Tips to overcome the present Financial Crisis

Some TIPS to overcome the Present Financial Crisis and encash long term benefits out of it.

The present crisis has shaken the confidence everywhere and knee-jerk reactions are attempted perhaps only to survive the situation without ,however, bothering about the damages these measures can afflict the economy in the long run. The only way to tackle the crisis is to go in for massive development of infrastructure which is abysmally poor in India and needs to be drastically augmented to ensure continuous growth of the economy. The question is how to find resources?

If there is a will, there is a way is the answer to find the resources. This is not the time to bother about deficit in the budget. This is the time to meticulously avoid extravaganza and unproductive expenditures by all including the government, public and private sectors and high net worth individuals. Resources need to be mobilized by attracting savings, borrowings, funds from both domestic and international markets. This is the time to sacrifice by those who amass wealth and are crying for reliefs and concessions. Definitely this is not the time to exploit the situation and make merry. This is also not the time to sacrifice employees to reduce the cost; but this is the time to reduce profit margin and show consideration for poorer sections of the society . This is the time to come to the rescue of the economy which has high potential to insulate itself from the global crisis and exhibit the world that we can be the world leaders and real performers. This is the time to revive the values and ethics which our forefathers practiced for centuries and have been given a go- by for the sake of money by the present generation. While liberalization of the economy for growth, comfort and welfare of the people needs to be encouraged, liberalization of values, ethics and our cultural heritage and civilization which can only bring harm to the society in various forms has to be carefully avoided. Corruption, black money, antisocial activities, terrorism and evasion of taxes legitimately due to the government have been rampant involving even the high and mighty and this is the time to have some introspection to give up unethical practices and inculcate morals, values, principles for better and peaceful living. This is also the time to firmly establish (in fact already proved that greed will only lead to ruin)that money can bring only doom and not the boom of sustainable nature. There should be a balanced approach and a clear cut line of demarcation in imitating some of the measures adopted by developed countries in the name of management and distribution of risk. Now Risk is well distributed and nobody knows how to survive.

Some of the following measures if implemented with sincerity and integrity both in thought and action can surely benefit the economy to maintain the growth, improve the infrastructure for continued growth of the economy and come out of the present rut. The measures will stand the test of ethics and values in creating and distribution of wealth. No statements or statistics have been discussed as volumes have appeared or have been appearing everywhere since the meltdown have begun.

Infrastructure viz: Social, Physical and Financial infrastructure

Is the need of the hour and the position requires to be meticulously reviewed from the scratch and steps need to be urgently initiated systematically develop the infrastructure on a sustainable basis. It has to be managed by professionals who are committed and result oriented. Co-operation from all without looking for exploitation and illegitimate benefits have to be solicited if required by force. There should be time bound approach to complete all physical infrastructure like bridges, roads, canals, ports, power generation and distribution, airports, markets, hospitals where comparatively massive employment is possible and demand for consumption of capital goods is relatively high. Funds have to be found if necessary by incurring deficit exclusively for this purpose and mobilization of resources from cash rich companies, high net worth individuals, attracting the black money either by force or by offering incentives. The distinction between black money and white money is getting blurred as there is no fool- proof system to track at least high value transactions in the economy. This is the most opportune time to introduce some solid measures using IT strength to plug the loop holes in the generation of black money.

Social Infrastructure should start from basic education to specialized skills in different areas like science, IT, Technology, humanities, finance, legal, management, tourism and other services. Social reforms rather than economic reforms in the present context of degeneration of values and ethics, ignorance of morals which every religion propagates for the welfare of humanity assumes greater importance and calls for revival with utmost priority. Money spent on social infrastructure will turn out to be a good investment and strong foundation for the society to look forward to.

