This refers to your edit ‘credit where it is not due’ (December 26,2011).The NPA menace which was kept under some check for a few years has again been raising its ugly head. More NPAs mean, more resources the banks have to find to maintain capital adequacy. The loss to the economy on account of NPAs is unfortunately made to bear by tax payers as the Govt loses its revenues on account of reduction of GDP because of non performance of assets and also is made to contribute to capital through budgetary provisions to enable the banks to maintain the capital adequacy standards as per Basle norms. Further, the cost of NPAs is unknowingly borne by all stakeholders of banks other than by the bad borrowers is an unfortunate reality. The fact that banks can camouflage NPAs and keep them under the carpet is well known and the hidden NPAs are difficult to be identified. Added to this, the permission granted by the Reserve Bank in August 2008 to restructure some of the unsatisfactory accounts and treat them as standard assets if found viable, has helped banks to keep the NPAs down artificially.
It is for the Govt and the Reserve Bank to seriously view the NPA menace and introduce a lasting solution perhaps acceptable to all stakeholders of banks other than borrowers. Time has come to give a serious thought to discipline the borrowers and to contain the problem of NPAs. Since only banks and borrowers do figure in the generation of NPAs, the only and ideal way to come out of this ever greening problem is to have a built in mechanism to liquidate NPAs by means of creating a fund under the nomenclature Precautionary Margin Reserve Fund (PMR) involving all borrowers and banks themselves. This has to be done on a systematic and scientific basis. Over a period this fund will be more than the formation of NPAs, and this approach can strengthen the vitally missing credit discipline among the borrowers. This suggestion developed through a statistical model has been found workable resulting in disciplining the borrowers and making the balance sheet of the banks strong. The Govt is the major beneficiary in case the solution is introduced.
T.V. Gopalakrishnan
(edited version of this appeared in Business-Standard dt 27/12/11).
Tuesday, December 27, 2011
Saturday, December 24, 2011
GDP , Economic Activities and Taxation policy
There are varieties of economic activities.But to what extent these economic activities and income generated from them reflect in GDP or tax revenue etc are in serious doubt. In various cities like Mumbai, Chennai Delhi, Calcutta, there are varieties of markets dealing right from scraps to gold bullion. There are whole sale and retail markets and transactions are generally in cash running into lakhs and even crores. These merchants are seldom seen issuing any receipts and it is difficult to assess tax collection if any. Apart from loss of revenue to the Govt, this system of transactions encourage black money and indiscipline in the society. It is desirable in the larger interest of the society that these transactions and the turn over should reflect online in some centralised data collection centre making use of the IT strength of the country. The very system of data generation will help to throw some light on the volume of transactions and money generated in the economy. This will pave way for formulation of policies on taxation,improvement of financial and banking inclusion, tracking black money generation and bringing in discipline and order among the trading community in paricular for conducting their business as per the laws of the country. It is not that difficult to get the transactions properly accounted for. Insistence of official receipt and getting the transactions tracked through IT will do the trick.The benefit is for the economy and the society.
Wednesday, December 21, 2011
NPA Menace
Time for the Govt and the Reserve Bank to come out of the morass caused by Non Performing Advances ( NPAs) in Banking and the Economy.
The NPA menace which was kept under some check for a few years has again been raising its ugly head disturbing the peace of mind of authorities i.e. the Govt and the Reserve Bank. More NPAs mean, more resources the banks have to find to maintain capital adequacy. As long as lending remains an inevitable function of banking and banks have to deal with human beings as borrowers, this problem will continue to haunt the banks. Further, the changes in economic scenario which gets influenced by several micro and macro economic factors that include both domestic and international such as declining GDP growth, high inflation, financial instability, exchange and interest rate volatility, monsoon conditions etc where the management of banks have no control whatsoever, also affect the working of banks adversely and resulting in increased level of NPAS. The present approach by the regulator to expect the banks to make good the loss on account of NPAs by charging to banks' profit and loss account at the cost of all stakeholders of banks viz; depositors, borrowers, shareholders, employees and even customers is neither ethical nor prudential by any reckoning. Further the loss to the economy on account of NPAs is unfortunately made to bear by tax payers as the Govt loses its revenues on account of reduction of GDP because of non performance of assets and also is made to contribute to capital through budgetary provisions to enable the banks to maintain the capital adequacy standards as per Basle norms. The position of Public Sector Banks NPAs vis-a-vis advances, deposits and investments for the period 1993 to 2011 is given below.
( Amount in Rs Crores)
Year Advance NPA NPA as % of Total Advances Deposit CD Ratio Investment Investment Deposit Ratio
1993 1,69,340 39,253 23.2 2,63,315 58.5 99,889 37.9
1994 1,65,621 41,041 24.8 3,03,392 48.4 1,32,810 43.7
1995 1,97,352 38,385 19.5 3,48,938 50.9 1,50,432 43.1
1996 2,31,321 41,661 18.0 3,90,820 53.1 1,62,667 41.6
1997 2,44,214 43,577 17.8 4,49,329 49.0 1,91,058 42.5
1998 2,84,971 45,653 16.0 5,31,723 48.9 2,27,102 42.7
1999 3,25,328 51,710 15.9 6,36,810 46.7 2,76,802 43.5
2000 3,80,077 53,294 14.0 7,37,280 47.8 3,33,414 45.2
2001 4,42,134 54,773 12.4 8,59,376 48.2 3,94,107 45.9
2002 5,09,368 56,473 11.1 9,68,623 52.6 4,54,509 46.9
2003 5,77,813 54,090 9.4 10,79,393 53.5 5,45,668 50.6
2004 6,61,975 51,541 7.8 12,29,462 53.8 6,26,176 50.9
2005 8,77,825 48,399 5.5 14,20,750 61.8 6,60,674 46.5
2006 11,34,724 41,358 3.6 16,22,481 69.9 6,33,557 39.0
2007 14,64,493 38,968 2.6 19,94,199 73.4 6,64,645 33.3
2008 18,19,074 40,595 2.2 24,53,868 74.1 7,99,841 32.6
2009 22,83,473 45,156 2.0 31,12,748 73.4 10,12,666 32.5
2010 27,01,019 57,301 2.1 36,91,802 73.2 12,05,783 32.7
2011 33,05,632 71,047 2.2 43,72,985 75.6 13,28,534 30.4
Source : Trend and Progress of Banking various issues.
It is gratifying to observe that the gross NPAs as percentage of gross advances have drastically come down from 23.2% in March 1993, (when the concept of NPA was first introduced in terms of Financial Sector Reforms) to 2.2 % in March2011. Working of banks got further streamlined based on banking sector reforms introduced in 1998. The results are very encouraging. In the decade 2000 to 2010s, Banks could bring down considerably its NPAs. Many factors have come to the rescue of banks in keeping the NPAs down. The banks were identifying the NPAs through manual process all these years and it was humanly impossible to assess the correct position of NPAs. The banks could manage to keep many NPAs under the carpet and the hidden NPAs were difficult to be identified as banks had umpteen ways to camouflage NPAs. The boom in real estate prices came handy for banks to bring pressure on borrowers who also found it advantageous to sell off their assets and come out of banks' clutches. Further, Debt Recovery tribunals, Lok Adalats, implementation of SURFAESI Act 2002 for recovery of dues, improved performance of the economy and bank's own performance in terms of better profitability on account of enhanced efficiency, productivity, competition, better return out of investments and diversification of operations greatly contributed to bring down NPAs. Huge write offs of NPAs again at the cost of shareholders who include the Govt, effective regulation and supervision of the Reserve Bank had also played an important and effective role in keeping down the level of NPAs. The provisioning requirements of the Reserve Bank in particular compelled banks to be vigilant in minimising the NPAs. Added to this, the permission granted by the Reserve Bank in August 2008 to restructure some of the accounts (though strictly need to be classified as NPAs) and treat them as standard assets if found viable, limited the growth of gross NPAs. The gross NPAs of public Sector banks with all aforesaid adjustments stood at Rs 71047 crores as at end March 2011 are still staggering and causing concern. The steep increase in advances since 2005 onwards (CD ratio increased from 61.8 in 2005 to 75.6 in 2011) is something abnormal and how much of this would turn out to be NPAs is worth watching. With the recent switch over to computerised system to identify the NPAs, the position has been moving from bad to worse. The high interest rate regime, persisting inflationary and near recessionary conditions in the domestic economy, and discouraging economic scenario in US and Europe, the chances of generation of more NPAs in coming months cannot be ruled out. The fact that NPAs affect the economy in general and all stakeholders of banks in particular adversely and finally lead to bail out of banks with budget allocations has been the trend, has to be recognised and this approach to manage NPAs needs a final go-bye.
Time has come to give a serious thought to this NPA menace and a lasting solution to put up with NPAs and at the same time discipline the borrowers without jeopardising the interests of other stake holders has to be attempted. Since only banks and borrowers do figure in the generation of NPAs, the only and ideal way to come out of this ever greening problem is to have a built in mechanism to liquidate NPAs by means of creating a fund under the nomenclature Precautionary Margin Reserve Fund (PMR) involving all borrowers and banks themselves. This has to be done on a systematic and scientific basis. Over a period this fund will be more than the formation of NPAs, and this approach can strengthen the vitally missing credit discipline among the borrowers.
There is a saying that all truth passes through three stages. First it is ridiculed. Second it is violently opposed. Third it is accepted as being self evident( Arthur Scapenhauer). The suggestion to remedy the NPA menace through creation of fund i.e. PMR should not be similar to that and kept aside. Bankers and borrowers will ridicule the suggestion first and oppose it as it affects them directly. Banks will have to tighten the monitoring of accounts on a continuous basis to rate the borrowers, discipline them and levy the contribution towards the PMR fund based on borrowers' rating. Bankers are generally inclined to satisfy the borrowers and do not want to incur any displeasure by being strict and vigilant with them for fear of losing the account when the going is good. Borrowers will oppose creation of this fund as it adds initially to their cost of funds and expects them to adhere to strict credit discipline though they can derive the benefit in the long term. Besides, the rating will have reputation risk with attendant consequences.
It is for the Govt and the Reserve Bank to seriously view the NPA menace and introduce a solution perhaps acceptable to all stakeholders of banks other than borrowers. This suggestion developed through a statistical model has been found workable resulting in disciplining the borrowers and making the balance sheet of the banks strong. The Govt is the major beneficiary in case the solution is introduced.
(Views are personal).
Dr.T.V.Gopalakrishnan
(Edited Version of this write up appeared in The Hindu-Business Line dated 19/12/11)
The NPA menace which was kept under some check for a few years has again been raising its ugly head disturbing the peace of mind of authorities i.e. the Govt and the Reserve Bank. More NPAs mean, more resources the banks have to find to maintain capital adequacy. As long as lending remains an inevitable function of banking and banks have to deal with human beings as borrowers, this problem will continue to haunt the banks. Further, the changes in economic scenario which gets influenced by several micro and macro economic factors that include both domestic and international such as declining GDP growth, high inflation, financial instability, exchange and interest rate volatility, monsoon conditions etc where the management of banks have no control whatsoever, also affect the working of banks adversely and resulting in increased level of NPAS. The present approach by the regulator to expect the banks to make good the loss on account of NPAs by charging to banks' profit and loss account at the cost of all stakeholders of banks viz; depositors, borrowers, shareholders, employees and even customers is neither ethical nor prudential by any reckoning. Further the loss to the economy on account of NPAs is unfortunately made to bear by tax payers as the Govt loses its revenues on account of reduction of GDP because of non performance of assets and also is made to contribute to capital through budgetary provisions to enable the banks to maintain the capital adequacy standards as per Basle norms. The position of Public Sector Banks NPAs vis-a-vis advances, deposits and investments for the period 1993 to 2011 is given below.
( Amount in Rs Crores)
Year Advance NPA NPA as % of Total Advances Deposit CD Ratio Investment Investment Deposit Ratio
1993 1,69,340 39,253 23.2 2,63,315 58.5 99,889 37.9
1994 1,65,621 41,041 24.8 3,03,392 48.4 1,32,810 43.7
1995 1,97,352 38,385 19.5 3,48,938 50.9 1,50,432 43.1
1996 2,31,321 41,661 18.0 3,90,820 53.1 1,62,667 41.6
1997 2,44,214 43,577 17.8 4,49,329 49.0 1,91,058 42.5
1998 2,84,971 45,653 16.0 5,31,723 48.9 2,27,102 42.7
1999 3,25,328 51,710 15.9 6,36,810 46.7 2,76,802 43.5
2000 3,80,077 53,294 14.0 7,37,280 47.8 3,33,414 45.2
2001 4,42,134 54,773 12.4 8,59,376 48.2 3,94,107 45.9
2002 5,09,368 56,473 11.1 9,68,623 52.6 4,54,509 46.9
2003 5,77,813 54,090 9.4 10,79,393 53.5 5,45,668 50.6
2004 6,61,975 51,541 7.8 12,29,462 53.8 6,26,176 50.9
2005 8,77,825 48,399 5.5 14,20,750 61.8 6,60,674 46.5
2006 11,34,724 41,358 3.6 16,22,481 69.9 6,33,557 39.0
2007 14,64,493 38,968 2.6 19,94,199 73.4 6,64,645 33.3
2008 18,19,074 40,595 2.2 24,53,868 74.1 7,99,841 32.6
2009 22,83,473 45,156 2.0 31,12,748 73.4 10,12,666 32.5
2010 27,01,019 57,301 2.1 36,91,802 73.2 12,05,783 32.7
2011 33,05,632 71,047 2.2 43,72,985 75.6 13,28,534 30.4
Source : Trend and Progress of Banking various issues.
It is gratifying to observe that the gross NPAs as percentage of gross advances have drastically come down from 23.2% in March 1993, (when the concept of NPA was first introduced in terms of Financial Sector Reforms) to 2.2 % in March2011. Working of banks got further streamlined based on banking sector reforms introduced in 1998. The results are very encouraging. In the decade 2000 to 2010s, Banks could bring down considerably its NPAs. Many factors have come to the rescue of banks in keeping the NPAs down. The banks were identifying the NPAs through manual process all these years and it was humanly impossible to assess the correct position of NPAs. The banks could manage to keep many NPAs under the carpet and the hidden NPAs were difficult to be identified as banks had umpteen ways to camouflage NPAs. The boom in real estate prices came handy for banks to bring pressure on borrowers who also found it advantageous to sell off their assets and come out of banks' clutches. Further, Debt Recovery tribunals, Lok Adalats, implementation of SURFAESI Act 2002 for recovery of dues, improved performance of the economy and bank's own performance in terms of better profitability on account of enhanced efficiency, productivity, competition, better return out of investments and diversification of operations greatly contributed to bring down NPAs. Huge write offs of NPAs again at the cost of shareholders who include the Govt, effective regulation and supervision of the Reserve Bank had also played an important and effective role in keeping down the level of NPAs. The provisioning requirements of the Reserve Bank in particular compelled banks to be vigilant in minimising the NPAs. Added to this, the permission granted by the Reserve Bank in August 2008 to restructure some of the accounts (though strictly need to be classified as NPAs) and treat them as standard assets if found viable, limited the growth of gross NPAs. The gross NPAs of public Sector banks with all aforesaid adjustments stood at Rs 71047 crores as at end March 2011 are still staggering and causing concern. The steep increase in advances since 2005 onwards (CD ratio increased from 61.8 in 2005 to 75.6 in 2011) is something abnormal and how much of this would turn out to be NPAs is worth watching. With the recent switch over to computerised system to identify the NPAs, the position has been moving from bad to worse. The high interest rate regime, persisting inflationary and near recessionary conditions in the domestic economy, and discouraging economic scenario in US and Europe, the chances of generation of more NPAs in coming months cannot be ruled out. The fact that NPAs affect the economy in general and all stakeholders of banks in particular adversely and finally lead to bail out of banks with budget allocations has been the trend, has to be recognised and this approach to manage NPAs needs a final go-bye.
