Re-Examining Inflation Targeting, Cost of Living, Productive Growth and the Strategic Role of Gold in Economic Stability

 

Re-Examining Inflation Targeting, Cost of Living, Productive Growth and the Strategic Role of Gold in Economic Stability

India stands today at a critical economic juncture where traditional frameworks governing monetary policy, inflation management, growth measurement and reserve management require a comprehensive re-evaluation in light of changing domestic and global realities.

The present note seeks to place before the Reserve Bank of India certain policy concerns and possible directions for broader discussion and examination.

1. Reconsidering Inflation as the Sole Anchor of Monetary Policy

The present inflation-targeting framework, while useful for monetary discipline and macroeconomic stability, may not adequately capture the actual stress experienced by households and productive sectors.

Inflation indices such as CPI and WPI often fail to fully reflect:

• rising healthcare expenditure,
• education costs,
• housing affordability,
• transportation burden,
• energy costs,
• erosion of household savings,
• and declining real purchasing power.

The actual concern of citizens is not merely statistical inflation but the increasing “cost of dignified living.”

There is therefore a need to examine whether monetary policy should gradually evolve from a narrow inflation-centric approach to a broader “cost of living stability framework.”

2. Inflation is Increasingly a Structural and Supply-Side Issue

A substantial portion of present inflationary pressures originates from:

• supply-chain inefficiencies,
• logistics bottlenecks,
• inadequate storage infrastructure,
• wastage in agriculture,
• speculative pricing,
• energy dependency,
• and excessive intermediation costs and tax spread.

In such circumstances, monetary tightening alone may not sufficiently address inflation and may, in some cases:

• suppress productive investment,
• increase borrowing costs,
• weaken MSMEs,
• and reduce employment generation.

It is therefore important to examine inflation in conjunction with:

• cost of production,
• storage and warehousing systems,
• transportation and logistics efficiency,
• energy economics,
• agricultural infrastructure,
• and market distribution systems.

A coordinated framework involving:

• Monetary Policy,
• Fiscal Policy,
• Industrial Policy,
• Agricultural Policy,
• and Infrastructure Development

may produce more durable and balanced outcomes.

3. Need to Revisit GDP-Centric Economic Measurement

GDP growth, though important, does not fully represent the economic well-being of society.

High GDP growth may coexist with:

• rising inequality,
• weak employment quality,
• declining savings rates,
• household indebtedness,
• and increasing social  and emotional stress.

There may therefore be merit in supplementing GDP-based assessments with broader indicators such as:

• purchasing power stability,
• employment quality,
• resilience of domestic production,
• savings strength,
• financial stability,
• and quality-of-life indicators.

Economic growth must ultimately strengthen the real economy and not merely expand financial aggregates.

4. Re-Examining the Strategic Role of Gold

Gold has historically served not merely as a commodity or ornament but as:

• a store of value,
• a reserve asset,
• protection against currency instability,
• a hedge against inflation,
• and a safeguard during geopolitical and financial uncertainty.

Globally, several central banks continue increasing gold reserves to strengthen resilience against:

• currency volatility,
• sovereign debt risks,
• sanctions exposure,
• and systemic financial shocks.

India possesses one of the world’s largest privately held gold stocks. A carefully designed and trust-based policy framework may help channel a portion of this dormant wealth into productive national use.

5. Possible Areas for Policy Exploration

The following areas may merit detailed examination:

A. Cost of Living Framework

• Development of broader indicators beyond headline inflation.
• Household affordability mapping across income groups.

B. Productive Inflation Management

• Linking inflation management with logistics and supply-chain efficiency.
• Strengthening agricultural storage and distribution systems.

C. Gold-Linked Economic Instruments

• Expansion of gold monetisation mechanisms. Gold Bank under the auspices of the Reserve Bank of India can be an excellent and innovative initiative.
• Gold-backed infrastructure and development instruments.
• Formalisation and recycling of idle gold reserves.

D. Monetary-Fiscal Coordination

• Closer coordination between monetary management and productive investment policy.
• Balancing inflation control with growth and employment objectives.

E. Financial Stability and Real Wealth Creation

• Encouraging productive capital formation over speculative expansion.
• Strengthening domestic savings and long-term investment culture.

6. Broader Strategic Consideration

The global economy is undergoing major transformations driven by:

• geopolitical uncertainty,
• technological disruptions,
• energy transition,
• supply-chain realignments,
• and rising financial vulnerabilities.