Financial infrastructure as it is, seems to be okay, but improvements can be thought of to bring the unorganized sector under some form of regulation and supervision. There are organized and unorganised money lenders, varieties of chits and kuries, indigenous bankers, volumes of transactions in Rs lakhs and crores taking place in gold and bullion markets, wholesale markets of different commodities including scraps, film industry, professionals like chartered Accountants, consultants, doctors, advocates, highly specialised and skilled contractors, real estate agents, traders of different classes etc. If all these can be brought under proper accounting and reporting, tax compliance will improve, black money deals will decline, deposits of commercial banks will increase and some sort of discipline, order and control can be established in society. More over, the general feeling that only salaried classes and a few honest citizens are paying taxes can be dispensed with and over all the confidence level in society particularly with reference to treatment of everybody equally can be improved. In the long run, the benefits will start accruing perhaps paving way for a general reduction of taxes and levies.

Capital Formation: Capital market is generally active and vibrant only in respect of secondary market(Of course not these days) and that too involving a few companies, traders, brokers etc. Share holding pattern also seems to be concentrating with a few institutions and high net worth individuals. It is doubtful whether 5% of the population have share holdings at all. Unless and until the shares of companies are widely held, the market cannot gain strength, depth and liquidity, will always be a problem particularly during crisis period. At least 50% and more of the public issues should be held by individual share holders and for this measures have to be urgently initiated. Some steps can be in the form of offering fiscal incentives to attract to capital market investments, more dividend to share holders holding less than some specified no of shares, loyalty incentives to those who hold shares for more than a specified period etc. Even the levy of STT can be waived for small shareholders to attract and retain them in the market.

A separate stock exchange can be thought of for companies having less than a specified amount of business turn over or a prescribed limit of capital. This will bring all round efficiency in regulation, supervision and market operations both for the companies and investors. Fiscal incentives should be different for small companies compared to multinational and very large companies. Rules and regulations also can be at variance in respect of small operators.

Companies having huge reserves when compared to the capital and have not been liberal in the issue of bonus shares or dividends should be identified and subjected to special scrutiny with reference to the share holding pattern, the reasons if any for not declaring bonuses or dividends , method of arriving at net profit, pattern of distribution of profit etc. The existence of such companies is neither good for the economy nor good for the share holders. This can affect the liquidity trend and can affect the sentiments in the market and cannot be encouraged. The reliefs and benefits to such companies should be kept low. In general, there should be a separate rating for companies by the Govt, based on the contribution of the companies for the socio-economic well being of the people, economy of the country in terms of production, employment, sharing of profit, forex earnings, corporate governance standards etc.

Reforms can be attempted in the operations with in the stock exchange from the angle of actively traded group of shares, the operators, domestic companies, multinational companies, turn over of shares, market capitalization and other classifications enabling for audit trials if necessary. Inter corporate pattern of share holding needs to be constantly watched as investments and disinvestments by the corporate can tilt the price movements at the cost of small operators.

FinancialCrisis Opportunity to act and improve

Present Financial Crisis An Opportunity to Act and improve



The economy shows signs of slowing down, but certainly does not call for panic reactions. Compared to the 1991 crisis, the present situation does not look bleak or does not seem to be any cause for concern. Fundamentals continue to remain strong as Inflation, Fiscal Deficit, GDP growth, Current Account Deficit, Balance of Payments position, Forex Reserves in particular , soundness of the Financial and the Banking system etc when compared to the 1991 situation show an impressive position, although there are aberrations which are caused only because of the linkages with the global economy. No doubt there are some problems in the form of ripple effects emanating from the aggressiveness of the US Financial system to which financial markets of both developed and developing economies are linked expecting better performance and growth. The US system was taken as a benchmark and blindly all followed it without bothering to understand, identify, measure and manage the risks involved while having business deals. No institution assessed its own share of risks while originating, transferring and distributing of risks under the guise of derivatives. Fortunately our economy and financial system came unscathed although severity of adverse impact on others is felt and confidence is bit shaken. Except for the liquidity crunch and perhaps anticipation of reduced dependence on our economy by the world market because of their deep involvement in the present crisis, there does not seem to be any concern for the economy to press the panic button and go in for any knee-jerk reactions.