Time has come to give a serious thought to this NPA menace and a lasting solution to put up with NPAs and at the same time discipline the borrowers without jeopardising the interests of other stake holders has to be attempted. Since only banks and borrowers do figure in the generation of NPAs, the only and ideal way to come out of this ever greening problem is to have a built in mechanism to liquidate NPAs by means of creating a fund under the nomenclature Precautionary Margin Reserve Fund (PMR) involving all borrowers and banks themselves. This has to be done on a systematic and scientific basis. Over a period this fund will be more than the formation of NPAs, and this approach can strengthen the vitally missing credit discipline among the borrowers.
There is a saying that all truth passes through three stages. First it is ridiculed. Second it is violently opposed. Third it is accepted as being self evident( Arthur Scapenhauer). The suggestion to remedy the NPA menace through creation of fund i.e. PMR should not be similar to that and kept aside. Bankers and borrowers will ridicule the suggestion first and oppose it as it affects them directly. Banks will have to tighten the monitoring of accounts on a continuous basis to rate the borrowers, discipline them and levy the contribution towards the PMR fund based on borrowers' rating. Bankers are generally inclined to satisfy the borrowers and do not want to incur any displeasure by being strict and vigilant with them for fear of losing the account when the going is good. Borrowers will oppose creation of this fund as it adds initially to their cost of funds and expects them to adhere to strict credit discipline though they can derive the benefit in the long term. Besides, the rating will have reputation risk with attendant consequences.
It is for the Govt and the Reserve Bank to seriously view the NPA menace and introduce a solution perhaps acceptable to all stakeholders of banks other than borrowers. This suggestion developed through a statistical model has been found workable resulting in disciplining the borrowers and making the balance sheet of the banks strong. The Govt is the major beneficiary in case the solution is introduced.
(Views are personal).
Dr.T.V.Gopalakrishnan
(Edited Version of this write up appeared in The Hindu-Business Line dated 19/12/11)
Wednesday, November 23, 2011
Tame the rise
Better Late Than never.
This refers to your editorial Get Going, Montek (Et dt,22/11/11). Inflation is said to the worst enemy of poor and the Govt and the planners have miserably failed to contain the inflation which has been in double digit for the past few months and continues to be defiant despite series of measures taken by the Reserve Bank. Containing inflation cannot be a lone battle by the Reserve Bank has been well proved and the failure of the Govt in this aspect has been very obvious. As rightly pointed out in your editorial, supply chain management with appropraite and effective logistics in the procurement, storage, cheap and quick transporation and distribution of the produce is the need of the hour to check spiralling of prices of food products. Further, incentives for improved productivity, controlling of corruption , black money and hoarding of agricultural products using bank funds will go a long way in bringing down prices. The suggestion to scrap the Agricultural Produce Market Committee Act is very valid and long overdue to be implementd. Coordination is the essence and planning Commission is well suited for that. Involvement of NABARD at state levels and Local Boards ofthe Reserve Bank would be of great help to coordinate.
(edited version of this appeared in ET dt 23/11/11)
Dr.T.V.Gopalakrishnan.
This refers to your editorial Get Going, Montek (Et dt,22/11/11). Inflation is said to the worst enemy of poor and the Govt and the planners have miserably failed to contain the inflation which has been in double digit for the past few months and continues to be defiant despite series of measures taken by the Reserve Bank. Containing inflation cannot be a lone battle by the Reserve Bank has been well proved and the failure of the Govt in this aspect has been very obvious. As rightly pointed out in your editorial, supply chain management with appropraite and effective logistics in the procurement, storage, cheap and quick transporation and distribution of the produce is the need of the hour to check spiralling of prices of food products. Further, incentives for improved productivity, controlling of corruption , black money and hoarding of agricultural products using bank funds will go a long way in bringing down prices. The suggestion to scrap the Agricultural Produce Market Committee Act is very valid and long overdue to be implementd. Coordination is the essence and planning Commission is well suited for that. Involvement of NABARD at state levels and Local Boards ofthe Reserve Bank would be of great help to coordinate.
(edited version of this appeared in ET dt 23/11/11)
Dr.T.V.Gopalakrishnan.
Monday, November 14, 2011
Make the Service Meaningful for self and others in society:
“People , it is said , can be placed in three classes; the few who makes things happen, the many who watch things happen, and the overwhelming majority, who have no idea what has happened”. The bank officials in general and public sector bank officials in particular have to necessarily find their place in the first category as by any standard they enjoy all possible comforts one can think of in a developing economy and they are comparatively in a commanding position by means of resources and support they get from the authorities to be of great service to society.
Corruption has been rampant in India and it has become a subject of discussion even among illiterate masses who are unfortunately the worst victims as they are at the receiving end in the sense unless bribe is given, they do not get their entitlements as citizens of this great nation. It is more than six decades since the country got independence, but have the people got their economic independence and dues for a comfortable and peaceful life is the question lingering in the minds of all right thinking human beings. The bank officials right from top to bottom can do a lot to improve the living conditions of masses and have the satisfaction of serving them in letter and spirit and giving the support system to give a big boost to the economic growth provided they get fully absorbed and involve themselves with commitment in the discharge of their responsibilities. The mandate for this has to come from within and for that everyone has to do an introspection to satisfy himself or herself as to whether justice has been done to the society which takes care of everyone’s need and to some extent greed also.
The celebration of Vigilance Awareness week has been going on for decades and the taking of oath on elimination of corruption has become a ritual and has been taken faithfully by each and every employee of Public Sector during the week. Bank employees, by and large are not corrupt, is a great consolation, but are they fully satisfying the expectations of the economy or the society consisting of around 70 percent of the people living below poverty line? It is not that banks alone can remove the poverty in India, but they can easily come to the rescue of poor people and give them the recognition they badly need in society for their survival.
Banks’ raw materials are basically money and people but they discriminate a lot, not by rule but rather by convention in their day to day business by not entertaining people of less means. This is a fact which cannot be ignored and this is exactly the reason for the financial inclusion not being a success despite persuasion, compulsion, motivation, incentives and encouragement. Why this reluctance and discrimination on the part of a bank official who deal with public deposits and authorities want financial inclusion by all means? There are millions of bank employees scattered throughout the length and breadth of the country and they are better placed to bring people of less means and less privileged under the banking fold. Employees have their own servants, iron wallas, plumbers, electricians and contacts with all categories of people in a society right from pan wallas to Gold merchants .Many people like carpenters, dealers in scraps, waste materials, traders etc do not have bank accounts or do not operate the accounts even if some have. If employees turn their attention a little and no special effort is called for, millions of people can be brought under banking fold. All their contacts can be easily encashed and many can be brought under banking fold. The officials have to take financial inclusion as an opportunity to show humanism and at the same time help the needy to improve their lot. Through financial inclusion bank employees can provide life to many and this will the greatest satisfaction one can derive from service.
KYC is a weapon to serve the customer better by understanding him and his requirements fully and not to kill him. Here the bank officials can perform better and add business to the bank. The present day banking is enjoying lot of freedom, products and advanced technology to improve business. Full understanding of Financial Inclusion and Know Your Customer norms offer excellent business opportunities and help the bank to comply with the authorities’ requirements. By adopting a human approach rather than being mechanical, even the NPA menace which has been growing like a cancer in the banking system can be tackled to a great extent. Mind should be devoted for service and service alone. Will the employees rise to the occasion and be more humane in their responsibilities to the society? By being humane, one derives great mental satisfaction and no money or compensation can achieve that?
I wish each and every bank employee would emerge as a great leader with the qualities defined in Sloka-21 of Chapter -3 of Bhagavat Geetha which says “Whatever action a great man performs, common men follow. And Whatever standards he sets by exemplary acts, all the world pursued”. It is time for each and every bank employee to set standards in his actions.
(Views expressed are personal)
Dr. T.V.Gopalakrishnan,
Corruption has been rampant in India and it has become a subject of discussion even among illiterate masses who are unfortunately the worst victims as they are at the receiving end in the sense unless bribe is given, they do not get their entitlements as citizens of this great nation. It is more than six decades since the country got independence, but have the people got their economic independence and dues for a comfortable and peaceful life is the question lingering in the minds of all right thinking human beings. The bank officials right from top to bottom can do a lot to improve the living conditions of masses and have the satisfaction of serving them in letter and spirit and giving the support system to give a big boost to the economic growth provided they get fully absorbed and involve themselves with commitment in the discharge of their responsibilities. The mandate for this has to come from within and for that everyone has to do an introspection to satisfy himself or herself as to whether justice has been done to the society which takes care of everyone’s need and to some extent greed also.
The celebration of Vigilance Awareness week has been going on for decades and the taking of oath on elimination of corruption has become a ritual and has been taken faithfully by each and every employee of Public Sector during the week. Bank employees, by and large are not corrupt, is a great consolation, but are they fully satisfying the expectations of the economy or the society consisting of around 70 percent of the people living below poverty line? It is not that banks alone can remove the poverty in India, but they can easily come to the rescue of poor people and give them the recognition they badly need in society for their survival.
Banks’ raw materials are basically money and people but they discriminate a lot, not by rule but rather by convention in their day to day business by not entertaining people of less means. This is a fact which cannot be ignored and this is exactly the reason for the financial inclusion not being a success despite persuasion, compulsion, motivation, incentives and encouragement. Why this reluctance and discrimination on the part of a bank official who deal with public deposits and authorities want financial inclusion by all means? There are millions of bank employees scattered throughout the length and breadth of the country and they are better placed to bring people of less means and less privileged under the banking fold. Employees have their own servants, iron wallas, plumbers, electricians and contacts with all categories of people in a society right from pan wallas to Gold merchants .Many people like carpenters, dealers in scraps, waste materials, traders etc do not have bank accounts or do not operate the accounts even if some have. If employees turn their attention a little and no special effort is called for, millions of people can be brought under banking fold. All their contacts can be easily encashed and many can be brought under banking fold. The officials have to take financial inclusion as an opportunity to show humanism and at the same time help the needy to improve their lot. Through financial inclusion bank employees can provide life to many and this will the greatest satisfaction one can derive from service.
KYC is a weapon to serve the customer better by understanding him and his requirements fully and not to kill him. Here the bank officials can perform better and add business to the bank. The present day banking is enjoying lot of freedom, products and advanced technology to improve business. Full understanding of Financial Inclusion and Know Your Customer norms offer excellent business opportunities and help the bank to comply with the authorities’ requirements. By adopting a human approach rather than being mechanical, even the NPA menace which has been growing like a cancer in the banking system can be tackled to a great extent. Mind should be devoted for service and service alone. Will the employees rise to the occasion and be more humane in their responsibilities to the society? By being humane, one derives great mental satisfaction and no money or compensation can achieve that?
I wish each and every bank employee would emerge as a great leader with the qualities defined in Sloka-21 of Chapter -3 of Bhagavat Geetha which says “Whatever action a great man performs, common men follow. And Whatever standards he sets by exemplary acts, all the world pursued”. It is time for each and every bank employee to set standards in his actions.
(Views expressed are personal)
Dr. T.V.Gopalakrishnan,
Monday, November 7, 2011
Time to clear off real estate accummulation
It makes sense to sell real estates particularly flats at current prices or even at discounted prices to clear off debts and avoid future losses. The market sentiments are against corruption and black money and accummulation of wealth by a few at the cost of masses will not be tolerated anymore. If the Govt is serious in tracking black money and accummulation of illegal wealth, the prices of real estate will have to crash sooner than later. This is the ideal time for builders to get rid off the stocks even at a lesser margin and profit than to incur heavy losses and debt.The advice by HDFC chief makes sense and worh pursuing.
T.V.Gopalakrishnan (Mumbai)
06 Nov, 2011 03:12 PM
T.V.Gopalakrishnan (Mumbai)
06 Nov, 2011 03:12 PM
Sunday, October 23, 2011
Exporters and Incentives
Posted on: Oct 17, 2011 at 22:32 IST inresponse to the editorial'Misguided Sops'.
Exporters are always a pampered lot.They enjoy tax incentitives, concessions,reliefs and interest rate subventions as the economy needs them to bring in as much foreign exchange as possible to support its essential imports particularly oil.Now it is time for the Govt to assess the support extended to exporters and value the benefits derived by the economy and reallocate the resources to vital segments like infrastructure which requires a thorough review, restructuring and fast development.One source of black money generation abroad is through exports and the inflow of funds to the economy through FDIs etc are part of this black money needs to be given weightage by the Govt when tax reliefs and concessions are liberally offered to exporters.Need based support is essential to encourage exports but as rightly pointed outin the editorial,it should not be at the cost of public money ignoring the other support system vitally needed for the economy to make all round progress.
Dr.T.V.Gopalakrishnan
This appeared in The Hindu-Businessline dated 18/10/11)
Exporters are always a pampered lot.They enjoy tax incentitives, concessions,reliefs and interest rate subventions as the economy needs them to bring in as much foreign exchange as possible to support its essential imports particularly oil.Now it is time for the Govt to assess the support extended to exporters and value the benefits derived by the economy and reallocate the resources to vital segments like infrastructure which requires a thorough review, restructuring and fast development.One source of black money generation abroad is through exports and the inflow of funds to the economy through FDIs etc are part of this black money needs to be given weightage by the Govt when tax reliefs and concessions are liberally offered to exporters.Need based support is essential to encourage exports but as rightly pointed outin the editorial,it should not be at the cost of public money ignoring the other support system vitally needed for the economy to make all round progress.
Dr.T.V.Gopalakrishnan
This appeared in The Hindu-Businessline dated 18/10/11)
Thursday, October 20, 2011
MBA graduates and PSUs
Are PSUs unable to provide a conducive work envrionment to management graduates?
The work culture in PSUs will not suit the management graduates. What the executives do in a month in PSUs, these management graduates will do in a two or three days. Their thinking, and taking decisions are faster and their patience level is low. They are result oriented and their temperments will not suit the PSU culture. Inefficiency, delay,procrastination normally seen in majority of the PSUs are beyond the tolerable level of any modern management graduate. The systems and procedures in vogue in majority of PSUs cannot be acceptable to these graduates as they are for quick decisions and results which is something difficult if one adheres to the systems and procedures which are outdated and illogical to the present requirements. These modern graduates are ambitious and have high aspirations which our PSUs cannot meet. They expect to reach the top early where as seniority and promotion avenues in PSUs do not permit these graduates to go beyond certain levels.The realities are different in PSUs and these graduates cannot cope with that is the reality why they do not stick on to PSUs for long.
