respects.Very high Food Inflation, Taxes and other Charges do not make living Comfortable for majority of the population. All their happiness, peace and contentment are first attached to food first and then only they think of other comforts like shelter, clothing, medical, pursuit of education, travel for social visits, for pleasure, sight seeing, pilgrimages etc etc. The whole life should not be left only for calculating subsistence and existence levels linked to income and cost of living. Majority have to come out of that situation and dream of a developed world and reaching their minimum standard  standards of life.

The Government in power and other authorities have moral, social, economic and emotional responsibility to keep the food prices under check by all means and make food available within the affordability of all. The  first and foremost objective of  both Fiscal and monetary policy should be to ensure that the food items are produced /imported  adequately at minimum cost and available to all within a reasonable price. Politics cannot and should not interfere in the pricing of food products and should not dictate terms in the production, storage, transportation, distribution and  their reachability to all. Politicians can have all welfare policies but the administration has to necessarily execute the policies in such a way that they do not affect the sentiments and urge to have  two square meals for the entire population irrespective of their incomes and affordability. Basic Need cannot be mixed with Luxury. The economic policies consisting of  Monetary and Fiscal Policies determine the generation and distribution of wealth based on the economic and social conditions of the entire population taking into consideration the availability of natural resources and other potentials of the country apart from geopolitical conditions of the whole universe, play a key role in regulating the food inflation, cost of production and giving the momentum of growth and keeping the population happy, motivated and aspiring for peace, safety and all round progress. Many of the ills of the economy emanate from poverty , very high food prices and high cost of living. Widening inequality adds fuel to fire.  

The success of democracy should be judged on the availability of food to all always and at reasonable prices without any linkage to affordability. It is easier said than done as the very administrative set up essential to ensure the availability of food to all at affordable prices unfortunately remains manipulative, corrupt, inefficient, exploitative and greedy beyond any justification either morally, ethically, legally and empathetically.

The  high inflation not only widens the gap between the Rich and the Poor, but it also affects the poor physically, financially, psychologically, emotionally and socially. High inflation in the absence of affordability  among majority of the people  to survive unfortunately takes away the very  happiness and welfare among the masses but adds to the very existential crisis which is not desirable in Nation's interest and long term stability of the economic progress and its continued sustenance. It is very apt to quote here the Kantar's Report that appeared in ET dated 6/12/24 which says"Urban middle Class Household Shrink, Rich Club Sees Big Jump. Incomes not able to keep pace with inflation. One needs to introspect and find ways and means to find some tangible solution to avoid such situations in the long term interest of the economy and welfare of the people.  

Removal of taxes and levies, malpractices prevalent in the form of corruption both in kind and cash in the production of  agricultural goods and  all logistics related services in the procurement, movement, storage  marketing , distribution and final destination of these to  people all around will definitely go a long way in reducing the food prices and making the people happy and motivated. Any sacrifice made in containing food inflation will prove to be a great boon to boost the economic growth and ensure universal welfare of people. Time for all authorities concerned to think afresh and coordinate policies and their successful implementation keeping the objective of ensuring food products at affordable prices and their availability irrespective of seasonal variations including political manipulations. Any cost to bring down the cost of food to majority of the people cannot be considered as cost , as the benefits that can accrue from this to the economy and the Government can definitely outweigh the COST.      

The only way to contain food inflation is to have a different approach by creating a' Food Inflation  Neutralisation and Stabilisation fund ' under the auspices of Reserve Bank , NABARD and the Banking System to administer  effectively the supply chain management of the sensitive food commodities particularly, Tomato, Potato and Onion and other vegetables and fruits , involving state Governments. The production and supply chain management keeping the influence of cost as the main factor in inflation control should be made more transparent and free from all possible manipulations by any force at the ground level. The need to activate RBI Local Boards in the matter is very  paramount It is high time MPC and RBI local Boards coordinate and think of some concrete measures to contain the food inflation which remains broadly undefined and defiant.  Man-made inflation cannot be controlled by the Monetary theory policies alone is a proven fact as inflation inter- alia is also a creation of poor administration with active support of unhealthy politics and tolerance of unethical and all sorts of malpractices. RBI has been providing the best of accommodative policies for years and has strengthened the financial and Banking system stability perhaps unheard of so far, but still the inflation continues to be a major challenge, stumbling block in the economic  growth which cannot be allowed any more to realise the dream of India becoming an advanced economy by 2047. The peoples' aspirations to see India as a welfare nation can be  fulfilled  only by adopting and adhering to some very dynamic and untried policies and approaches. No advanced economies suffer from very high inflation and the standards of Life have some enviable quality.

 Loka Samastha Sukhino Bhavanthu starts with food for all at affordable prices. Once this is taken care of,  all other  challenges for economic development are within our reach with all our  own natural and best of human resources.    

 TVG Krishnan

( personal Views).  