In this changing environment, India may benefit from evolving towards a more integrated economic policy architecture focused on:

• resilience,
• productive growth,
• real wealth creation,
• monetary stability,
• and long-term national economic security.

Conclusion

The time may have come to re-examine whether inflation alone should remain the principal anchor of monetary policy or whether broader national economic objectives relating to:

• cost of living,
• productive capacity,
• employment,
• household resilience,
• and strategic reserve management

should receive greater integration into policy formulation.

Similarly, the strategic economic role of gold deserves balanced and objective reconsideration not merely as a passive reserve asset, but as a potential instrument for strengthening economic resilience, supporting investment and protecting long-term national wealth.

                                              

Loka samasta sukhino Bhavantu.

T V G Krishnan

(personal Views)

Banks Loans and Recovery Agents at what Cost?

  Banks Loans and Recovery Agents at what Cost?

Apropos the editorial “Off the Tough Route to Loan Recovery” (ET, 1 May 2026), the growing reliance on stringent recovery measures points to a deeper malaise—not weak laws, but weak credit culture within the banking system. The saying that one can take a horse to water but twenty cannot make it drink holds true to bankers approach to credit. The problem originates at the appraisal stage. Credit is too often extended without a disciplined assessment of cash flows, viability, and repayment capacity. Lending, in several instances, has become exposure-driven rather than need-based. The outcome is predictable: stressed assets that later demand “tough routes” for recovery. All at a very high cost indeed.

Equally paradoxical is the continued exclusion of genuinely viable small borrowers. Despite decades of nationalisation, financial inclusion initiatives, and advances in technology, the banking system still shows limited sensitivity to the needs of the poor and informal sector. While larger exposures have at times benefited from relaxed discipline, deserving small borrowers struggle for access. The bankers are yet to get the feel of the poor and feel for the poor is a sad story. 

The solution lies not merely in tightening recovery mechanisms, but in reorienting banking practices. Credit must be anchored to cash flows, supported by effective use of technology and artificial intelligence for appraisal and monitoring. Integrating lending with transaction and deposit accounts can align credit with real economic activity and improve repayment behaviour.

Banks must return to basics—mobilising deposits responsibly and deploying credit prudently across all viable sectors. A system that lends with discipline will not have to rely excessively on coercive recovery methods. 

A shift from reactive recovery to proactive credit management is essential to restore both efficiency and credibility in the banking system.

Yours faithfully,
 T V Gopalakrishnan

( This letter sent to ET found published with modifications on 4/5/26)

Last Mile connectivity . Can we not have a better planning and enhanced efficiency and earn the goodwill and cooperation of people.?

 

Last-Mile Connectivity: The Missing Link in Urban Mobility Bengaluru. 

The city’s traffic crisis is no longer an inconvenience—it is a daily erosion of productivity, health, and civic dignity. Despite being projected as a global technology hub, the lived reality reflects administrative indifference and a worrying lack of coordinated action.

The problem is not merely one of infrastructure, but of governance. Roads choked by garbage dumping, rampant encroachments, and indiscriminate parking have turned mobility into a struggle. Add to this poorly maintained roads, unchecked potholes, and unauthorized speed breakers, and the result is avoidable chaos.

Equally concerning is the collapse of traffic discipline. Signal violations, reckless criss-crossing, and disregard for basic road safety norms have become routine. This is not a behavioural issue alone—it reflects weak enforcement and absence of sustained monitoring.

However, meaningful change does not require grand projects. It demands focused and well coordinated  execution of simple, practical measures:

• Keep roads clear of garbage and strictly prevent illegal parking and encroachments.
• Repair potholes promptly and remove unauthorized road obstructions.
• Enforce traffic rules consistently, without exception or interference.
• Strengthen last-mile connectivity by improving access to bus stands, metro stations, and railway hubs through smaller, well-managed feeder services.
• Ensure coordination among traffic police, municipal authorities, and transport agencies for real-time problem-solving.
• Encourage institutions and offices to promote pooled transport and reduce single-occupancy vehicle usage.

Last-mile connectivity remains the weakest link in the city’s transport ecosystem. Without addressing it, investments in metros and major infrastructure will continue to underdeliver.

What is needed is not more discussion, but visible accountability and time-bound action. The city deserves governance that matches its aspirations. Every citizen, in both personal and official roles, has a direct responsibility to improve the quality of life in our cities. Nowhere is this more visible than on our roads. Safe, reliable mobility is not just an infrastructure issue—it is a matter of discipline, accountability, and civic sense.