Dr.T.V.Gopalakrishnan
(This appeared in ET epaper dt19 Oct 2011, 1358 hrs IST)
The work culture in PSUs will not suit the management graduates. What the executives do in a month in PSUs, these management graduates will do in a two or three days. Their thinking, and taking decisions are faster and their patience level is low. They are result oriented and their temperments will not suit the PSU culture. Inefficiency, delay,procrastination normally seen in majority of the PSUs are beyond the tolerable level of any modern management graduate. The systems and procedures in vogue in majority of PSUs cannot be acceptable to these graduates as they are for quick decisions and results which is something difficult if one adheres to the systems and procedures which are outdated and illogical to the present requirements. These modern graduates are ambitious and have high aspirations which our PSUs cannot meet. They expect to reach the top early where as seniority and promotion avenues in PSUs do not permit these graduates to go beyond certain levels.The realities are different in PSUs and these graduates cannot cope with that is the reality why they do not stick on to PSUs for long.
Dr.T.V.Gopalakrishnan
(This appeared in ET epaper dt19 Oct 2011, 1358 hrs IST)
Tuesday, October 18, 2011
Incentives and exporters
Exporters are always a pampered lot.They enjoy tax incentitives, concessions,reliefs and interest rate subventions as the economy needs them to bring in as much foreign exchange as possible to support its essential imports particularly oil.Now it is time for the Govt to assess the support extended to exporters and value the benefits derived by the economy and reallocate the resources to vital segments like infrastructure which requires a thorough review, restructuring and fast development.One source of black money generation abroad is through exports and the inflow of funds to the economy through FDIs etc are part of this black money needs to be given weightage by the Govt when tax reliefs and concessions are liberally offered to exporters.Need based support is essential to encourage exports but as rightly pointed outin the editorial,it should not be at the cost of public money ignoring the other support system vitally needed for the economy to make all round progress.
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu-Business Line E paper dated 18/10/11).
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu-Business Line E paper dated 18/10/11).
Monday, October 17, 2011
Int Rate and Industrial growth
Int rates cannot affect the growth as it forms only an insignificant share of the over all cost of production. The growth gets affected for several reasons. The Govt's inaction on fiscal front,infrastructure development,on black money,corruption and so on and so forth has a negative impact on industrial climate. Labour reforms, legal reforms and administrative reforms which are long overdue in Indian economy affect the industrial growth negatively. The general level of confidence in our political and administrative system has been on the wane for the past few years and it needs to be revived.The industrialists have to be made more responsive to the societal needs and their greed to make money at any cost ignoring the national priorities needs to be given a cultural change. Will the Govt, bureaucrats and the industrialists do an introspection of their method of exploiting the society and come out clean to mutually cooperate and coordinate to work for the economy's welfare without ignoring their own pursuits?The economy needs a changed mindset and a common objective to take the nation on the growth trajectory without murmuring on issues like interest cost which is not significant.
(This appeared in ET Epaper dt 14/10/11).
Dr.T.V.Gopalakrishnan
(This appeared in ET Epaper dt 14/10/11).
Dr.T.V.Gopalakrishnan
Monday, October 10, 2011
Perpetual poverty of India
(This is in response to a write-up in ET dated 09/10/11).
Not only the planning commission is out of touch with reality but the govt,the industrialists,the middle class, the religious leaders, social reformers and who ever talk of poverty are out of touch with reality.The success of the successive Govts for past six decades after independence is to have successfully manipulated the governance system and exploited the helpnesses of the masses to keep them in perpetual illiteracy and poverty.It is a shame for our politicians,industrialists and bureaucrats to have framed policies in the pretext of removing poverty and made themselves shamelessly rich. Statisticians have aided the policy makers by providing bogus figures on poverty and measurement of poverty standards.It is really surprising to find that this article is from a planning commissiom member which only shows that there are still some left in the Govt with some conscience and concern for the poor.What the economy needs is policy correction and strict implementation of policies with representatives of common people to keep a watch on policies and their implementation.Taxation policy pursued since 1990s widened the inequality of income and the conditions of the lower middle class and poor the worst beyond imagination.It does not require any superintelligence to understand the poverty in India. It is sufficient if our politicians, industrialists and bureaucrats travel in their cars keeping observing on both sides of the road and visit some slums spread all over the country.
T.V.Gopalakrishnan
Not only the planning commission is out of touch with reality but the govt,the industrialists,the middle class, the religious leaders, social reformers and who ever talk of poverty are out of touch with reality.The success of the successive Govts for past six decades after independence is to have successfully manipulated the governance system and exploited the helpnesses of the masses to keep them in perpetual illiteracy and poverty.It is a shame for our politicians,industrialists and bureaucrats to have framed policies in the pretext of removing poverty and made themselves shamelessly rich. Statisticians have aided the policy makers by providing bogus figures on poverty and measurement of poverty standards.It is really surprising to find that this article is from a planning commissiom member which only shows that there are still some left in the Govt with some conscience and concern for the poor.What the economy needs is policy correction and strict implementation of policies with representatives of common people to keep a watch on policies and their implementation.Taxation policy pursued since 1990s widened the inequality of income and the conditions of the lower middle class and poor the worst beyond imagination.It does not require any superintelligence to understand the poverty in India. It is sufficient if our politicians, industrialists and bureaucrats travel in their cars keeping observing on both sides of the road and visit some slums spread all over the country.
T.V.Gopalakrishnan
Friday, October 7, 2011
SBI's rating and Govt of India
The editorial is well written.The downgrading of SBI's rating by Moody reflects Govt's insensitiveness to safeguard the largest bank of the country with timely measures to raise its capital to the prescribed level.The Chairman of the bank has also to be blamed for his utterances against the previous chairman for allged window dressing of banks's balance sheet. The banks operations continue to be strong despite adverse economic conditions. Its deposit and advance growth have been well above many pvt sector and public sector banks.Its NIM is also comparatively high comapred to that of its peer group.The npas, provisions and profits have perhaps not been at the desired levels and for that the general performance of the economy needs improvement. All said, the bank has a competent management and support of its large clientele of customers and investors.The downgrading is only a warning to the bank to do well and it is not going to affect the bank's operations in any manner.
T.V.Gopalakrishnan
(This appeared in The Hindu Business Line dated 7/10/11)
T.V.Gopalakrishnan
(This appeared in The Hindu Business Line dated 7/10/11)
Thursday, October 6, 2011
Sharing of wealth in India
It is a shame that Indians have to be advised by outsiders on Dharma for sharing and distribution of wealth among the needy.Indian culture,heritage and philosophy speak very high of dharma and the real joy of life is giving and not taking and accummulating.The politicians and bureaucrats have looted the country and enabled a few industrialists to amass wealth through wrong taxation and other economic policies. Some of them share a part of the wealth to earn a name and gain tax benefits.Some are looting even in the name of charitable trusts and charities. Govt sponsored schemes to aid the poor are avenues for free loot and the money does not reach the intended beneficiaries. Loot is going on in the name of spiritualism and there are no checks and balances. Ethics and values have been given a go bye and for survival one has to be dishonest, corrupt, disloyal,and 420 in letter and spirit. Honesty and straightforwardness are openly condemned. Corruption,blackmoney,and out of the way dealings are openly encoraged and anybody raising voice against mal practices and irregularities are taken to task and harassed.Morals and Principles in day to day life have become things of past geneartion and very talk of these things are looked down upon with contempt. Before we beg the wealthy to distribute their wealth, let all Indians learn to introspect and realise that over a period we have discarded values, morals, and ethics which our ancient culture and civilisation were once proud of.
Dr.T.V.gopalakrishnan
Dr.T.V.gopalakrishnan
GST and the masses
GST if introduced and implemented should benefit the economy and the people, but the way the Govt functions it is difficult for people to take for granted the govt's sincerity and good intentions if any behind it.All these years, the Govt has been fooling the masses and has made life miserable for aam aadmi. The latest is the Planning Commission's submission to the Supreme Court that person earning Rs 32 a day in an urban centre comes above the poverty line reflecting the Govt's insensitiveness to realise the ground realities of the living conditions of the masses and lack of concern for aam aadmi's welfare. The Govt is a miserable failure in combating inflation, corruption black money and bringing in fiscal discipline. GST should not be another modus operandi to favour the rich industrialists at the cost of general public is the fear lingering in the minds of masses. Govt should realise this and take proactive steps to convince that GST would turn out to be good for the masses and the economy.
Dr.T.V.Gopalakrishnan
Dr.T.V.Gopalakrishnan
Wednesday, October 5, 2011
SBI and Moody's rating
Your editorial is well balanced and most appropriately concluded by saying that Moody's rating of SBI must be seen as a note of caution rather than as an alarm bell. The present predicament of SBI is the making of its present chairman for his utterances on banks' balancesheet as on 31st March 2011. Further the economy has not been doing well because of Govt's inefficient and ineffective fiscal policies in controlling inflation,black money, corruption and providing the much needed support to give a boost to economic growth. Of late its quality of assets has been deteriorating affecting capital adequacy, profitability and recycling of assets. All said, the Moody's rating basically based on some quarterly results do not reflect on the bank's overall strength with the strong backing of the Govt and its competence to overcome the temporary upsets. SBI is the largest PSB and it has abundant resources at its command to improve its performance in terms of NIM, asset liability management and capital adequacy ratio. It enjoys the confidence of investors, depositors and borrowers and the moment,economy starts showimg some sysmptoms of good growth, in no time the bank's performance will turn better. Moody's rating is only a warning to the bank to be more alert.
Dr.T.V.Gopalakrishnan
Dr.T.V.Gopalakrishnan
Time for Exchanges for SMEs
The idea of SME exchanges needs serious consideration and at least four such exchanges should be set up in East, West,South and North regions. This will facilitate upcoming and already existing entrepreneurs to raise equity funds to set up SMEs and venture capital and Private Equity Funds can find some good avenues for investment. Such exchanges would facilitate distribution and better utilisation of wealth in the economy.It would also ensure improved participation of the masses in the capital formation and provide adequate resources for capital starved but well promising ventures.Banks continue to be shy in financing SMEs is a fact.The present exploitation of SMEs by large scale units needs to be given a go bye.This is possible only if well regulated and well run exchanges are set up in the economy.The country has all the potential in terms of resources,human power, technology including capital but it lacks the initiative and approach particularly from the Govt to take up new ventures in the form of setting up of exchanges for SMEs. The reasons can be adduced to the grip and control the industrialists have over the Govt.They want to take away all the facilities and benefits of policies for themselves hindering the growth of well deserving SMEs in the economy. Earlier the exchanges are set up,the better. The emergence of exchanges would help improve the functioning of the NSEs and other regional exchanges. This would also bring in the much needed discipline among Companies.
Dr.T.V.Gopalakrishnan
Dr.T.V.Gopalakrishnan
Saturday, October 1, 2011
2G scam loss and the economy
(This comment is in response to the editorial'Telecom Turbulance' appeared in The Hindu-Business Line)
The fact that the Finance Ministry has failed to exercise its due vigilance on the proposal of the Telecom Ministry to jettison the auction procedure and adopt first come first served has led to the loss of the exchequer in crores of rupees needs an explanation from the Govt.This sort of leakage of revenue due to malpractices and lack of concern for managing public finance efficiently leads to avoidable deficit and consequent damages to the economy which has been facing problems one after another for want of resources.The failure of these Ministries should be viewed as the failure of the Govt as the damage caused to the economy is irreparable.Inflation remains unchallenged since 2009 and the basic reason is failure of fiscal policy and definitely not due to ineffectiveness of monetary policy.Easy money in the hands of a few due to failure of policies has adverse moral,ethical and financial impact in the economy. The confidence is shaken among public and the economy suffers.
T.V.Gopalakrishnan
( This appeared in The Hindu Business Line Dt,1/10/11)
The fact that the Finance Ministry has failed to exercise its due vigilance on the proposal of the Telecom Ministry to jettison the auction procedure and adopt first come first served has led to the loss of the exchequer in crores of rupees needs an explanation from the Govt.This sort of leakage of revenue due to malpractices and lack of concern for managing public finance efficiently leads to avoidable deficit and consequent damages to the economy which has been facing problems one after another for want of resources.The failure of these Ministries should be viewed as the failure of the Govt as the damage caused to the economy is irreparable.Inflation remains unchallenged since 2009 and the basic reason is failure of fiscal policy and definitely not due to ineffectiveness of monetary policy.Easy money in the hands of a few due to failure of policies has adverse moral,ethical and financial impact in the economy. The confidence is shaken among public and the economy suffers.
T.V.Gopalakrishnan
( This appeared in The Hindu Business Line Dt,1/10/11)
Friday, September 30, 2011
Investors and Cpital Market
The editorial is very right in saying that by offering sops alone investors will not return to market.The market has been volatile since September 2008 when the financial meltdown began and continued without any sign of recovery.Even now the world economy is in a mess and the chances for an early recovery are remote.STT is non-inflationary in character and it is difficult to pass on to others and hence the grievance from investors and brokers.In fact,Govt should modify STT and should be made different for purchases and sales,retailers and whole salers,brokers and traders,FIIs and domestic institutions etc.STT can emerge as an important regulatory tool and it should contiue.Stamp duty rationalisation is overdue and needs to be expedited.The confidence in market needs a boost and for that the GOVT and SEBI should put on some coordinated efforts.The Govt has to ensure that its fiscal deficit will be contained through improved administration and policy initiatives followed by actions.
from: T.V.Gopalakrishnan.
(This appeared in the Hindu-business Line Dt 30/09/11).
from: T.V.Gopalakrishnan.
(This appeared in the Hindu-business Line Dt 30/09/11).
Wednesday, September 28, 2011
Talk of taxing the rich at last.
Dr.T.V.Gopalakrishnan (Fort Worth, Tx)
At last Mr Chidambaram is talking sense.All over the world the move is to tax the richest and wealthiest people to take the economy out of the woods and in India the Govt thinks of abolishing the Security Transaction Tax which is paid basically by people who enjoy excess funds and speculate in the market out of greed and make more wealth. The rich who invest in markets earns dividend in crores of Rs do not pay any tax. They are not affected by inflation as they have both black money and white money to exploit the economy in all possible ways. They trade in commodities like gold and silver and that too using cash. They also trade in real estate like stocks and escape all forms of taxes. The limit for wealth tax has been substantially hiked and many do not pay wealth tax. The economy expects to fill its kitty by direct and indirect taxes making the life of common man miserable. It is time to have an asessment of the gap between the rich and poor over the last two decades in particular and evaluate the performance of the Govt. Rich has become richer and the poor has become poorer. The rate of growth of wealth has been exhorbitant and the black money generation is at its peak. The economy after the reforms has done well but the benefits have gone to the well off of the society is a fact to be recognised.The laws favour the wealthy and they rule the economy. Earlier the Govt realises the folly, the better for the Govt and the people.The FM needs a change of his mindset to act.