Monetary measures in the form of reduction in CRR by 3.5%, reduction of Repo rate by 2.5%, SLR reduction by 1% and other measures to provide assistance to Mutual Funds and NBFCS have already been introduced to support credit growth, maintain economic growth taking advantage of the softening trend observed in the rate of inflation, reduction in international oil prices. These measures can yield results only if they are equally supported by some fiscal measures. These can be in the form of;

1 Encouraging infrastructural development to give a boost to employment, all round demand for all sorts of products including capital goods and services.

The expenditure no doubt will increase the fiscal deficit, but in the long run the direct and indirect benefits that will accrue to the exchequer can easily wipe out the deficit. Alternatively Govt can have a separate account styled “Special Expenditure to Develop Infrastructure” not accounting for the purpose of arriving Deficit Finance. Funds can be mobilized for this from the market through floating of long term bonds to attract funds which can include even black money from both domestic and international markets. Special incentives in the form of tax concessions and other reliefs can be considered to attract funds. This can be a one time measure justifying the extra ordinary circumstances in which the economy is presently placed.

2 Offering tax concessions/exemptions to attract funds towards capital formation particularly under Primary market.

3 Introducing expenditure tax or disincentive tax for those indulging in extravaganza beyond certain cut-off limits.

4 Introducing a special levy on purchases of two or more houses, cars, frequent trips abroad, land and real estate deals like shares and debentures, etc.

5 Offering Government guarantee for a small fee in a very selective manner to enable well performing Mutual Funds , private sector banks, NBFCs, Large public sector undertakings to raise funds from abroad.

6 Plugging all possible loopholes in evading taxes. For this, the easiest solution would be insistence on cheque payment for all transactions above Rs 15,000. Cheques should invariably carry the PAN No.

The present crisis should be taken as a god given opportunity and there is nothing wrong fishing in troubled waters as the measures would certainly benefit the economy for a long time to come as the saying goes ends justify the means.





Dr.T.V.G.Krishnan

Can't the Government do anything to stop this crash?

The market seems to be having a free fall despite a slew of measures. The sensex has taken a dive from 13500 to touch 8000 in october 2008 as if panic button has been kept continuously on. FIIS play havoc with our market and make a kill taking the market up and down and dictating terms and creating helpless situation. To counter the FIIS move,it is better for banks, insurance companies and mutual funds to enter the market with Government's guarantee. As it is, banks are allowed to have capital market exposure upto 5 % of their net worth. Most of the banks have not gone for this as a matter of abundant precaution and prudence. Banks having capital adequacy ratio of 12% and above ,NPA level less than 1%, and having no exposure to real estate and capital market exposure of less than 5% can be made to enter the market in a caliberated manner and boost the market sentiments and confidence. Since the sensex has fallen drastically despite fundamentals of our economy remain strong, finacial and banking system remain largely insulated from global crisis and claim to be resilient to absorb the shocks there is nothing wrong if banks are allowed to increase their capital market exposure a bit . There is no serious downside risk and and at the same time banks can think of improving their trading profit . What the markets want now is the confidence level and this can be achieved only by making institutions to enter the market. Even strong mutual funds having good financials and insurance companies with sound business base can enter the market with a guarantee from the Government. The cost is only notional and the benefit is substantial.
Even investments by retailers upto Rs 1 lakh in capital market can be considered for tax concession if not exemption. Of course risks have to be borne by them. We are facing an unusual situation and nothing wrong if we take some unusual measures.
The cost incurred by the Government will be more than offset by the direct and indirect gains.