Traffic chaos is not created by systems alone but by everyday violations we choose to ignore. Lane indiscipline, signal jumping, and disregard for pedestrians erode not only safety but also dignity in public life.

If we seek better roads and smoother traffic, the starting point is not elsewhere—it is within us. Self-discipline, consistently practiced, is the foundation on which any meaningful improvement in quality of life must be built.

 A comfortable, peaceful and satisfying life does not come from expectations alone—it comes from responsible conduct.Each one of us can contribute by following rules, respecting public spaces, cooperating with authorities, and acting with discipline in our daily lives.

When citizens become partners in governance rather than passive critics, the quality of life improves for everyone.
Let us not wait for change—let us be the reason for it.

TVG Krishnan

(Personal Views)

New Provisioning Norms of RBI A welcome initiative for a very healthy , Stable and sound banking system.

 Strengthening Credit Discipline through a Precautionary Margin Reserve Framework

The recent regulatory stance of the Reserve Bank of India marks a significant and long-overdue shift towards reinforcing credit discipline and restoring integrity within the banking system. This approach, focused on early recognition of stress, prudent lending, and accountability, has the potential to materially improve the quality of bank balance sheets while aligning borrower behavior with responsible financial conduct.

In this context, it is important to recall that as early as 2004, the book “Management of Non-Performing Advances in Public Sector Banks”,dedicated to the Reserve Bank of India, published by the Indian Institute of Banking and Finance had articulated a structured and forward-looking framework to address the persistent challenge of non-performing assets. The central recommendation was the creation of a Precautionary Margin Reserve, built through small, risk-calibrated contributions from borrowers, supplemented by contributions from banks and, where appropriate, supported within a regulatory framework.

The essence of this proposal lies in shifting from a reactive to a pre-emptive and self-sustaining mechanism for managing credit risk. By linking contributions to borrower risk profiles and credit ratings, such a reserve would:

• Instill stronger credit discipline among borrowers
• Encourage more prudent and accountable lending practices by banks
• Create a dedicated buffer to absorb emerging stress and facilitate timely resolution of bad debts
• Reduce the recurring burden of recapitalization on the exchequer and other stakeholders

Importantly, this approach internalizes the cost of credit risk within the banking ecosystem itself, thereby sparing depositors, taxpayers, and the broader economy from the cyclical impact of mounting NPAs.

The current regulatory environment—characterized by tighter supervision, improved risk assessment frameworks, and emphasis on provisioning—provides an opportune moment to revisit and operationalize this concept. A well-governed Precautionary Margin Reserve Fund, aligned with existing prudential norms and supported by transparent oversight, can serve as a complementary layer to the present provisioning systems.

Had such a mechanism been institutionalized earlier, the magnitude and recurrence of the NPA problem could have been significantly mitigated. Nevertheless, the present shift in regulatory philosophy offers a timely opportunity to adopt a more durable and systemic solution.

A calibrated introduction of this framework—possibly on a pilot basis—would not only strengthen the resilience of bank balance sheets but also contribute to long-term financial stability and sustainable economic growth.

T V G Krishnan.

(Personal Views)

Reframing the Governance of Hospitals particularly Corporate Hospitals in India.

 

 Reframing the Governance of Corporate Hospitals in India

Background

Corporate hospitals have become a significant pillar of India’s healthcare delivery system, contributing to advanced medical infrastructure, specialised care, and medical tourism. However, their operational philosophy has increasingly mirrored that of conventional commercial enterprises, where profit maximisation and cost minimisation dominate decision-making.

While financial sustainability is necessary, applying a purely commercial framework to healthcare risks compromising ethics, patient trust, and equitable access to care. Healthcare is fundamentally distinct from other industries—it deals with human life, dignity, and societal well-being.

Problem Statement

There is growing public concern regarding:

• Over-commercialisation of healthcare services
• Unnecessary diagnostics and procedures driven by revenue targets
• Lack of transparency in billing and pricing
• Financial exploitation during medical emergencies
• Erosion of trust between patients and healthcare providers
• Taxation policy for Health sector should be totally different from all Other Sectors. 

Such trends not only burden individuals financially but also weaken the credibility of the healthcare system as a whole.

Policy Objective

To establish a differentiated governance and regulatory framework for corporate hospitals that ensures:

• Ethical, patient-centric care
• Transparency and accountability
• Financial sustainability aligned with social responsibility
• Restoration of public trust in institutional healthcare .                 