(This appeared in ET dated 28/09/11).
At last Mr Chidambaram is talking sense.All over the world the move is to tax the richest and wealthiest people to take the economy out of the woods and in India the Govt thinks of abolishing the Security Transaction Tax which is paid basically by people who enjoy excess funds and speculate in the market out of greed and make more wealth. The rich who invest in markets earns dividend in crores of Rs do not pay any tax. They are not affected by inflation as they have both black money and white money to exploit the economy in all possible ways. They trade in commodities like gold and silver and that too using cash. They also trade in real estate like stocks and escape all forms of taxes. The limit for wealth tax has been substantially hiked and many do not pay wealth tax. The economy expects to fill its kitty by direct and indirect taxes making the life of common man miserable. It is time to have an asessment of the gap between the rich and poor over the last two decades in particular and evaluate the performance of the Govt. Rich has become richer and the poor has become poorer. The rate of growth of wealth has been exhorbitant and the black money generation is at its peak. The economy after the reforms has done well but the benefits have gone to the well off of the society is a fact to be recognised.The laws favour the wealthy and they rule the economy. Earlier the Govt realises the folly, the better for the Govt and the people.The FM needs a change of his mindset to act.
(This appeared in ET dated 28/09/11).
Tuesday, September 27, 2011
Poverty, Statistics, Politics and the common man
The editorial Poverty of Statistics is very apt. The Planning Commission's submission to the Supreme Court that a person who earns Rs 32( not 31 as indicated ) in urban area and Rs 27 in rural area should be treated above poverty line only reflects poor understanding of the poverty, or of the value of the rupee, or the inflation level prevailing in the economy, or the credibility of data by its Members. It also reflects poorly, the concern that the Members have for the people particularly the poor.It is okay if these poor people have access to some canteens maintained by the Govt and the food is made available at these rates.It is time to admit that there is no accuracy of data with regard to the poor people and the method of arriving at the poverty level has no consensus. The amount of subsidies and various poverty linked programmes do not benefit the poor are common knowledge. The UID is the only hope left now and hope some lasting solution to remove poverty will be found soon.
Dr.T.V.Gopalakrishnan.
(This appeared in The Hindu-Business Line Dt 27/09/11).
Wrong Approach of the Finance Minstry to abolish STT
The proposal to cut STT and rationalise stamp duty to give a boost to the sagging stock market is welcome. The STT introdoced in 2004-05 budget has several benefits and can emerge as a leveller of the marketfluctuations and a source of recurring revenue to the exchequer without any inflationary implications. The revenue earned through STT at Rs 2223 crores this fiscal may appear less and lower than the expectations, this can be attributed to the volatility seen in the market due to the poor performance of the domestic and international economy.STT can be used as a tool to contain volatility and excessive speculation.STT should be different for purchase and sales,individuals and institutions,various cut off limits,equtuity and bonds,Govt securities of different maturities, Gold and silver,Forex etc.It should emerge as an administrative tool to regulate the various markets in Financial System, replace capital gains tax over a period.The need to retain STT is essential but with changes.
Dr.T.V.Gopalakrishnan
( This appeared in The Hindu-Business Line on 27/09/11).
Dr.T.V.Gopalakrishnan
( This appeared in The Hindu-Business Line on 27/09/11).
Abolition of Security Transaction Tax -A blunder
The move of the capital market division of the Finance Ministry to abolish the STT is not in the interests of the economy. This tax introduced through 2004 budget has been fetching easy revenue, non inflationary in caharacter and sparing the aam aadmi. It is basically affecting those who with their surplus income enter the capital market with a basic motive to save and speculate.Investors and brokers cannot ever favour such tax as their greed and clamour to curry favour from the Govt for all concessions and reliefs at any cost have always been considered, heard and adhered to. In case the Govt yields to this demand and abolish the tax the loss is substantial and it will be difficult to reintroduce at a later date. This tax needs to be reformed to emerge as an important administartive tool to regulate the capital market from the angle of controlling excessive speculation, volatility, raising recurring revenue without any inflationary implications, removing all other taxes like stamp duty, capital gains etc. The approach to abolish STT is only shortsightness and the Govt will repent later on. This levy needs to be made more dynamic and should vary from transactions to transactions.This tax should be different for retailers and whole salers based on certain cut-off limits,for individuals and institutions,for FIIs and domestic investors, equty, bonds and commodities, forex,etc. This will eventually lead to have a track of events in Financial market.
Dr.T.V.Gopalakrishnan
(This appeared in Et dated 27/09/11).
Dr.T.V.Gopalakrishnan
(This appeared in Et dated 27/09/11).
Friday, September 23, 2011
Gold Reserves to the rescue of world economic crisis
The Gold price has been on the increase for the past several years and the demand for gold got an unprecedented boost since September2008when the financial crisis erupted in US.Gold became attractive as an investment avenue and storage medium from the angle of safety,liquidity and profitability.The Central banks of the world started purchasing Gold for Reserve purposes which resulted in steep increase of gold prices.Investors who speculate in commodities found an opportunity to make easy money and accummulation of wealth started purchasing gold ignoring the prices and gave a boost to gold market.Developing countries particularly India, where inflation is persisting at high level and black money circulation is very high,found gold as a best hedge against inflation and store of value.India alone imports gold on an average1000 tonnes per annum wasting the precious foreign exchange.Now the economic crisis is becoming a reality and US,Europe and other economies are finding it difficult to survive the crisis creating a panic situation.It is time for the leading institutions like world bank,IMF and central banks of advanced and developing nations to turn to Gold reserves and arrive at a solution to resolve the crisis.The World leaders have to cooperate and find some workable solution to convert gold into productive assets and rescue the badly affected economies.Globalisation integrates economies and Gold Reserves should facilitate it and resolve the economic crisis. Will it happen?
Dr.T.V.Gopalakrishnan
Dr.T.V.Gopalakrishnan
Rich and Poor A Paradoxical Situation in India
My response to the editorial"Teach people to Fish" appeared in ET dated 22/09/11.
The link is here
Your editorial Teach people to Fish is thought Provoking and commendable.The planning Commission's affidavit to Supreme Court that any one with a monthly expenditure of Rs 965 in urban area and Rs 781 in rural area would be deemed not poor is an indication that the members of Planning Commission are totally unaware of the ground realities as to how much Rs 965 and Rs 781 can fetch in the market taking into consideration the fall in the value of Rs and rise in the value of products. In urban areas,water costs Rs 15 a bottle,milk costs Rs25-30 a litre, fuel costs Rs 375 a cylinder and the lists go on. Rs 965 a month at best can help a person to live for 15 days and starve for the next 15 days.This sort of definition of poverty level only reflects the poor understanding of the market realities and the actual living conditions of the masses.This lack of knowledge reflects poorly in all policy formulation.The number and conditions of people below poverty level have not changed for past six decades after independence. It is time to acknowledge the naked truth that Rs 32 a day can fetch nothing in the present day inflationary situation and this awakening is needed among the policy makers that economic policies so far pursued have miserably failed and widened the gap between the rich and the poor. The fact that dividend earned in crores of Rs is tax free,wage of Rs 32 earned through hard physical labour is above poverty level is a paradox and the Govt is answerable for that.
Dr.T.V.Gopalakrishnan
The link is here
Your editorial Teach people to Fish is thought Provoking and commendable.The planning Commission's affidavit to Supreme Court that any one with a monthly expenditure of Rs 965 in urban area and Rs 781 in rural area would be deemed not poor is an indication that the members of Planning Commission are totally unaware of the ground realities as to how much Rs 965 and Rs 781 can fetch in the market taking into consideration the fall in the value of Rs and rise in the value of products. In urban areas,water costs Rs 15 a bottle,milk costs Rs25-30 a litre, fuel costs Rs 375 a cylinder and the lists go on. Rs 965 a month at best can help a person to live for 15 days and starve for the next 15 days.This sort of definition of poverty level only reflects the poor understanding of the market realities and the actual living conditions of the masses.This lack of knowledge reflects poorly in all policy formulation.The number and conditions of people below poverty level have not changed for past six decades after independence. It is time to acknowledge the naked truth that Rs 32 a day can fetch nothing in the present day inflationary situation and this awakening is needed among the policy makers that economic policies so far pursued have miserably failed and widened the gap between the rich and the poor. The fact that dividend earned in crores of Rs is tax free,wage of Rs 32 earned through hard physical labour is above poverty level is a paradox and the Govt is answerable for that.
Dr.T.V.Gopalakrishnan
Thursday, September 22, 2011
MNCs and Labour Unions in India
The following is my comment on the article"MNCs cannot wish away union"
appeared in The Hindu Business Line Dated 22/09/11.
The write up justifies the need for recognising workers right to unionise and fight for their just rights by MNCs. The exploitation of workers has been going on for years and taking labourers on contract basis without any welfare or terminal benefits has been the order of the day. No doubt, making the workers to discharge their duties and responsibilities is sine qua non for any economy to register growth, it is also equally the responsibility and duty of the employers to see that workers are not exploited to satisfy their greed to amass wealth. The reforms in Labour laws are long overdue and it is the ideal time for the Government to take all the Unions into confidence to initaite and finalise meaningful laws to ensure smooth functioning of companies without any sort of exploitation of workers. They have to be compensated for their labour and militancy should never be tolerated. Politicisation of unions should be avoided and reforms of laws need to reflect this strongly.
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu Business Line E paper dated 22/09/11)
appeared in The Hindu Business Line Dated 22/09/11.
The write up justifies the need for recognising workers right to unionise and fight for their just rights by MNCs. The exploitation of workers has been going on for years and taking labourers on contract basis without any welfare or terminal benefits has been the order of the day. No doubt, making the workers to discharge their duties and responsibilities is sine qua non for any economy to register growth, it is also equally the responsibility and duty of the employers to see that workers are not exploited to satisfy their greed to amass wealth. The reforms in Labour laws are long overdue and it is the ideal time for the Government to take all the Unions into confidence to initaite and finalise meaningful laws to ensure smooth functioning of companies without any sort of exploitation of workers. They have to be compensated for their labour and militancy should never be tolerated. Politicisation of unions should be avoided and reforms of laws need to reflect this strongly.
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu Business Line E paper dated 22/09/11)
Wednesday, September 21, 2011
RBI 's lone role to contain inflation
My comment on the article "RBI Governor: The loneliest job in India" appeared in ET dated 21/09/11. The link is here
The author is right in saying that the Governor's job is the loneliest. The Reserve Bank has raised the interest rates 12 times Since March 2010 to combat inflation without success.Had the Reserve Bank not hiked the rates, perhaps,inflation would have been much higher and done more damage to the economy is a fact to be acknowledged both by the Industrialists and the Government.The Govt cannot claim to have taken any fiscal or administrative measures to support the monetary measures to contain inflation which is driven by excess demand,supply constarints and external factors where the Reserve Bank has very limited control.On the contrary, the prices of petroleum products have been hiked several times though warranted,challenging the monetary measures and creating diffidence in the whole management of the economy keeping at heart the welfare of aam admi.The Govt had several other issues other than managing the economy during the last several months and the the issue of containing inflation became the solitary responsibility of the Reserve Bank.
Speculation in commodities particularly gold and silver has been at its peak and the black money generation in these transactions has always been the rule rather than an exception.Corruption, black money, maladministration in the procurement, processing,storage, transportation,distribution, export and import of commodities which affect the supply and demand where RBI has absolutely no say have an inflationary impact and the Govt can play an effective and supportive role to bring down prices. Agricultural credit has been on the decline for the past several years and it needs to be tackled to improve agricultural productivity and marketing of the agricultural products. Here Central Govt, State Govts and NABARD can contribute a lot leaving RBI.Industrialists have a tendency to clamour for more from the Govt and Banks and this time they find RBIthe scapegoat for their failure.It is time they realiseit.
Dr.T.V.Gopalakrishnan
The author is right in saying that the Governor's job is the loneliest. The Reserve Bank has raised the interest rates 12 times Since March 2010 to combat inflation without success.Had the Reserve Bank not hiked the rates, perhaps,inflation would have been much higher and done more damage to the economy is a fact to be acknowledged both by the Industrialists and the Government.The Govt cannot claim to have taken any fiscal or administrative measures to support the monetary measures to contain inflation which is driven by excess demand,supply constarints and external factors where the Reserve Bank has very limited control.On the contrary, the prices of petroleum products have been hiked several times though warranted,challenging the monetary measures and creating diffidence in the whole management of the economy keeping at heart the welfare of aam admi.The Govt had several other issues other than managing the economy during the last several months and the the issue of containing inflation became the solitary responsibility of the Reserve Bank.
Speculation in commodities particularly gold and silver has been at its peak and the black money generation in these transactions has always been the rule rather than an exception.Corruption, black money, maladministration in the procurement, processing,storage, transportation,distribution, export and import of commodities which affect the supply and demand where RBI has absolutely no say have an inflationary impact and the Govt can play an effective and supportive role to bring down prices. Agricultural credit has been on the decline for the past several years and it needs to be tackled to improve agricultural productivity and marketing of the agricultural products. Here Central Govt, State Govts and NABARD can contribute a lot leaving RBI.Industrialists have a tendency to clamour for more from the Govt and Banks and this time they find RBIthe scapegoat for their failure.It is time they realiseit.
Dr.T.V.Gopalakrishnan
Federal reserve's Stimulus to revive the US economy
FOMC meet: Is Federal Reserve running out of options to boost slumping US economy?
The following is my comment on this issue.
The monetary policy in the long run should encourage savings and investments and the stimulus it provides to banks should result in investment out of savings. The policy should aim at to take the banks out of the mortgage mess and for that a Fed Reserve can think of some innovative ways to attract idle funds lying in the economy to banks through some incentives. Banks should offer better rate of interest on savings and credit off take by individuals for consumption purposes needs to be drastically curbed. Consumption should come out of savings and credit combined or out of savings only. It may take some time for the economy to achieve this,but the result will be worh the waiting. Too many products and too much of capital market investments need to be closely monitored. Safety of funds should get priority over profitability and Risk taking and Fed Reserve's policies should be aiming at this. Production oriented investments of banks should be encouraged for job creation in the economy.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated21/09/11)
The following is my comment on this issue.