Why not an International Market Stabilisation Fund

Why not An International Markets Stabilisation Fund?
Volatility in markets and instability of markets have of late been the order of the day world over. Reasons can be attributed among other things to the failure of the regulatory and supervisory system, aggressiveness of some institutions in introducing exotic products in the garb of minimizing and distribution of risks, unchecked expansion of business particularly under off balance sheet category and generating hype without much of base about the economic growth prospects and exploiting sentiments of people ignoring business ethics and values. Using jargons, mathematical formulas ignoring the basic concepts of margin and safety are observed to be the guiding principles in the present day banking and investments. Principles of accounting have been grossly violated in such a way that it is humanly impossible to track the transactions and get a feeling of the final destination of the transactions. This is termed as distribution of risk under the modern risk management system using derivatives in an infinite manner. Because of the inter-linkages of markets and institutions under financial liberalization and integration of economies and usage of complex products , the real risk is unidentifiable and the coverage of risk is therefore unmanageable. The good old principle of lending ie not to carry all eggs in one basket has been systematically ignored through mysterious ways and the present failure of well known institutions is nothing but due to concentration of risk in one or two portfolios camouflaged in some derivative products. This has been going on for quite sometime and many institutions have totally disappeared or have been fast disappearing from the scene. The result is erosion of confidence in institutions, markets, products and the regulatory and supervisory
System. The question is how long this can go on?
The only solution perhaps is to think of setting up an International Markets Stabilisation Fund on the model of International Monetory Fund. Both developed and developing countries can be made members of the fund and they can subscribe to the fund based on certain parameters like GDP growth, turnover in various markets,
efficacy of the regulatory and supervisory system etc. In case markets fail due to various reasons and stability of the system gets disturbed beyond certain reasonable limits, the fund can consider bail out measures depending on the circumstances and the extent of cooperation from member countries. The objective of setting up of the Fund should be basically to maintain the confidence level of various economies in institutions, markets and products in the world financial system and ensure to have a backing in case of crisis situation like the one the markets are experiencing now. The institution can be on the model of IMF and can be set up in any developing economy. The modalities of setting up of the institution, its management, method of operation and etc details
can be worked out in coordination with all economies. Such an institution can certainly come to the rescue of institutions, markets and economies from irrational exuberance and collapse of the financial system.
Dr.T.V.G.Krishnan

Black Money is the root cause for all evils

The cause behind all the ills in the economy which include high level of inflation, asset price boom, inequality of income, law and order problem, frequent bouts of terrorism, social unrest, degeneration of society to live by any unethical means etc can be attributed to among other things uncontrolled generation of black money. Despite administrative and several fiscal measures in force, the generation of black money continues unabated leading to destabilization of the economy, disturbance of the financial system , and erosion of confidence in having a peaceful and comfortable social life.

Inflation continues to remain high and insensitive to the measures from monetary and fiscal authorities. These measures will have effect only if the entire financial system is under the control of authorities and actions initiated even against creation and circulation of black money. It is a matter of serious doubt as to whether RBI and the Government have a grip over the entire financial system where black money both in local and foreign currencies rule the roost. The measures to contain black money do not seem to have attracted the desired attention of authorities. This may be due to very obvious reason as the survival of politicians, bureaucrats, industrialists, large farmers, highly placed professionals and criminals having nexus with all categories of people who matter in an economy, depends to a great extent on the generation and proliferation of black money. As long as the system permits to liberally generate black money , one cannot expect to have satisfactory control over inflation, law and order problem, terrorism and all other ills experienced by the society.

Values and ethics by and large have been given a go –bye and greed and fraud have emerged as a way of life. As money has no value, life also has no value. Deaths are reported as if the dead will come back alive after some lapse of time. These situations are avoidable to a reasonable level in an upcoming economy where people look forward to a happy, comfortable and peaceful life. unfortunately the existence of unlimited quantum of black money and the facilities and incentives knowingly or unknowingly built-up to generate any amount of such money prevent the economy from becoming a welfare society. The adage money is the root cause of all evils holds good and people irrespective of religion, caste, creed, position and from all walks of life try to possess and accumulate the money at any cost, legally or illegally ignoring the ethics, values and needs.