Key policy Recommendations 

 1. Patient-Centric Governance Framework
Mandate that all clinical decisions be based solely on medical necessity. Introduce institutional policies that explicitly prohibit revenue-linked clinical targets.

2. Ethical Standards and Accountability

Develop measurable indicators for compassion, ethical conduct, and patient outcomes. Incorporate these into hospital accreditation, licensing, and periodic evaluations.

3. Transparent and Standardised Pricing

• Enforce clear disclosure of treatment costs
• Standardise pricing for common procedures where feasible
• Require itemised billing with justification for major interventions

4. Independent Regulatory Oversight
Establish or strengthen independent regulatory bodies to:

• Audit hospital practices and billing patterns
• Address patient grievances swiftly
• Publish performance ratings based on ethics, outcomes, and patient satisfaction—not just infrastructure
• Introduce Ombudsman Scheme to redress Complaints of patients. 

5. Balanced Financial Model
Encourage a hybrid model where:

• Profitability supports sustainability and reinvestment
• A defined portion of capacity/services is allocated for affordable care
• Incentives are provided for hospitals demonstrating social responsibility

6. Holistic Healthcare Delivery
Promote expansion beyond curative care to include:

• Preventive healthcare and early diagnosis programs
• Mental health and counselling services
• Patient education and post-treatment support

7. Medical Tourism with Ethical Positioning
Position India as a global destination for value-based healthcare, combining clinical excellence with humane treatment and transparent pricing.

Implementation Approach

• Ministry-led task force with representation from healthcare professionals, economists, ethicists, and patient groups
• Phased regulatory reforms with pilot programs in major metropolitan areas
• Integration with existing accreditation systems and digital health platforms
• Continuous monitoring through publicly accessible dashboards Expected Outcomes

• Improved trust in corporate healthcare institutions
• Reduction in unethical medical practices
• Greater affordability and transparency in healthcare delivery
• Enhanced global reputation of India’s healthcare system
• Alignment of healthcare growth with societal well-being
• Taxation policy needs total review to reduce the cost of treatment , increase the trust in Hospitals and enhance affordability with or without Insurance. 

Conclusion 

Corporate hospitals are not merely business entities—they are custodians of human life. Their governance must reflect this responsibility. A shift from profit-driven healthcare to value-driven healthcare is not just desirable; it is essential for building a just, equitable, and trusted healthcare system in India.

Samastha Loka Sukhino Bhavanthu.

TVG Krishnan

(personal Views)

Legal reform . Make it real, rear, rehabilitate , respect and regard.

 

justice Must Be Seen to Be Done: A Call for Urgent Legal Reforms in India

“It is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.” — Lord Hewart

The concerned authorities in governance, judiciary, and policy-making must undertake serious and time-bound introspection on how our legal system delivers justice. The issue is not merely about the existence of laws, but about the efficiency, consistency, and credibility of their implementation. Delays in adjudication, procedural complexities, and uneven enforcement continue to act as structural bottlenecks. These not only erode public trust but also directly impede economic growth, discourage investment, and weaken social welfare outcomes.

A qualitative transformation is therefore essential—one that focuses on simplifying procedures, ensuring accountability, leveraging technology, and delivering time-bound justice. Such reforms are not optional; they are critical to eliminating systemic inefficiencies.

India’s legal framework is founded on the noble principles of equity, fairness, and justice for all. The laws enacted are comprehensive and, in intent, designed to protect citizens and ensure uniform application. However, the growing divergence in interpretation and implementation of laws across jurisdictions is steadily eroding public trust.

A widely perceived reality today is that outcomes often depend less on the law and more on the individual involved. This perception—whether fully accurate or not—has serious consequences. It weakens institutional credibility, creates uncertainty, and imposes emotional, social, psychological, and financial strain on citizens.

Legal reform, therefore, is not merely overdue—it is essential for restoring faith in governance and ensuring that economic and social policies achieve their intended outcomes.

Key Areas of Concern

• Lack of uniformity in judicial decisions across courts

• Multiplication of similar cases despite existing precedents

• Judicial delays and mounting backlog

• Scope for discretion leading to inconsistency and perceived bias

• Limited accessibility of prior judgments to all levels of judiciary

• All Institutions should ensure to comply with the laws of the country concerning public welfare and their own delivery of statutory functions in letter and spirit.