The monetary policy in the long run should encourage savings and investments and the stimulus it provides to banks should result in investment out of savings. The policy should aim at to take the banks out of the mortgage mess and for that a Fed Reserve can think of some innovative ways to attract idle funds lying in the economy to banks through some incentives. Banks should offer better rate of interest on savings and credit off take by individuals for consumption purposes needs to be drastically curbed. Consumption should come out of savings and credit combined or out of savings only. It may take some time for the economy to achieve this,but the result will be worh the waiting. Too many products and too much of capital market investments need to be closely monitored. Safety of funds should get priority over profitability and Risk taking and Fed Reserve's policies should be aiming at this. Production oriented investments of banks should be encouraged for job creation in the economy.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated21/09/11)
Sunday, September 18, 2011
Petrol Politics, Inflation and Indian masses
This is in response to the write up on "For petrol, Indians shell out the most in the world". The link is here
The only explanation for high prices of oil in India is the total mismanagement of the economy and utter disregard for the concern of the people's suffering. It is a solid example that pricing in india is not based on any rationale.The tax,wastage, extravaganza of companies who deal in petroleum products, maldistribution and wrong method of transportation and excessive cost on tranportation will account for the mismanagement. Black money, corruption and other mal practices like adulteration also add to the cost to the ultimate consumer. Governance is literally absent and accountability is virtually missing. People are helpless and they silently suffer. This is one of the major reasons for continued persistence of high inflation and the Reserve Bank has its own limitations in such matters like pricing of essential consumable items having inflationary impact.
Dr.T.V.Gopalakrishnan
The only explanation for high prices of oil in India is the total mismanagement of the economy and utter disregard for the concern of the people's suffering. It is a solid example that pricing in india is not based on any rationale.The tax,wastage, extravaganza of companies who deal in petroleum products, maldistribution and wrong method of transportation and excessive cost on tranportation will account for the mismanagement. Black money, corruption and other mal practices like adulteration also add to the cost to the ultimate consumer. Governance is literally absent and accountability is virtually missing. People are helpless and they silently suffer. This is one of the major reasons for continued persistence of high inflation and the Reserve Bank has its own limitations in such matters like pricing of essential consumable items having inflationary impact.
Dr.T.V.Gopalakrishnan
Indians and Gold
This is in response to the article "Do we know something about gold the world doesn’t?" appeared in ET. The link is here
The author has not come out with any suggestion or new insights in the presentation. Indian economy cannot afford to import gold at the presnt inflated value of gold and unfavourable exchange rate. It is time the sentiments attached to gold gradually disappear and the holdings of gold in India get converted into productive assets. India is far behind in infrastructure and this needs to be developed to make it a vibrant and fast growing economy. The money lying in the form of gold needs to be converted into cash and put into use for infrastructure development.The Government should discourage investment in gold and import of gold to save both money and valuable foreign exchange. The craze seen of late,to speculate on gold price volatility needs to be nipped in the bud itself. The rush after gold is widening the inequallity between haves and havenots and it is not good in the long run for the society.The approach by the Govt should be1) To Set up a Gold Bank and see that all gold holdings which include institution's and family holdings are taken as deposits on payment of some interest 2)Convert the Gold into cash and put into productive use in the economy3)Discourage speculation in Gold 4) Ensure that gold imports are well regulated 5) Gold encourages black money hoardings in the economy and it is the responsibility of the Govt to see that Gold hoardings are tracked.6)Purchase and sale of Gold above a cut off limit to be tracked by insisting payments through cards, cheques and internet and indicating PAN numbers.7) Educate the public not to run after gold and bring discipline through dowry prevention regulations.
8) The income tax wealth tax and sales tax for gold needs to be reviewed and reformed.
It is time for investors to realise that gold does not enjoy an intrinsic value and internal rate of return. The Govt should carry out a survey to assess roughly the Gold holdings and take appropriate steps to put them into optimum use to develop the economy.
Dr.T.V.Gopalakrishnan
The author has not come out with any suggestion or new insights in the presentation. Indian economy cannot afford to import gold at the presnt inflated value of gold and unfavourable exchange rate. It is time the sentiments attached to gold gradually disappear and the holdings of gold in India get converted into productive assets. India is far behind in infrastructure and this needs to be developed to make it a vibrant and fast growing economy. The money lying in the form of gold needs to be converted into cash and put into use for infrastructure development.The Government should discourage investment in gold and import of gold to save both money and valuable foreign exchange. The craze seen of late,to speculate on gold price volatility needs to be nipped in the bud itself. The rush after gold is widening the inequallity between haves and havenots and it is not good in the long run for the society.The approach by the Govt should be1) To Set up a Gold Bank and see that all gold holdings which include institution's and family holdings are taken as deposits on payment of some interest 2)Convert the Gold into cash and put into productive use in the economy3)Discourage speculation in Gold 4) Ensure that gold imports are well regulated 5) Gold encourages black money hoardings in the economy and it is the responsibility of the Govt to see that Gold hoardings are tracked.6)Purchase and sale of Gold above a cut off limit to be tracked by insisting payments through cards, cheques and internet and indicating PAN numbers.7) Educate the public not to run after gold and bring discipline through dowry prevention regulations.
8) The income tax wealth tax and sales tax for gold needs to be reviewed and reformed.
It is time for investors to realise that gold does not enjoy an intrinsic value and internal rate of return. The Govt should carry out a survey to assess roughly the Gold holdings and take appropriate steps to put them into optimum use to develop the economy.
Dr.T.V.Gopalakrishnan
Saturday, September 17, 2011
Interest Rates and industrial growth
This comment in response to the Article "RBI right in sticking to its guns" appeared in The Hindu Businessline dated 17/09/11.
The author is right in the sense that the interest cost cannot be cited for the problems faced by the industrial sector.The credit off take is more than the expectations and the credit deposit ratio has been on the higher side indicating continuous demand for credit and banks are meeting them thanks to the liquid adjustment facility made available by the Reserve Bank.Industrialists by nature clamour for more facilities and concessions as they do not want to sacrifice a bit of profit though they have umpteen ways to cover up the small interest cost caused due to RBI's monetary policy. The inventory management and luxurious style of living by our corporates' bigwigs add to the cost of production and it is time special measures are taken to avoid excess inventory, avoidable waste and introduce austirity measures in the over all expenditures of the company. The accountability of auditors has been virtually absent in our corportae accounting practices and this needs to be reviewed.
Dr.T.V.Gopalakrishnan
The author is right in the sense that the interest cost cannot be cited for the problems faced by the industrial sector.The credit off take is more than the expectations and the credit deposit ratio has been on the higher side indicating continuous demand for credit and banks are meeting them thanks to the liquid adjustment facility made available by the Reserve Bank.Industrialists by nature clamour for more facilities and concessions as they do not want to sacrifice a bit of profit though they have umpteen ways to cover up the small interest cost caused due to RBI's monetary policy. The inventory management and luxurious style of living by our corporates' bigwigs add to the cost of production and it is time special measures are taken to avoid excess inventory, avoidable waste and introduce austirity measures in the over all expenditures of the company. The accountability of auditors has been virtually absent in our corportae accounting practices and this needs to be reviewed.
Dr.T.V.Gopalakrishnan
Thursday, September 15, 2011
Dividend and Income Tax.
Link to the article in ET is here.
It is time dividend earned beyond a cut off limit of Rs 1 crore and above should be brought under Income Tax net. A salary income of Rs 1.80 lakh is taxed. Out of this income, the person has to maintain family, take care of medical expenses, education of children and all sorts of expenses which include bribing to get small things done. It is difficult to understand Indian Taxation policy. Those who earn very high income beyond the imagination of ordinary people silently enjoy and talk of morals and ethics. politicians and bureacrtas who make unaccounted money enjoy life at others cost and advise people to lead a simple life with high thinking. They also liberally quote Bhagavat geetha, Ramayana and Gandhian thoughts for people to follow. It is time for industrialists to voluntarily contribute for common peoples' welfare as the money they earn by way of dividend is in a way public money. Make education free as far as possible and see that common people do not struggle to lead a life having atleast two time ordinary meals. With inflation ruling high, poor people have no means to survive.There is no moral, economic and social justification to exempt dividend from Income Tax under the name of double taxation. Taxation policy and the implementation of the policy have done maximum damage to our economy and the people. Will the authorities have the conscience to compare the tax and income of the Rich and the Ordinary taking into account the inflation factor and the living standards?
It is time dividend earned beyond a cut off limit of Rs 1 crore and above should be brought under Income Tax net. A salary income of Rs 1.80 lakh is taxed. Out of this income, the person has to maintain family, take care of medical expenses, education of children and all sorts of expenses which include bribing to get small things done. It is difficult to understand Indian Taxation policy. Those who earn very high income beyond the imagination of ordinary people silently enjoy and talk of morals and ethics. politicians and bureacrtas who make unaccounted money enjoy life at others cost and advise people to lead a simple life with high thinking. They also liberally quote Bhagavat geetha, Ramayana and Gandhian thoughts for people to follow. It is time for industrialists to voluntarily contribute for common peoples' welfare as the money they earn by way of dividend is in a way public money. Make education free as far as possible and see that common people do not struggle to lead a life having atleast two time ordinary meals. With inflation ruling high, poor people have no means to survive.There is no moral, economic and social justification to exempt dividend from Income Tax under the name of double taxation. Taxation policy and the implementation of the policy have done maximum damage to our economy and the people. Will the authorities have the conscience to compare the tax and income of the Rich and the Ordinary taking into account the inflation factor and the living standards?
Tuesday, September 13, 2011
IMF and World Economic Stability
Dr.T.V.Gopalakrishnan (Fort worth, Texas)
13 Sep, 2011 10:51 PM
It is good to hear that IMF has proposed a set of tools financial regulators could use to detect buildup of risks that can lead to financial crisis. The IMF being an international institution set up exclusively to help its members to come out of forex and balance of payment crisis and bring in some sort of economic stability world over has a major role to play to help resolve the European and U S economic crisis. It is time IMF comes out with an innovative approach taking the support of all member countries and its own gold and other reseves to come to the rescue of US economy in particular in finding a solution for its debt crisis. The economic scenario under globalisation and integration of world economies has undergone a sea change and it is time for IMF to review its own role in the changed scenario and work towards world economic stability using its command over the entire world. The role of gold reserves in ensuring world economic stability needs to be defined and IMF which has huge reserves of Gold should be in a position to bring the much needed economic stability through out the world by converting gold into productive assets and help the nations to work as per its directives till some semblence of economic order is achieved.Time has arrived for IMF to emerge as a world leader institution to look forward to by all member countries including advanced economies.Gold Reserves of various central banks of the world also needs to be put into productive use.
(This appeared in ET E Paper dated 13/09/11).
13 Sep, 2011 10:51 PM
It is good to hear that IMF has proposed a set of tools financial regulators could use to detect buildup of risks that can lead to financial crisis. The IMF being an international institution set up exclusively to help its members to come out of forex and balance of payment crisis and bring in some sort of economic stability world over has a major role to play to help resolve the European and U S economic crisis. It is time IMF comes out with an innovative approach taking the support of all member countries and its own gold and other reseves to come to the rescue of US economy in particular in finding a solution for its debt crisis. The economic scenario under globalisation and integration of world economies has undergone a sea change and it is time for IMF to review its own role in the changed scenario and work towards world economic stability using its command over the entire world. The role of gold reserves in ensuring world economic stability needs to be defined and IMF which has huge reserves of Gold should be in a position to bring the much needed economic stability through out the world by converting gold into productive assets and help the nations to work as per its directives till some semblence of economic order is achieved.Time has arrived for IMF to emerge as a world leader institution to look forward to by all member countries including advanced economies.Gold Reserves of various central banks of the world also needs to be put into productive use.
(This appeared in ET E Paper dated 13/09/11).
Sunday, September 11, 2011
Import of Gold and Import Duty
Dr.T.V.Gopalakrishnan , Fortworth, Texas , says:
Investments in gold take away the capital intended for productive use. Further, it has become a speculative habit even among middle class to invest in gold thus taking away the savings of the economy for economic development. If there is some arrangement to covert gold into productive asset by some means like setting up a gold bank and converting hold hoardings into cash, there is no harm in permitting gold imports. Higher import duties should not, however, result in smuggling of gold and generation of black money. In india administration is a weak area and prone to corruption and hence higher import duties should not lead to such undesirable practices.
(This appeared in ET E Paper Dt 6 Sep 2011, 2247 hrs IST).
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Investments in gold take away the capital intended for productive use. Further, it has become a speculative habit even among middle class to invest in gold thus taking away the savings of the economy for economic development. If there is some arrangement to covert gold into productive asset by some means like setting up a gold bank and converting hold hoardings into cash, there is no harm in permitting gold imports. Higher import duties should not, however, result in smuggling of gold and generation of black money. In india administration is a weak area and prone to corruption and hence higher import duties should not lead to such undesirable practices.
(This appeared in ET E Paper Dt 6 Sep 2011, 2247 hrs IST).
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Should the Indian government have a sovereign wealth fund to invest overseas?
Dr.T.V.Gopalakrishnan , Fort Worth, Texas , says:
India's present economic status does not permit for such luxuries. India has to make its economy strong in terms of improved GDP,percapita income,inflation and standard of living for its people. Charity begins at home and India should not venture for such adventures at least for another decade.Overseas markets are also not very conducive of late to attract investments. There are lots of uncertainities.Better to secure India's economy first and then think of entering overseas market. What is the source of Soverign wealth? Has India got the wealth?
(This appeared in ET E paper,9 Sep 2011, 1950 hrs IST)
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India's present economic status does not permit for such luxuries. India has to make its economy strong in terms of improved GDP,percapita income,inflation and standard of living for its people. Charity begins at home and India should not venture for such adventures at least for another decade.Overseas markets are also not very conducive of late to attract investments. There are lots of uncertainities.Better to secure India's economy first and then think of entering overseas market. What is the source of Soverign wealth? Has India got the wealth?
(This appeared in ET E paper,9 Sep 2011, 1950 hrs IST)
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Saturday, September 10, 2011
SLR, Fiscal Discipline and Banks
Gopalakrishnan (Fort Worth, Texas)
This refers to your editorial on SLR reduction and Govt's fiscal discipline. The reduction of SLR is ideal provided the banking system is otherwise sound and the Govt is prudent in its fiscal management. If reduction in SLR is permitted,the banks exposure to credit will expand and consequently, it will have to provide additional capital to meet the capital adequacy standards, provide more towards provision for bad debts and find good demand for credit expansion which is not there due to high interest rate, high inflation,lack of congenial atmosphere / comfort level for investment by the private sector etc. No doubt, the need for reduction in SLR is justifiable to discipline the Government's fiscal management and dependence on dependable bank finance, will it be possible in India taking into consideration poor professionalism in banking, compulsions to finance weaker sections of society, lack of discipline among borrowers to conduct their operations with banks and public money etc is a million dollar question ? How far RBI's autonomy if at all if it is there, can permit it to run the banking system the way it wants? is another issue to be debated in the matter.
( This appeared in ET E Paper dt 10/09/11)
This refers to your editorial on SLR reduction and Govt's fiscal discipline. The reduction of SLR is ideal provided the banking system is otherwise sound and the Govt is prudent in its fiscal management. If reduction in SLR is permitted,the banks exposure to credit will expand and consequently, it will have to provide additional capital to meet the capital adequacy standards, provide more towards provision for bad debts and find good demand for credit expansion which is not there due to high interest rate, high inflation,lack of congenial atmosphere / comfort level for investment by the private sector etc. No doubt, the need for reduction in SLR is justifiable to discipline the Government's fiscal management and dependence on dependable bank finance, will it be possible in India taking into consideration poor professionalism in banking, compulsions to finance weaker sections of society, lack of discipline among borrowers to conduct their operations with banks and public money etc is a million dollar question ? How far RBI's autonomy if at all if it is there, can permit it to run the banking system the way it wants? is another issue to be debated in the matter.