Roughly the black money and the fake currencies in circulation would be equal to the white money in circulation if not more. With liberalization and globalization of the economy the black money and fake currencies can be found both in domestic and foreign currencies as well. While white money circulation can be kept under check to a great extent with monetary policies, the black money generation cannot be so easily curbed unless there is coordinated approach from administrative, fiscal and monetary policy authorities. Here in lies the problem.

Sources of black money are very many and it is beyond anybody’s imagination. Corruption which is the main source of black money is rampant and more or less institutionalized though not legalized. It is not an exaggeration to say that right from cradle to grave one has to literally bribe to live through. Otherwise living in India is a miracle or a mystery!! Survival since birth is greater task unless one is fortunate to find place in any three categories of classification shown below.

1. People occupying position of power and capable of influencing

2. People having sufficient money including black money to throw around to get things done

3. People enjoying both power and money to curry favour.

People not falling in any of these categories, survival is only for the sake of survival and definitely driven by self motivation to survive. These people are susceptible to be lured by money to indulge in anti-social activities and are not bound by values in life.

Other sources of black money can be largely found in all dealings, in agriculture, trade and commerce. It is difficult to have any dealings in real estate without involving black money. So is the case in starting any business or industry. Export import business has its own way of generating black money both in domestic and foreign currency. Contributions to charities, temples and churches help to generate black money. System provides attractive incentives and comforts to deal in black money .It also encourages conversion of white money into black money. The result is simultaneous circulation of both white and black money ,creating chaos , providing space for easy maneuverability to destabilize any system,and affording opportunities to make quick money in the garb of innovations . Black money supports all unethical activities and it is akin to a very wide open floodgate without any hurdles to stop it from doing the damages.

Containing the excess money whether it is black or white in an economy is a big challenge. It requires meticulous planning, harsh decisions and execution of policies. It is high time some serious thought is given to the subject and meaningful and result oriented actions are initiated soon. Fortunately, the country has the capacity, resources and all potential to make it a strong economy and a welfare society but the mindset has to change. What is required is integrity of thought and sincerity in actions.

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Fuel Prices and Inflation

Despite series of fiscal and monetary measures and impressive growth witnessed in GDP growth at around 9%, the rate of growth of inflation continues to be unabated disturbing the political stability and confidence level in the economy. Although the major reason for this upsurge in inflation can be attributed to the unchecked spurt in oil prices at international level, the fact remains that the increase in oil prices and its repercussions on the domestic economy in general and on the inflation rate in particular have been experienced and were anticipated for quite sometime. Historical evidence clearly indicates that whenever there is an unusual increase in international prices, it is always accompanied by higher levels of growth in inflation rate. This correlation between oil price and inflation rate growth has been well established particularly in India during 1970s, 1990s and in 2007-2008. The severity of impact of inflation has perhaps not been felt so far this time, for the simple and very valid reason that the value of rupee had been appreciating due to (among other things) GDP growth achieved through liberalisation and globalisation of the economy.

It is time now to take a serious view of the ugly and piquant situation in which the Govt, economy and people are placed because of continuous increase observed in price levels of all commodities unresponsive to the counter measures in operation to check them and there being no hope of early return to normalcy or of stabilization of oil prices at an acceptable level. While we have limited options to contain international price levels definitely we can have some innovative measures other than the traditional fiscal and monetary counter measures already in force to soften the impact of present inflation. The present and steep hike affected by the government in the prices of petrol, diesel and LPG is likely to boomerang and worsen the situation further. Jugglery of figures and tinkering with the policies here and there cannot work any longer to overcome the situation and the reality has to be faced boldly without the confidence level being shaken. As a nation we have faced major crises worse than the present one, we have successfully tackled them and we have never failed. From this angle the following random thoughts emerge and perhaps can be given a trial after adequately evaluating the pros and cons.