Recommendations for Immediate Consideration

1. Establish a National Judicial Precedent System
Create a centralized, digitally accessible repository of judgments across all courts, integrated and searchable in real time. This should be mandatory reference material for all judicial officers to ensure consistency in decision-making.

2. Mandatory Adherence to Precedents
Introduce clear guidelines requiring lower courts to adhere to established precedents in similar cases, with any deviation to be explicitly justified in writing. This will reduce arbitrary interpretation and enhance accountability.

3. Classification and Standardization of Cases
Develop a system of categorizing cases based on subject matter and legal principles, enabling faster identification of applicable precedents and reducing duplication of litigation.

4. Judicial Performance and Accountability Metrics
Implement transparent performance indicators such as case disposal time, adherence to precedents, and quality of judgments. Periodic review mechanisms can help improve efficiency and consistency.

5. Use of Technology and AI Assistance
Leverage technology to assist judges in identifying relevant past rulings, similar case patterns, and legal benchmarks. This can significantly reduce delays and improve the quality of adjudication.

6. Strengthening Legal Awareness and Accessibility
Ensure that citizens, legal practitioners, and lower judiciary have easy access to simplified legal information and landmark rulings to promote informed litigation and reduce unnecessary cases.

7. Discouraging Frivolous and Repetitive Litigation
Introduce stricter measures, including penalties, to prevent filing of cases on issues already conclusively settled by higher courts.

Conclusion

Justice in a democracy cannot afford to be inconsistent or unpredictable. Uniformity in interpretation and application of laws is essential not only for fairness but also for maintaining public confidence in the system. A coherent, transparent, and technology-enabled judicial framework will not only reduce pendency and corruption but also reinforce the credibility of governance.

The time to act is now. Restoring trust in the justice delivery system is not optional—it is fundamental to ensuring that laws serve their true purpose: protecting and empowering every citizen equally.A strong and credible justice system does more than uphold rights; it strengthens the very foundation of the economy by ensuring predictability, fairness, and investor confidence. At the same time, it lays the groundwork for a truly robust and enviable democratic framework—one where governance is transparent, accountability is real, and justice is not delayed or denied.

Viksit Bharat is well within our reach with admirable and enviable justice delivery system by All Institutions, Legal Luminaries and all Individuals . 

Samastha Loka Sukhino Bhavanthu.

T V G krishnan

(personal Views)

Bangalore Traffic &Roads A call for Urgent , Practical Action

 

Reports indicate that over ₹100 crore is being spent daily in Bengaluru (TOI,12th April). Yet, for the average citizen, a basic question remains unanswered: why do potholes, poor roads, and traffic disorder continue unchecked?

A recent hospital visit using a call driver reflected the daily reality. What should have been a simple commute turned stressful and unsafe—especially for senior citizens. Driving today requires not just skill, but constant alertness to bad roads, indiscipline, and unpredictability.

Traffic concerns have become the common starting point of conversations everywhere. This is not inevitable—it is a result of gaps in execution, accountability, and civic discipline.

What Is Going Wrong

• Poor road maintenance and delayed pothole repairs
• Encroachments and illegal parking reducing usable road space
• Inefficient traffic signals and lack of synchronization
• Frequent violations: wrong-side driving, signal jumping, rash behaviour
• Weak and inconsistent enforcement
• Safety norms routinely ignored

A sensitive but important concern is the presence of beggars at traffic signals. While this reflects deeper social issues, it also disrupts traffic flow and creates safety risks. This calls for humane rehabilitation, not unchecked continuation.

The Real Impact

• Loss of time and productivity
• Increased stress and health strain
• Safety risks for all road users
• Growing public frustration and loss of trust

Shared Responsibility: Administration & Public

Administration must:

• Ensure time-bound road repairs and quality maintenance
• Introduce efficient, technology-driven traffic systems
• Enforce rules firmly and consistently
• Clear encroachments and regulate parking

Public must:

• Follow traffic rules and respect lane discipline
• Avoid violations and unsafe driving practices
• Cooperate with enforcement and civic norms

The Core Message

Good roads and disciplined traffic are not luxuries—they are basic necessities. They determine how peacefully, safely, and productively people live.

Citizens seek simple things: dignity, safety, and the ability to move easily to workplaces, hospitals, schools, and public services. Efficient connectivity is central to this.

Time to Act

A well-managed traffic system can resolve many of Bengaluru’s daily stresses.

Can we act now—collectively and decisively—before this becomes an accepted way of life?

Samastha Loka Sukhino Bhavanthu. 

TVG Krishnan

(personal Views)