( This appeared in ET E Paper dt 10/09/11)
Friday, September 9, 2011
New Version of Loan Mela and the PSBs
The Govt's plans to dole out Rs 10000 to aam aadmi to boost rural economy through PSBs is nothing but replica of the 1980s loan melas and do not sound good economics or good politics. The banking system though financially sound thanks to Reserve Bank's regulation and supervision,but it is still under the Govt's direction is a curse.Particularly PSBs at this rate cannot be expected to be run on professional lines whether they come under RBI or not,as longs as Govt's interference is there. The system of financing agriculture is in a mess and the contribution of agriculture to the GDP is dwindling year after year. The presence of NABARD exclusively set up to develop rural and agricultural development is never felt and the RRBs, Local area banks and cooperative banks have equally failed to give a boost to the rural segment.Six decades of independence have not been beneficial to the rural masses is a stigma to our political system and economic management.Giving out doles like this to the poor only indicates that people can be fooled and they have not come out of their ignorance to have an independent thinking to assess our system of administration of the economy. This approach is nothing but an intelligent way of exploitation of the poor. This is another form of corruption perpetrated on the poor in our economy by the Government. It is time to change and see that real economic activities are introduced in our rural areas using the institutions set up with public money. Will the Govt act ?.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 10/09/11).
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 10/09/11).
Obama's Package for Job creation in US
Obama's proposals merit consideration, but will the politicians' agree? is the major issue. The economic crisis in US is more of political making than anything else. It is unfortunate that the politicians even in most advanced nation like US are behaving like the politicians of undeveloped / underdeveloped economies. Politics spoils the best of intentions whether they come from Obama or someone else. Obama has universal welfare in his actions and thoughts but the politicians of US have their own greed for power, money and self interests. Nothing can be done in such circumstances.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 9/09/11).
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 9/09/11).
Wednesday, September 7, 2011
The Great US Bank Robbery
It is pathetic that tax payers money is liberally spent / wasted to save banks and bankers for their greed and mindless risk taking with investors money. This only reflects poorly on the regulatory system and the regulator's performance. The raw material to run banks is public money and banks should not be allowed either to face a run or run away with that money. There should be a built in mechanism in banks to save themselves from risks by creating a fund taking contributions from banks themselves from out of investment income, investment managers from their bonuses and regulators from their income earned from regulated entities. Making tax payers, depositors including retirees to bear the burden for someones' faulty investments out of greed is something beyond tolerance and there is no business ethics in that. The author is fully justified in his arguments that money invested to save banks should have gone for some productive investments to fetch better return.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt 7/09/11)
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt 7/09/11)
Obama to call for extended pay Roll tax
Along with tax cuts for employees and employers, it is desirable to introduce some tax incentives for savings.Economic security should precede social security and there should be some measures to aim for economic stability. The Government can think of creating a fund 'Economic Stabilisation Fund' by mobilising funds from all segments of the economy. There can be two parts for this fund ie Refundable and Non-refundable. The country has billionaires,millionaires, and large multi-national corporations with lots of wealth in the form of gold, real estates, huge reserves and cash balances. By providing some incentives , the Government should be in a position to attract a small portion of these resources either on a refundable or non-refundable basis. The economic recovery is in the interest of all and there should not be any hesitation to come forward to contribute. The Govt can also consider introducing some levies in the form of Speculation tax on large deals in forex, capital market, commodity market and others, greed tax on casinos and other gambling areas, luxury tax for owning and operating very high end cars more than two and aircrafts, extravaganza tax on consumption, entertainment, marriage, festivals etc. USA has all the resources, talent, expertise and skill and the present situation is only a temporary upset which can be easily overcome without much fuss. The political bickerings need to be kept aside and efforts should be made only on economic recovery.
Dr.T.V.Gopalakrishnan
(This appeared in ET Epaper dt/7/09/11
Dr.T.V.Gopalakrishnan
(This appeared in ET Epaper dt/7/09/11
Tuesday, September 6, 2011
CBI Action on illegal Mining
At last CBI has started acting and it should be welcomed by all right thinking citizens. The loot of the common property by any body and any where needs to be eliminated and the present action of CBI is an eye opener. This enhances the sagging image of CBI in the eyes of the public and they deserve all appreciation and support. This is what is expected of CBI and other law enforcing agencies in India. Such actions will prove to be deterent in containing illegal activities. The enforcement of the existing laws will itself go a long way in tackling corruption and black money in India. Will this trend continue or stop as usual with political influence and interference?
Dr.T.V.Gopalakrishnan
This appeared in ET E paper dt 6/9/2011
Dr.T.V.Gopalakrishnan
This appeared in ET E paper dt 6/9/2011
Probe into black Money by Income Tax Dept and ED
The probe by IT and ED into the black money is welcome and keenly watched by Indian masses as they have a big stake. The money if collected should be fully put into eradication of poverty and Government can take full credit for the black money recovery and its proper use. The modus operandi used to transfer and accummulate black money abroad needs to be studied in detaail and all the loopholes need to be plugged. Checks and balances should be in place to see that such instances do not recur anymore. The Government has to instill the confidence among public that it is back in action and it will not tolerate violation of laws of the land. This has been missing for decades in India and the economy has suffered and has been suffering.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt06/09/ 2011
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt06/09/ 2011
Sunday, September 4, 2011
The US economy -The way forward
The US economy - The way forward-some random thoughts.
The US economy is in a big mess. The GDP growth (less than 2 %) is not picking up as per expectations. Unemployment (9.1%) is increasing beyond expectations. The debt and deficit are going beyond the means. The rating has been lowered from AAA+. The attempts so far made to improve the economy which include two installments of Quantitative Easing of money have not made any tangible impact. On the contrary it has aggravated the problems. To make the matters worse, the other economies particularly Europe for some reason or other have not been doing well. The economic situation has created a politically tense situation. For the status of US, the present damage to its image, is something unimaginable and not digestible. The think tank of the economy is engaged in arriving at a solution acceptable to the political thinking and improving the economic status. Maintaining the social security without the real backing of the economic security is becoming a challenge. The talk of a double dip recession is going around adding fuel to fire. The situation is abnormal, demanding an abnormal solution. One possible way to come out of this rut is to think of an Economic Stabilisation Fund and use the resources mobilised for infrastructure development, expansion of research and technology, improving skills all around to fill up the existing gap between demand and supply of skilled workers, finding alternate resources particularly for oil and electricity where wastage and extravaganza are visible, educating the people to save and then go for consumption with the support of credit if needed backed by repaying capacity etc. The need for reducing the greed of many is an area where value education is also desirable in a big way.
How to mobilise the resources for the 'Economic Stabilisation Fund' in a fund starved economy is an issue to be tackled? This should not be a problem for this advanced and rich nation. The wealth spread over in the economy with individuals, institutions, multinational companies in the form of gold, shares, high value commodities, real estate or in any form needs to be assessed and the possibility of getting a small share either by way of refundable loans or non refundable contribution to revive the economy has to be explored.
Refundable Basis:
An insignificant percentage of profit or writing down huge reserves of multinational companies towards contributing to this fund with or without interest if necessary by providing a tax incentive can build up the fund fast.
Individuals, institutions, multinational corporates having huge cash reserves can transfer part of the funds to this Stabilisation Fund on refundable basis. They can be paid reasonable rate of interest.
Part of Pension, Provident Funds and other funds of similar nature can be diverted towards this fund instead of investing in capital markets. Reasonable rate of interest can be paid.
Contributions from super rich and wealthy people can be accepted towards this fund and to encourage such contributions some tax incentives can be considered.
Non refundable Basis :
Since the fund is meant for ensuring economic stability on an endurable basis , the Government can consider levying some surcharges or cess from those segments of the society who can really afford without any burden. The following type of levies can merit consideration:
Greed Tax: Those who indulge in heavy gambling and speculation can be made to pay a small percentage of their investment towards this fund. In case they earn on such investments, a separate tax on such income i.e. different from income tax can be levied at a higher rate than the normal income tax. The gambling centres like casinos can contribute a considerable sum from their profit towards this fund.
Turn over tax: Multinational Companies, corporates, dealers, traders, brokers etc whose turnover is more than a cut off limit say $1billion can contribute a very small percentage of 0.01 or even less towards this fund till such time economy recovers/stabilises and overall position becomes comfortable.
Deal/ Transaction tax: Every purchase and sale in all exchanges like commodities, stocks, securities, bullion, foreign exchange etc can be taxed at some lower rates. While purchase transaction can have a very low rate compared to a sale transaction as the latter is generally to make some profit and should attract a higher rate. Short sale transactions should attract a different rate altogether.
Wealth tax and Estate Duty: The economic stability is in the interest of all segments of the society, the expectation from very wealthy and super rich segment to come to the rescue of the economy is naturally high and there is every justification to charge a little extra tax on this category.
Extravaganza Tax:
The concept of expenditure tax particularly on large expenditures on marriages, festivals, parties, clubs etc above a cut off limit can be introduced and funds thus collected can be contributed towards this fund.
Luxury tax:
The tendency to go in for very high end cars and own aircrafts is very much prevalent in the society. This type of luxury can be brought under luxury tax till such time the economy recovers and there is full employment in the society. The objective is not to curb the freedom of luxury but to the timing of indulging in such luxuries when a large segment of people are unemployed /underemployed and the economy is struggling to meet the social safety standards.
The measures suggested can be considered in combination or in isolation.
The economic security should precede social security and from this angle, build up of economic security is sine qua non and should be on the top of the agenda of the Government. The country has everything at its command in terms of human talent, skill, expertise and natural resources and the present economic crisis is not something beyond its control. It has an able, competent, excellent, and committed leader in Mr Barack Obama who aspires the welfare of not only the US citizens but the whole universe and it is an opportune moment to show solidarity and back him with all support to take the economy out of the present predicament. The need of the hour is to regain the lost confidence and for that some extra ordinary measures like creation of Economic Stabilisation Fund should be able to take care of the problem.
Dr.T.V.Gopalakrishnan
Fortworth, Texas
The US economy is in a big mess. The GDP growth (less than 2 %) is not picking up as per expectations. Unemployment (9.1%) is increasing beyond expectations. The debt and deficit are going beyond the means. The rating has been lowered from AAA+. The attempts so far made to improve the economy which include two installments of Quantitative Easing of money have not made any tangible impact. On the contrary it has aggravated the problems. To make the matters worse, the other economies particularly Europe for some reason or other have not been doing well. The economic situation has created a politically tense situation. For the status of US, the present damage to its image, is something unimaginable and not digestible. The think tank of the economy is engaged in arriving at a solution acceptable to the political thinking and improving the economic status. Maintaining the social security without the real backing of the economic security is becoming a challenge. The talk of a double dip recession is going around adding fuel to fire. The situation is abnormal, demanding an abnormal solution. One possible way to come out of this rut is to think of an Economic Stabilisation Fund and use the resources mobilised for infrastructure development, expansion of research and technology, improving skills all around to fill up the existing gap between demand and supply of skilled workers, finding alternate resources particularly for oil and electricity where wastage and extravaganza are visible, educating the people to save and then go for consumption with the support of credit if needed backed by repaying capacity etc. The need for reducing the greed of many is an area where value education is also desirable in a big way.
How to mobilise the resources for the 'Economic Stabilisation Fund' in a fund starved economy is an issue to be tackled? This should not be a problem for this advanced and rich nation. The wealth spread over in the economy with individuals, institutions, multinational companies in the form of gold, shares, high value commodities, real estate or in any form needs to be assessed and the possibility of getting a small share either by way of refundable loans or non refundable contribution to revive the economy has to be explored.
Refundable Basis:
An insignificant percentage of profit or writing down huge reserves of multinational companies towards contributing to this fund with or without interest if necessary by providing a tax incentive can build up the fund fast.
Individuals, institutions, multinational corporates having huge cash reserves can transfer part of the funds to this Stabilisation Fund on refundable basis. They can be paid reasonable rate of interest.
Part of Pension, Provident Funds and other funds of similar nature can be diverted towards this fund instead of investing in capital markets. Reasonable rate of interest can be paid.
Contributions from super rich and wealthy people can be accepted towards this fund and to encourage such contributions some tax incentives can be considered.
Non refundable Basis :
Since the fund is meant for ensuring economic stability on an endurable basis , the Government can consider levying some surcharges or cess from those segments of the society who can really afford without any burden. The following type of levies can merit consideration:
Greed Tax: Those who indulge in heavy gambling and speculation can be made to pay a small percentage of their investment towards this fund. In case they earn on such investments, a separate tax on such income i.e. different from income tax can be levied at a higher rate than the normal income tax. The gambling centres like casinos can contribute a considerable sum from their profit towards this fund.
Turn over tax: Multinational Companies, corporates, dealers, traders, brokers etc whose turnover is more than a cut off limit say $1billion can contribute a very small percentage of 0.01 or even less towards this fund till such time economy recovers/stabilises and overall position becomes comfortable.
Deal/ Transaction tax: Every purchase and sale in all exchanges like commodities, stocks, securities, bullion, foreign exchange etc can be taxed at some lower rates. While purchase transaction can have a very low rate compared to a sale transaction as the latter is generally to make some profit and should attract a higher rate. Short sale transactions should attract a different rate altogether.
Wealth tax and Estate Duty: The economic stability is in the interest of all segments of the society, the expectation from very wealthy and super rich segment to come to the rescue of the economy is naturally high and there is every justification to charge a little extra tax on this category.
Extravaganza Tax:
The concept of expenditure tax particularly on large expenditures on marriages, festivals, parties, clubs etc above a cut off limit can be introduced and funds thus collected can be contributed towards this fund.
Luxury tax:
The tendency to go in for very high end cars and own aircrafts is very much prevalent in the society. This type of luxury can be brought under luxury tax till such time the economy recovers and there is full employment in the society. The objective is not to curb the freedom of luxury but to the timing of indulging in such luxuries when a large segment of people are unemployed /underemployed and the economy is struggling to meet the social safety standards.
The measures suggested can be considered in combination or in isolation.
The economic security should precede social security and from this angle, build up of economic security is sine qua non and should be on the top of the agenda of the Government. The country has everything at its command in terms of human talent, skill, expertise and natural resources and the present economic crisis is not something beyond its control. It has an able, competent, excellent, and committed leader in Mr Barack Obama who aspires the welfare of not only the US citizens but the whole universe and it is an opportune moment to show solidarity and back him with all support to take the economy out of the present predicament. The need of the hour is to regain the lost confidence and for that some extra ordinary measures like creation of Economic Stabilisation Fund should be able to take care of the problem.