The oil companies which bear the brunt of ever increasing prices of oil in international market without being in a position to pass on the same to the consumers because of inflationary impact and adverse consequences in the economy need to be compensated by all means to make them remain commercially viable. The loss incurred by them estimated at Rs. 2,45,000 crores need to be made good and for this, sources other than the hike in prices of petrol, diesel and LPG have to be found as increase in prices of these items have an inflationary impact there by affecting worst the economy in general and the common man in particular. Any policy particularly economic policy to be pursued, should be helpful to the common man. Other wise, it cannot sustain larger interest of the economy for long and may prove to be disastrous in the long run. The so-called common man, who has no hedge against any harmful effects of policy particularly such as the present one of pricing the fuels, can only suffer silently. He cannot be expected to be tolerant and patient for long as this may ultimately lead to economic, social and mental depression, which is certainly not good to any society by any reckoning.

There are umpteen ways to raise resources to make good the shortfall faced by the oil companies. The Government can cancel all subsidies and create an oil subsidy fund by inviting subscriptions and mobilizing resources from various sources to help the companies and also introduce some measures to benefit the companies directly.

The Oil Subsidy fund can be created by 1) earmarking a percentage through budgetary resources even at the cost of some fiscal deficit, 2) making state governments to share a small portion of the life tax levied from high end and luxury car owners), receiving contributions from cash rich companies particularly from those who are enjoying tax holidays; if necessary Government can consider giving further incentives on such subscriptions, 4) levying a small percentage on real estate transactions both on purchase and sale above a cut off limit say Rs. 5 cores and above, 5) levying a percentage on funds coming from abroad towards churches, temples, charitable trusts etc: under Foreign Contribution Act,6) inviting subscriptions from public without insisting on source of funds. This way a part of the black money can be expected to come to the main stream. Govt can pay a small percentage of interest on this money to attract subscription and make it repayable after a suitable period.

Some of the other possible ways to come to the rescue of oil companies can be 1) to make funds available to oil companies at very reasonable rates from the banking system, 2) facilitate oil companies to raise funds from abroad at competitive rates, 3) introducing special rates for diesel for vehicles utilized for public transport without giving room for irregularities and malpractices, 4) having special rates for high end vehicles used by corporates and high net worth individuals- if this cannot be monitored for practical reasons, such vehicle owners can be asked to pay a fixed amount per month to an escrow account maintained for the purpose and this fund can be shared by the oil companies based on their balance sheet size, 5) offering a special exchange rate as a special case to oil companies and insulating them from the adverse fluctuations of the exchange rate.

The above measures either in isolation or in combination can be attempted to come out of the present crisis. At any cost, the cost of production in an economy like ours has to be kept at the minimum which itself will help the inflation under check. The hike in oil prices has a chain and poisonous effect and cannot be easily reversed. Besides such a measure will only have a dampening effect on the morale of people particularly unemployed and people in the lower strata of society who have no means and hope to survive? It has to be accepted that rich will always thrive under any circumstances and poor will only perish under the present circumstances. One cannot equate a common man earning less than Rs.40 a day with an individual purchasing car worth Rs. few lakhs and crores. A civilised nation following the principles of Dharma cannot go in for measures, which can kill the spirit of living when alternate measures are available to overcome any crisis and kindle the light of Hope.

Views expressed are personal and are in the larger interests of The society and the Economy.

T V G Krishnan

How to Contain Prices

How to contain prices

Poorest of the poor are the worst affected because of continuous increase in prices . The present inflation index which is primarily assessed based on movement of wholesale prices consisting of items unseen/unheard of by a section of people and to that extent change in inflation index does not mean anything as far as this section of people is concerned. Their consumption pattern is totally at variance with that of middle class and higher echelon of society. While it is essential to contain price levels through monitoring of Whole sale price index, the fact remains that price levels of items consumed by the so called lowest category of people need to be maintained as low as possible if The Govt is really worried about them. By and large these people require rice/wheat/ salt, sugar, tea, mirchi, one or two vegetables like onion or potato or leaf vegetables, oil (fuel, consumption). They are not worried about price of petrol, apple, dry fruits, manufactured items and things like that. Can the Govt do something for these categories of people without much of fanfare? Will it be possible to reach the very essential items to these people without loot, corruption and other malpractices? Controlling wholesale price index is something different from making available essentials at very reasonable prices to the poorest of poor. The real success of controlling inflation depends on the latter. From this angle, the following suggestions may be attempted.