Inflation Control Why not have a different approach

 Monetary policy Why not have a different approach to contain Inflation.

Dear Sir,

Apropos your editorial RBI’s not too much behind the curve, (ET 7 Dec) the fact remains that RBI has done its best to retain the policy rates unchanged and maintain its accommodative monetary policy neutral, despite the continued persistence of high  food inflation and not so encouraging economic growth as targeted.Two members of the MPC had a different view on policy rates is itself an indication that  seeing the historical trend in containing the inflation which is beyond the fiscal and monetary measures a unanimous view on Price Stability and economic growth cannot be  sensible/ possible / practicable. However, as a matter of great relief RBI cut the CRR rate by 50 basis points  in two tranches, to neutralise its  neutral policy stance and provide some comforts to  banks and economy by easing the availability of liquidity to expand credit to the needy segments of the economy.Even though CRR cut itself is inflationary ,the overall approach of RBI seems to be obviously limited to contain the food inflation which remains defiant and unresolvable easily by monetary policy alone. It is time to seriously introspect  by policy makers to identify the causes of continued persistence of food inflation year after year which requires it to be tackled diligently, politically, fiscally, administratively and monetarily.

T V Gopalakrishnan

Bengaluru

( Letter sent to ET on 7th Dec )

Block Oxygen to this circulation.

 

This refers to  your editorial Visible Withdrawal  Symptoms of ATMs (Dec 4),   The informal economy , corruption , and offer of cash at  election times fuel  the withdrawal of cash through the ATMs. Since digitalisation has picked up considerably among the retailers, the poor, lower and middle middle class  the need for ATMs particularly for small denomination notes  will  decline.With  the requirement of high denomination notes rising  because of real estate deals involving black money and other reasons , there is a need to review  maintenance of  ATMs at a high cost.  Gradually eliminate black money and  high denomination notes through better fiscal , monetary and other administrative measures.    

T.V.Gopalakrishnan

Bengaluru.

( This letter appeared in ET dated 5th Dec 2024.) 

Manage Food Inflation Differently.

 

This refers to the news report "Centre-RBI disagreement deepens over inflation and rates cuts"that appeared in BL dated 20th Nov 2024. The best and only way to contain food inflation is to have a different approach by creating a' Food Inflation  Neutralisation and Stabilisation fund ' under the auspices of Reserve Bank , NABARD and the Banking System administering effectively the supply chain management of the sensitive food commodities particularly, Tomato, Potato and Onion and other vegetables and fruits , involving state Governments. The need to activate RBI Local Boards in the matter is very  paramount . It is high time MPC and RBI local Boards coordinate and think of some concrete measures to contain the food inflation which remains  broadly undefined and defiant.  Man made inflation cannot be controlled by the Monetary theory policies alone is a proven fact as inflation inter- alia  is a creation of poor administration with active support of unhealthy politics and tolerance of unethical  and all sorts of malpractices . RBI has been providing the best of accommodative policies for years and has strengthened the financial and Banking system stability perhaps unheard of so far , but still the inflation continues  to be a major stumbling block in the economic  growth which cannot be allowed any more to realise the dream of India becoming an advanced economy by 2047. The peoples' aspirations to see India as a welfare nation can be  fulfilled  only by adopting and adhering to some very dynamic and untried policies and approaches. 

T V Gopalakrishnan

( Sent to Hindu Business Line ) 

Manage Inflation Differently         

Apropos the news item Food prices have nothing to do with Managing Inflation,(ET 15/11/24) the Commerce Minister's call  to  the RBI to Cut rates saying that it is an absolutely flawed theory to consider food inflation while deciding policy rates, makes a lot of sense in Indian context. The food inflation inter alia  is basically man-made taking advantage of political uncertainties, nature's  failure, ineffective governance , lack of financial discipline particularly at state levels and play of dirty politics to exploit the situation gambling on price sensitive commodities adding to inflationary pressures. A strong administration and prudent management of Fiscal Areas of the Central and State governments can to a great extent manage and contain the food inflation with sensible  supportive policy changes  in the production, export, import, procurement, storage, and smooth distribution of agro based commodities. Perhaps a very closely coordinated approach  involving  NABARD , Local Boards of RBI, Commercial Banks, RRBS , Cooperative banks  and Agricultural departments of both Central and State Governments can definitely play a key role in containing the food inflation. In this context, even setting up an Inflation Neutralisation and Stabilisation Fund  under the auspices of RBI  can be seriously thought of to tackle food inflation particularly vegetables like Onion , Potato and Tomato. The food inflation  which is a creation of administrative failures basically cannot be allowed to distort the twin objectives of Monetary policy  Viz Economic Growth and  Price Stability and make the dream of the PM to make the  nation to be an advanced economy by 2047 unrealistic.WE cannot afford to lose the battle for want of a nail .

  

            

T.V.Gopalakrishnan