Dr.T.V.Gopalakrishnan
Fortworth, Texas
Tuesday, August 30, 2011
US Economy- Some random thoughts
US Economy -The way to come out of the present mess- Some random Thoughts
The US economy, the leader of the world economy has been in trouble since 2008 after the breakdown of its financial system. Unfortunately for Mr Obama, the president on whom lot of expectations were there with his message Yes, We can Change, things have not gone in his favour both domestically and internationally and the Change he wants to see in US and the world over has been elusive for some reason or other. The full potential of the economy remains untapped and for no reason, the country is facing an embarrassing situation. It is avoidable and needs to be avoided. Mr Obama has the mind and the commitment and he should be in a position to bring the changes.
The Fiscal and the monetary policies pursued particularly after the financial turmoil in 2008, have not brought the desired impact in the economy and the fear of US facing a deep recession if not depression is looming large. The fiscal deficit and the debt incurred to save the economy from the crisis have aggravated the problem and the monetary policy inducements have also not helped to salvage the situation. The downgrading of its debt from AAA+ to AAA by S&P followed by European crisis has deepened the crisis further. Problems will always come in battalion is literally proved in the case of US. More than the disease, the remedy has turned out to be a major head-ache is said to be the situation in US now. To make the situation worse, regulatory measures on the financial system are often blamed for the banks' poor performance particularly in the area of deployment of credit.
To come out of the situation, it is advisable to pursue some simple theories than to depend on major economic theories and then face criticism from all around. As an observer from outside and without any deep knowledge of the economic theories and the economic crisis faced by the US now, I would like to suggest a few measures worth attempting.
The country is very vast and any amount of infrastructure to link east to west and north to south would prove to be only inadequate. The present approach to connect these places by vast stretches of road is good no doubt, but it is proving to be costly and energy consuming affecting the fiscal health of the economy. The dependence of the economy and its people largely on road and air needs to be reviewed and these need to be equally supported by expansion of rail and water transports. The money spent on oil and electricity needs to be saved by introducing massive rail and water transport system. The acceptance of this, may have resistance but in the long run, the economic benefits derived in terms of employment generation, reduction in fiscal deficit, improved consumption, saving and demand would justify such an action.
Public spending needs to be augmented considerably and private savings need to be encouraged to derive real strength for the economy. Demand, Consumption and investment should basically come from improved savings and prudent public spending. Expecting only enhanced consumption without any inducement for saving, for increased investment and employment opportunities would prove to be a disaster for the economy and this needs to be avoided. This approach will tantamount to building a house without adequate foundation.
Taxation policy pursued should ensure equitable distribution of wealth and income. Allowing one segment to accumulate wealth and another segment to consume more through induced credit without savings will have its own adverse impact in the economy. Development of the economy is the responsibility of both the haves and have nots and taxation policy should ensure that as per the capacity, people contribute for the economic development.
Too much of dependence on capital market to earn and accumulate wealth is not a healthy trend. Capital market cannot be taken as a substitute for Casinos. Its function is basically to aid capital formation and provide adequate liquidity and return to those who provide capital by way of investment. Too much of Speculation is not envisaged in capital market. This is perhaps where more regulation and supervision are called for to prevent casualties. Introducing exotic products in the guise of fighting against risks in speculation is inviting all round trouble and this tendency needs to be completely eradicated. The economy can function well even without any of these products.
The need of the hour is to improve the functioning of the economy through generation of employment opportunities, well managed public spending, induced private savings, improved fiscal deficit and well intended taxation policies. Infrastructure development connecting the entire length and breadth of the country through railway and water net work system can help to improve the economy with all its multiple side benefits. The other areas of development can however keep going as per the major proven economic theories true to pattern.
T.V.Gopalakrishnan ( Personal views)
The US economy, the leader of the world economy has been in trouble since 2008 after the breakdown of its financial system. Unfortunately for Mr Obama, the president on whom lot of expectations were there with his message Yes, We can Change, things have not gone in his favour both domestically and internationally and the Change he wants to see in US and the world over has been elusive for some reason or other. The full potential of the economy remains untapped and for no reason, the country is facing an embarrassing situation. It is avoidable and needs to be avoided. Mr Obama has the mind and the commitment and he should be in a position to bring the changes.
The Fiscal and the monetary policies pursued particularly after the financial turmoil in 2008, have not brought the desired impact in the economy and the fear of US facing a deep recession if not depression is looming large. The fiscal deficit and the debt incurred to save the economy from the crisis have aggravated the problem and the monetary policy inducements have also not helped to salvage the situation. The downgrading of its debt from AAA+ to AAA by S&P followed by European crisis has deepened the crisis further. Problems will always come in battalion is literally proved in the case of US. More than the disease, the remedy has turned out to be a major head-ache is said to be the situation in US now. To make the situation worse, regulatory measures on the financial system are often blamed for the banks' poor performance particularly in the area of deployment of credit.
To come out of the situation, it is advisable to pursue some simple theories than to depend on major economic theories and then face criticism from all around. As an observer from outside and without any deep knowledge of the economic theories and the economic crisis faced by the US now, I would like to suggest a few measures worth attempting.
The country is very vast and any amount of infrastructure to link east to west and north to south would prove to be only inadequate. The present approach to connect these places by vast stretches of road is good no doubt, but it is proving to be costly and energy consuming affecting the fiscal health of the economy. The dependence of the economy and its people largely on road and air needs to be reviewed and these need to be equally supported by expansion of rail and water transports. The money spent on oil and electricity needs to be saved by introducing massive rail and water transport system. The acceptance of this, may have resistance but in the long run, the economic benefits derived in terms of employment generation, reduction in fiscal deficit, improved consumption, saving and demand would justify such an action.
Public spending needs to be augmented considerably and private savings need to be encouraged to derive real strength for the economy. Demand, Consumption and investment should basically come from improved savings and prudent public spending. Expecting only enhanced consumption without any inducement for saving, for increased investment and employment opportunities would prove to be a disaster for the economy and this needs to be avoided. This approach will tantamount to building a house without adequate foundation.
Taxation policy pursued should ensure equitable distribution of wealth and income. Allowing one segment to accumulate wealth and another segment to consume more through induced credit without savings will have its own adverse impact in the economy. Development of the economy is the responsibility of both the haves and have nots and taxation policy should ensure that as per the capacity, people contribute for the economic development.
Too much of dependence on capital market to earn and accumulate wealth is not a healthy trend. Capital market cannot be taken as a substitute for Casinos. Its function is basically to aid capital formation and provide adequate liquidity and return to those who provide capital by way of investment. Too much of Speculation is not envisaged in capital market. This is perhaps where more regulation and supervision are called for to prevent casualties. Introducing exotic products in the guise of fighting against risks in speculation is inviting all round trouble and this tendency needs to be completely eradicated. The economy can function well even without any of these products.
The need of the hour is to improve the functioning of the economy through generation of employment opportunities, well managed public spending, induced private savings, improved fiscal deficit and well intended taxation policies. Infrastructure development connecting the entire length and breadth of the country through railway and water net work system can help to improve the economy with all its multiple side benefits. The other areas of development can however keep going as per the major proven economic theories true to pattern.
T.V.Gopalakrishnan ( Personal views)
Monday, August 29, 2011
Auditors, Banks and Accountability
DrT.V.Gopalakrishnan (Fort worth, Texas)
30 Aug, 2011 04:09 AM
The editorial reads well and the suggestion that auditors should be paid from a pool of finance is welcome to prevent frauds and provide better accountability. However, this will not prove to be a foolproof method as long as the Boards of Directors are not made accountable and corporate Governance is rated in a transparent manner. The banks have also a major role to ensure that the corporates they finance conduct the accounts satisfactorily and the NPAs do reflect correct position. The auditors of Companies and auditors of banks have to have some inter action to ensure that all the Companies' dealings with banks and conduct of accounts, balances with banks, current assets, working capital position and NPAs reflect a true and correct position in terms of banks books and companie's books. Such an approach would itself reduce the nature of irregularities as seen in Satyam's books.
The ethics and values adhered to by Auditors in both banks' and corporates' accounts need to be independently assessed by their respective regulators viz; the Reserve Bank and the SEBI. There should be adequate checks and balances to ensure that the accounts reflect the correct position and there is no room for concern for investors. The Auditors unfortunately have not been enjoying the confidence of Regulators, investors and the Government is a fact to be taken note of by the Institute of Chartered Accountants of India while fixing their compensation and mode of payment.
This appeared in ET E paper dated 30/08/11.
30 Aug, 2011 04:09 AM
The editorial reads well and the suggestion that auditors should be paid from a pool of finance is welcome to prevent frauds and provide better accountability. However, this will not prove to be a foolproof method as long as the Boards of Directors are not made accountable and corporate Governance is rated in a transparent manner. The banks have also a major role to ensure that the corporates they finance conduct the accounts satisfactorily and the NPAs do reflect correct position. The auditors of Companies and auditors of banks have to have some inter action to ensure that all the Companies' dealings with banks and conduct of accounts, balances with banks, current assets, working capital position and NPAs reflect a true and correct position in terms of banks books and companie's books. Such an approach would itself reduce the nature of irregularities as seen in Satyam's books.
The ethics and values adhered to by Auditors in both banks' and corporates' accounts need to be independently assessed by their respective regulators viz; the Reserve Bank and the SEBI. There should be adequate checks and balances to ensure that the accounts reflect the correct position and there is no room for concern for investors. The Auditors unfortunately have not been enjoying the confidence of Regulators, investors and the Government is a fact to be taken note of by the Institute of Chartered Accountants of India while fixing their compensation and mode of payment.
This appeared in ET E paper dated 30/08/11.
Thursday, August 25, 2011
Time to set up a National Gold Bank
The article highlights the benefits that Indian Economy can derive from the recessionary trends witnessed in US and Europe. The fact that prices of all commodities except Gold have been on the decline and India is favourably placed to import goods, particularly oil, and improve its economy has been well brought out by the author. It is the best opportunity to attract funds for developing our economy provided the Government finds time and concentrates on the management of the economy. Gold stocks are available in plenty in India and the economy should know how to encash the gold and divert the resources for infrastructure development. It is time to think of a National Gold Bank and mobilise gold holdings of families and institutions and convert the assets into cash for economic development. Opportunities now available should not be lost sight of. By the time, the international scenario changes, India can build its economy strong and become the super-economic power early.
from: Dr.T.V.Gopalakrishnan
Posted on: Aug 25, 2011 at 02:31 IST
(This appeared in The Hindu Business Line)
from: Dr.T.V.Gopalakrishnan
Posted on: Aug 25, 2011 at 02:31 IST
(This appeared in The Hindu Business Line)
Issue of Banking Licence to Corporate Sector
Dr.T.V.Gopalakrishnan (Fort worth, Texas.)
25 Aug, 2011 09:00 AMThe editorial is very apt and to the point. The Governor's concern on the issue of banking Licences to corporates is genuine and justifiable. As it is, the banking sysytem in India is fairly sound, healthy and competitive. Ownershipwise, banks are reasonably well distributed and owned by government, public and private sector, private sector and Cooperative sector and their working has been by and large satisfactory catering to all segments of the economy. In case corporate sector steps in, it may distort the functioning and the present laws will not be adequate to regulate it effectively. Besides, in case Corpo rate sector enters the field,Financial inclusion which has not taken off well in the absence of active involvement of private sector,will become a major casuaty and agricultural sector will continue to suffer further. Tax payers money will have to come to the rescue of many segments if corporates enter banking . Prevention is better than cure should be the approach. Hope wisdom will prevail. The Govt cannot afford to ignore the lessons from past history of banking in the 1960s and the compulsions for nationalisation of banks in !969 and 1980. Let us not experiment again by allowing corporates to set up banking.
(This appeared in ET,dated 25/08/11)
25 Aug, 2011 09:00 AMThe editorial is very apt and to the point. The Governor's concern on the issue of banking Licences to corporates is genuine and justifiable. As it is, the banking sysytem in India is fairly sound, healthy and competitive. Ownershipwise, banks are reasonably well distributed and owned by government, public and private sector, private sector and Cooperative sector and their working has been by and large satisfactory catering to all segments of the economy. In case corporate sector steps in, it may distort the functioning and the present laws will not be adequate to regulate it effectively. Besides, in case Corpo rate sector enters the field,Financial inclusion which has not taken off well in the absence of active involvement of private sector,will become a major casuaty and agricultural sector will continue to suffer further. Tax payers money will have to come to the rescue of many segments if corporates enter banking . Prevention is better than cure should be the approach. Hope wisdom will prevail. The Govt cannot afford to ignore the lessons from past history of banking in the 1960s and the compulsions for nationalisation of banks in !969 and 1980. Let us not experiment again by allowing corporates to set up banking.
(This appeared in ET,dated 25/08/11)
Wednesday, August 24, 2011
Multinational companies and Consumer Forum
The author has beautifully presented the problems of Indian Customers grievances despite the safeguards available under consumer proptection Act 1986. The inadequacies of Consumer Forum have also been well covered. The ultimate result is that consumers suffer and multinational companies get away with deleivery of substandard items.In my own case, I had to replace the clutch plateof my new car at my own cost within a few months and the Company had the audacity to argue the case before the District Consumer Forum stating that the Road conditions and drivers' skill are responsible for defective functioning of the clutch. Though the District Consumer Forum gave a verdict in my favour, the Company has filed an appeal in State Consumer forum after inordinate delay and put forward the same argument that Indian Roads are in bad condition and driver has no skill to drive.Due to frequent change of Gear,the cluth goes defective and the company is not responsible. Cos thrive in India at the cost of consumers.
from: Dr.T.V.Gopalakrishnan
Posted on: Aug 22, 2011 at 22:27 IST
(This appeared in The Hindu-Businessline)
from: Dr.T.V.Gopalakrishnan
Posted on: Aug 22, 2011 at 22:27 IST
(This appeared in The Hindu-Businessline)
Tuesday, August 23, 2011
Corporates, Real estate sector and irregularities
T.V.Gopalakrishnan (Fortworth, Texas)
23 Aug, 2011 04:37 AM
The editorial is apt and timely and calls for an immediate action from authorities. The real estate sector needs a comprehensive law and an Ombudsman exclusively to protect the interets of home buyers. The corporates involved in real estate business have umpteen ways of extracting money from prospective buyers of properties and practically there is no accountability for the funds raised by them. Transparency in accounting and auditing is virtually absent and buyers have nowhere to look forward to register their complaints. Money is raised towards corpus funds without any standardised approach towards maintenance, funds for car parking are raised again without any standardised guidelines, terms and conditions are altered without the knowledge of customers, final terms included in the deeds are not maintained and undivided share of land included in the deed are subsequently sold without the knowleddge of customers,etc. are some of the very common mal practices the companies resort to. It is time an audit by a Govt appointed agency is conducted in all multinational companies who indulge in real estate business along with other business and mix up all accounts. Corruptive practices in multi national companies are perhaps worse compared to those in Government and needs to be closely monitored. It can help to bring down the real estate prices and minimise black money transactions also. Such checks and balances definitely bring some order in the transactions.
(This appeared ET E paper on 23rd august).