Generally poor people and low class people are found concentrated in specified localities in Metropolitan, urban, semi-urban and rural areas. Supply of some of the very essential items referred to above in plenty to this segment of society at a subsidized cost without giving room for any mal practices under close supervision of agencies involved in social welfare and subjected to social audit by rotary clubs or identified groups of social workers can be attempted. If workable, coupons can be distributed through post offices, banks, self help groups, or farm clubs etc against proper identification to enable them to have these items from specified shops. Through this method of distribution of essential items to the segment of society worst affected because of spiraling prices and those really deserve support for day to day life, can be taken care of till such time general level of inflation is brought under control. The cost involved to take care of this segment of society has to be recovered through some special levies from the really wealthy segment of the society by way of surcharge on income tax, wealth tax etc. Persons owning several houses, cars, estates and having regular flow of income through different sources that do not generally get affected by any price increase can be made to bear part of the cost to meet essential supplies to the poor.

Strong measures need to be initiated against hoarding, black marketing and exploitation. Anti social elements engaged in such undesirable activities that include moneylenders, bankers who provide advances against sensitive commodities need to be identified through a separate monitoring system and need to be demonstrably punished.

Augmentation of production of essential commodities by encouraging utilization of waste lands is a sure way of increasing supply and controlling prices.. This may be a long-term solution and would prove to an endurable solution to contain inflation.

Composition of items to assess the inflation index and method of assessment keeping in view the pattern of consumption among people, income levels of people, availability of commodities from local and international sources, efficiency in distribution management etc need to be reviewed and made transparent. A little readjustment of the composition of items largely consumed by majority of people and specific measures to control prices of those items if necessary by subsidizing wherever required can also be thought of.

Cost of production, which reflects on inflation index, needs to be reexamined so as to exclude luxury spending incurred by the manufacturers for manufacturing. It is unfortunate to observe that luxury expenditure incurred by executives for their five star culture of stay, travel and life style are to be borne by the common man without any of these having known to him leave alone experienced. The fact that Food has to come to five star hotels from farms is being forgotten and farmers have to starve, are something astonishing and should serve as food for thought among all policy makers. It is desirable that any expenditure of extra -vaganza in nature should be taken out from cost of production and should figure only below the line of profit.

Farm subsidies presently incurred by the Government can be converted into Inflation subsidy to help the lowest strata of society instead of supporting the rich farmers Resistance need to be bravely fought and this measure alone would help to bring down inflation as the large farmers as it is, are in a position to dictate the Govt and the price levels. Consolidation of small land holdings need to be encouraged and if necessary Government should take initiative to consolidate the lands and lease them to those who are interested in cultivation of crops. Even lands owned by Government and other public sector undertakings and lying vacant can be leased out for cultivation of essential crops. Because of subdivision and possession of lands in small and uneconomical quantities the incentive to cultivate any crop is found missing and thousands of acres of lands remain uncultivated affecting the supply of food articles.

The tendency to speculate on land (rather than cultivate some crops) has of late been on the increase and farmers find it lucrative to sell the land at attractive prices to persons who are neither interested in cultivation or interested in some productive activities other than waiting for an opportunity to exploit the boom in prices. The law relating to purchase and sale of lands particularly agricultural lands need to be reset and it should encourage only genuine transactions. Keeping the land uncultivated for one crop period should attract heavy penalty. The funds so collected can go to the inflation subsidy.

No doubt fiscal and monetary measures which aim at macro level control of prices and have more of a signaling effect on a long term perspective need to be continued along with the other measures keeping in mind the plight of people who have absolutely no hedge against spiraling prices other than silently suffering . It is high time for those who exploit society and make money at any cost to restraint themselves and come to the rescue of those who unfortunately form majority of the same society and suffer for no fault of theirs by any reckoning.