23 Aug, 2011 04:37 AM
The editorial is apt and timely and calls for an immediate action from authorities. The real estate sector needs a comprehensive law and an Ombudsman exclusively to protect the interets of home buyers. The corporates involved in real estate business have umpteen ways of extracting money from prospective buyers of properties and practically there is no accountability for the funds raised by them. Transparency in accounting and auditing is virtually absent and buyers have nowhere to look forward to register their complaints. Money is raised towards corpus funds without any standardised approach towards maintenance, funds for car parking are raised again without any standardised guidelines, terms and conditions are altered without the knowledge of customers, final terms included in the deeds are not maintained and undivided share of land included in the deed are subsequently sold without the knowleddge of customers,etc. are some of the very common mal practices the companies resort to. It is time an audit by a Govt appointed agency is conducted in all multinational companies who indulge in real estate business along with other business and mix up all accounts. Corruptive practices in multi national companies are perhaps worse compared to those in Government and needs to be closely monitored. It can help to bring down the real estate prices and minimise black money transactions also. Such checks and balances definitely bring some order in the transactions.
(This appeared ET E paper on 23rd august).
India and grammar of anarchy
Your strongly worded editorial 'India and the grammar of anarchy' unfortunately fails to identify the genuine reasons why Mr Anna Hazare has to fight the elected Government taking the public support against widely prevalent corruption which make the life miserable for the common man in India. (August 20,2011) It is incorrect to interpret that Mr Hazare demands parliament to create the unelected post of ombudsman, chosen by a panel of worthies, with sweeping powers to haul up any public official on graft charges, without having a full grasp of the whole issue.
The issue of corruption and the suffering of common masses in India have been there since decades and the successive Governments in power have failed to find proper solution to eradicate / minimise the problem. The movement by Anna Hazare against corruption got its momentum in the recent past because of indifference of the Government and casual approach to take action against series of scams detected at Government level and put in place a meaningful system to prevent mal and corruptive practices. The suffering of the masses In India for their day to day life because of corruption at various levels is perhaps unimaginable in US and hence such an editorial.
It is right to say that the remedy to fight corruption through an institutional set up as per the well established Constitutional procedure is more ideal and appropriate. But the Government's response and intentions are not convincing. The bill proposed by the Government to fight corruption is only an eye wash as per the civil Society headed by Mr Anna Hazare and will not serve the purpose. The only way available for the public to fight for an anticorruption bill passed through Parliament is through this movement led by Mr Hazare. The insensitivity and inaction of the Government to understand the suffering of masses due to rampant corruption has forced the public to resort to this sort of agitation. Anarchy in Government's functioning is the cause and Anna Hazare's fight is the effect. Exceptional situation demands exceptional solution and Hence Anna Hazare's most appropriate method to seek solution for the perennial problem.
Dr.T.V.Gopalakrishnan,
( This was sent to The Wall Street Journal).
Saturday, August 20, 2011
Neglect of the Economy by the Government
This refers to your editorial politics playing spoilsport which is very apt and timely. The very fact that the economy is not progressing well despite the presence of several positive factors like favourable demographic dividend, talented and worldly recognised scientists, economists, bankers,IT strength and abundant natural resources,etc is a matter to be seriously debated and accounted for by our politicians and bureacrats. The economy needs to be run by professionals and politians should keep for themselves administration and social welfare bereft of corruption of course. The present international scenario is an ideal opportunity to attract both FII and FDI investments as India is perhaps one of the emerging economies whose fundamentals continue to remain strong except perhaps on inflationary front.The Government should come out of its false ego and arrogance and concentrate more on the management of the economy efficiently and effectively. It is time for Govt to act.
from: T.V.Gopalakrishnan
(This appeared in Business Line E paper Dated 19/08/11).
from: T.V.Gopalakrishnan
(This appeared in Business Line E paper Dated 19/08/11).
Thursday, August 18, 2011
Insensitive Government and the masses
The editorial has a clear message that the governmeent has lost its' sense of collective judgement of issues, sensing public mood and perception. Having won the elections, does not give the power to ignore the public and their sensitivity to issues dearer to their survival. The Government forgets that they have to continuously take care of common man's requirements and their welfare and they are elected for that. The present predicament of the Government is its own making and it is unfortunate that th Government does not realise its follies and commits one blunder after another. It is time for the Government to introspect and come to the rescue of the common masses who suffer from the worst system of corruption and miss their rightful entitlements and comfortable living. They do not want to amass wealth. They just want to lead a peaceful life and free from harassment for day to day living.
from: T.V.Gopalakrishnan
(This appeared in Business Line dated 18th August 2011).
from: T.V.Gopalakrishnan
(This appeared in Business Line dated 18th August 2011).
Monday, August 15, 2011
Independence in India and PM's speech
15 Aug, 2011 07:40
This is another year of Independence Day celeberation. Unfortunately, 64 years of independence, have not been helpul to remove the poverty from the Country and PMs have made wonderful speeches soothing only for the ear. If speeches can remove poverty and problems of this great nation, people can be happy as all the speeches since the 1st independence day to the lat one ie yesterday's will not lag behind. How long can the nation fool the masses is a big question that remains unanswered and our rotten polics, poor governance have only helped to create black money, corruption, and degeneartion of society and its values. It is time for all Indians to introspect and see whether we are in the right track in our nation building efforts. Let us believe in actions based on morale, ethics, values and principles to achieve a welfare society. Speeches can wait.
This appeared in ET E paper dated 15th August 2011.
Dr.T.V.Gopalakrishnan
This is another year of Independence Day celeberation. Unfortunately, 64 years of independence, have not been helpul to remove the poverty from the Country and PMs have made wonderful speeches soothing only for the ear. If speeches can remove poverty and problems of this great nation, people can be happy as all the speeches since the 1st independence day to the lat one ie yesterday's will not lag behind. How long can the nation fool the masses is a big question that remains unanswered and our rotten polics, poor governance have only helped to create black money, corruption, and degeneartion of society and its values. It is time for all Indians to introspect and see whether we are in the right track in our nation building efforts. Let us believe in actions based on morale, ethics, values and principles to achieve a welfare society. Speeches can wait.
This appeared in ET E paper dated 15th August 2011.
Dr.T.V.Gopalakrishnan
Saturday, August 13, 2011
Rating and the Regulator's Dilemma:
The recent downgrading of US long term debt by S&P has created a scare among those particularly bankers who hold these assets in their portfolio as it may erode the realisable value of these assets in the short run and to that extent the soundness and safety get adversely affected. This rating, which has more of a psychological impact than that of a realistic situation, should not and need not affect banks soundness as the banks investments in such assets may not be that significant among its various other assets to worry about. The regulators interest generally is to ensure safety of each and every bank and it is for individual banks to diversify its assets based on its own assessment of various risks including market risk keeping in view and complying with regulator's guidelines. Overall stability of the financial system is the concern of both the Government and the Regulator.
The US economy can always bounce back from its economic crisis caused by heavy external debt fiscal deficit and poor GDP growth and it has all the potential and strength to put up a better show. The present downgrading should be viewed only as an eye opener and should help to review the economic policies so far pursued and initiate fresh policies in the areas of savings, infrastructure development, employment and taxation. The present approach More public Spending would stimulate demand needs to be replaced by more savings would lead to better investment, more employment opportunities, more spending and better GDP in the long run. It is a time consuming process, but end result would be lasting and enduring. It requires structural reforms in the area of taxation, income distribution, incentives for investment and generation of employment opportunities through creation of improved infrastructure in particular etc. Too much of debt would sound death-knell even if they are backed by assets.
Dr.T.V.Gopalakrishnan
Thursday, August 11, 2011
Sensible Decision of the Government of India.
The editorial is well written and the decision of the Government to extend the term of Dr Subbarao for a couple of years more is perhaps an indication that it cannot afford to ignore the economy any more. The Reserve Bank despite its limitations has been fighting a lone battle to contain the inflationary pressures and maintain some semblance of stability in economic growth for the last couple of years although, both internal and external conditions have been and continue to be a major constraint. Dr Subbarao has displayed his determination to challenge the odds which he has been facing since his inception as Governor. This extension is well deserved. Hope, the Government will continue to concentrate more on the management of the economy and come out with such decisions to enable the instituitions to perform well.The present international crisis is an opportunity to attract external funds and concentrate on infrastructure development badly needed for Indian economy to grow.
from: T.V.Gopalakrishnan
Posted on: Aug 11, 2011 at 06:10 IST (The Hindu Business Line)
Monday, August 8, 2011
Uncalled for scare- aftermath of Rating by Standard and Poor of the US.
Standard & poor's decision to bring down the US of its triple A rating has created a scare in all international markets about the health of the US economy and its repercussions world over. The rating should not be taken to view that everything has gone wrong in US and there is no scope for revival of the economy in the immediate future. No doubt, the 2008 financial turmoil had forced the authorities to go in for some economic policies which failed to bring in the desired recovery, but it should not be construed that all decisions taken were wrong and the economy has gone from bad to worse. As the saying goes, problems always come in battalion, the crisis in Europe, Japan and other parts of the developed and developing countries as well has added fuel to fire and made a mess of all well intended policies pursued meticulously in US. The rating given by S&P at best can be taken to mean that the policies pursued need a relook and fresh efforts are needed to revive the economy . The two major issues faced by the economy are debt ceiling and fiscal deficit.
Both debt and fiscal deficit which are complementary to each other, however, failed to help the GDP growth and aggravated the economic problem. Standard and Poor, without presumably going into the reasons for the lower rate of growth of GDP taking into consideration other world contributory factors for poor performance and inherent strength of the US economy which has successfully weathered earlier crises, has come out with a rating at an inappropriate time when serious thinking and measures are in progress to take the economy out of the present predicament.
The damage such a rating has done to the global economy in general and US economy in particular is something enormous and the rating agency has to be made accountable for such an unwarranted untimely rating and making it widely transparent. Advance warning by rating agencies are welcome but bringing damage to an economy and creating widespread losses and attendant consequences in the form of higher interest rates, loss of credit market and erosion of values in various securities is something undesirable and perhaps avoidable in the overall interest of the economies. Rating an instrument and rating a country are two totally different matters and there should be some standardised norms in assessing and making transparent the rating of a country. Since negative assessment compared to positive assessment has more of an adverse impact, it is advisable for rating agencies to have a different approach to caution the rated economies in the case of a negative assessment even if the assessment is very objective and accurate.
Dr.T.V.Gopalakrishnan
Sunday, August 7, 2011
Enhance the Confidence level in US
It is essential that in the interest of the whole world economy the US economy needs to grow and for that the only immediate solution is all round development of public transportation system in entire US through encouragement of construction of needed infrastructure involving more of private participation.
It is time for US to have a relook on its energy spend particularly on oil and power and divert the resources saved therein to develop state wide transportation system in particular without in any way losing its glamour for private transport system presently in vogue.
The US economy has all the potential to attract international tourists and ways and means should be found to exploit its potential to the optimum level to make international tourism an opportunity and reality to support its further growth.
Employment opportunities will get an immediate boost and consumption and demand would increase necessitating fresh investment and production. Massive tourism to US from all over the world particularly from fast emerging economies like BRIC countries will help both the emerging economies and the US to mutually exchange trade, technology and other expertise for everybody's benefit. The avenues for revenues of the Government will automatically increase once the tourism picks up considerably.
Special incentives to industries who create additional employment opportunities can perhaps be another solution to tide over the present crisis. The need of the hour is to give a boost to the confidence in US economy and this country has fortunately everything to give that much needed boost.
Dr.T.V.Gopalakrishnan
It is time for US to have a relook on its energy spend particularly on oil and power and divert the resources saved therein to develop state wide transportation system in particular without in any way losing its glamour for private transport system presently in vogue.
The US economy has all the potential to attract international tourists and ways and means should be found to exploit its potential to the optimum level to make international tourism an opportunity and reality to support its further growth.
Employment opportunities will get an immediate boost and consumption and demand would increase necessitating fresh investment and production. Massive tourism to US from all over the world particularly from fast emerging economies like BRIC countries will help both the emerging economies and the US to mutually exchange trade, technology and other expertise for everybody's benefit. The avenues for revenues of the Government will automatically increase once the tourism picks up considerably.
Special incentives to industries who create additional employment opportunities can perhaps be another solution to tide over the present crisis. The need of the hour is to give a boost to the confidence in US economy and this country has fortunately everything to give that much needed boost.
Dr.T.V.Gopalakrishnan
Wednesday, August 3, 2011
US Debt Pangs - Response to the editorial on Business Line
US problem of debt has only been postponed and the solution arrived at will have its own adverse impact for the future unless the US Government comes out with some innovative new economic policies to give a boost to its economic growth and enhance the confidence in international markets. Deficit and debt burden caused due to the banking crisis continue to haunt the US economy and the crisis management has only aggrevated the problem indicating the urgency to have a relook on the policies so far pursued and bring in a totally new approach keeping in view of the changes witnessed in international economic scenario particularly in emerging economies like China and India.
It is again an opportunity for India to take advantage of the position and go in for massive economic and financial reforms but unfortunately the present Government has been in a paralysed condition as rightly pointed out in your editorial and is unable to concentrate on economic issues faced by the nation.
from: T.V.Gopalakrishnan
Appeared on Hindu Business Line e-paper on: Aug 3, 2011 at 04:47 IST
It is again an opportunity for India to take advantage of the position and go in for massive economic and financial reforms but unfortunately the present Government has been in a paralysed condition as rightly pointed out in your editorial and is unable to concentrate on economic issues faced by the nation.
from: T.V.Gopalakrishnan
Appeared on Hindu Business Line e-paper on: Aug 3, 2011 at 04:47 IST
Tuesday, August 2, 2011
The black money and corruption
Black money generation takes place through umpteen ways. Corruption is prevalent literally from cradle to grave. Except politicians and bureaucrats, every body knows how to prevent corruption and minimise geration of black money. The simplest method is to track high value transactions through insistence of PAN card and payment by means of plastic cards and Cheques above Rs 5000. If this is introduced on a trial basis the result can be visible within a period of six months. Through out the world Indian IT strength is well recognised but unfortunately In India,It has not been put into optimum use to keep track of all transactions,tie up with the transactions with their origin,destination and link them ultimately to tax revenues, GDP growth etc intelligently. If there is a will there is a way. Readiness to trace black money and prevent corruption is all that matters. Will the authorities viz Politicians and bureaucrats bell the cat?
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu Business Line E paper dated 2nd August 2011).
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu Business Line E paper dated 2nd August 2011).
RBI's solution for inflation
No doubt the solution offered is bitter but unavoidable to contain the high level of inflation,but the question as to whether this hawkish measure of RBI will contain inflation still remains unanswered.Growth will come down with such measures is a reality but containing inflation requires more measures other than monetary is a fact which is being ignored for long.This sort of hide and seek game keeping the problem of inflation at high level only shows lack of real concern for the masses who suffer from poverty and unemployment /underemployment.
This appeared in ET's blog dated 2nd August 2011.
Dr.T.V.Gopalakrishnan
This appeared in ET's blog dated 2nd August 2011.
Dr.T.V.Gopalakrishnan
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