Dr.T.V.Gopalakrishnan , Mumbai , says: Not only in Solar power, even in other sources of power, the approach of the Govt is lackadaisical and the economy is suffering.The power sector needs lot of reforms and earlier the Govt takes the initiative the better. Solar energy, thermal power and other sources need to be fully exploited taking advantage of the favourable natural resources and other potentials of the economy.Politics plays spoilsport and economy's growth is hindered.
(This appeared in ET dated 31/01/12).
Tuesday, January 31, 2012
Monday, January 30, 2012
Will FIIs' inflows will sustain?
Dr.T.V.Gopalakrishnan , Mumbai , says: Yes. High FII inflows will sustain in the calendar year just for the reason that the economic growth will be around 7% despite all the constraints and it is attractive. Once the elections are over and the political stability returns,the economy can perform well.Inflation will be brought under control by March 2012 and the budget is expected to be investment and production oriented as the Govt has no other alternative but to bring fiscal deficit under control.The climate is very conducive for FIIs to continue to invest in Indian market by any reckoning.
30 Jan 2012, 1759 hrs IST
(This appearted et ET dated 30/01/12)
30 Jan 2012, 1759 hrs IST
(This appearted et ET dated 30/01/12)
Sunday, January 29, 2012
January 29, 2012:
Kudos to the Reserve Bank for having come out with a bold measure of releasing liquidity to the funds-starved market through reduction of CRR by 50 basis points from 6.0 per cent to 5.5 per cent.
This measure alone should help the banking system take care of partially the gaps in the credit needs of the manufacturing sector to augment investment and production, although the cost of funds is comparatively higher as policy rates have not been changed.
The Reserve Bank is fully justified in keeping the repo rate and reverse repo rate unchanged in the background of persisting high level of headline inflation which averaged at 9.7 per cent (y-o-y) during April-October 2011 and ever increasing fiscal deficit expected to be far more than the budgeted figure of 4.6 per cent.
Thus, the repo rate and the reverse repo rate will continue to be at 8.5 per cent and 7.5 per cent respectively. This has been done perhaps keeping in view the RBI's continued apprehension, and justifiably so, in containing the inflation and inflation expectations.
Comfort to liquidity
The relaxation in CRR is to provide comfort to the liquidity constraints, of late, faced by the banking system. The borrowings of banks from the Reserve Bank have been exceeding the limits and often much higher than the RBI's comfort level of Rs 60,000 crore.
These borrowings add to the cost of funds whereas banks do not get any return on their cash reserves kept with Reserve Bank out of their costly deposits. The reduction in CRR is expected to release funds to the tune of Rs 32,000 crore and this can be used to expand the credit particularly to the manufacturing sector. This should also help the banks to reduce the rate of interest to the borrowers to the extent they save on their borrowings from the Reserve Bank.
The banks got partially what they want but they also have got a lot to do in the economy taking into account the fiscal, monetary and economic conditions of the country. They have a major role to play to make inclusive growth a reality by taking advantage of financial and banking inclusion through innovative methods as a great business opportunity.
Improved offerings
The potential to increase deposits is manifold and the tendency of people to go in for other types of investments, particularly in gold and real estate, needs to be curbed by offering improved savings products. The NIM continues to be high in banks and this needs to be checked and brought down by improving the credit portfolio and recycling of funds.
The Asset-Liability management needs fining and cost of funds need to be brought down further. The Reserve Bank has been liberal with the banks by deregulating the SB NRI deposits rates and permitting them to restructure the sticky loans to improve their competitiveness and project a better balance-sheet.
The Reserve Bank has, however, moderated the GDP growth at 7 per cent as against 7.6 per cent projected earlier in its October 2011 review of credit policy. Considering, the external and domestic factors, even the 7 per cent growth is good enough to keep the confidence level high and to better the performance further in the next fiscal.
The need of the hour is the development of infrastructure which impedes the growth of the economy. Making available quality coal at reasonable price to the power sector through all possible means i.e. by rail and road will itself go a long way to give a boost to the economic growth.
The ease of doing business by removing administrative and legal bottlenecks, facilitating FDI investments in infrastructural developments, improving productivity both in agricultural and industrial areas without too much of interference by the Government and bringing in efficiency in the marketing and distribution of products, particularly agricultural products, need urgent attention which only the Government can provide. There is also an imperative need to activate and coordinate all rural development related agencies to give a facelift to the rural economy which requires more freedom for State Governments to take initiative.
Now, it is the turn of the Central Government to do its bit to contain fiscal deficit, improve supply constraints and provide the much needed infrastructure to give a boost to GDP growth and bring down inflation.
On the fiscal front, the Reserve Bank has made its message explicitly clear to the Government by saying that “considering the egregious implications of large fiscal deficits, which are well known , there is an urgent need for decisive fiscal consolidation, which will shift the balance of aggregate demand from public to private, and from consumption to capital formation. This is critical to yielding the space required for lowering rates without the imminent risk of resurgent inflation. The fourth coming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way.”
Hope the Government does its part fast and the economy will flourish.
Dr.T.V.Gopalakrishnan
(This article appeared in The Hindu-Business Line dt29/01/12).
Kudos to the Reserve Bank for having come out with a bold measure of releasing liquidity to the funds-starved market through reduction of CRR by 50 basis points from 6.0 per cent to 5.5 per cent.
This measure alone should help the banking system take care of partially the gaps in the credit needs of the manufacturing sector to augment investment and production, although the cost of funds is comparatively higher as policy rates have not been changed.
The Reserve Bank is fully justified in keeping the repo rate and reverse repo rate unchanged in the background of persisting high level of headline inflation which averaged at 9.7 per cent (y-o-y) during April-October 2011 and ever increasing fiscal deficit expected to be far more than the budgeted figure of 4.6 per cent.
Thus, the repo rate and the reverse repo rate will continue to be at 8.5 per cent and 7.5 per cent respectively. This has been done perhaps keeping in view the RBI's continued apprehension, and justifiably so, in containing the inflation and inflation expectations.
Comfort to liquidity
The relaxation in CRR is to provide comfort to the liquidity constraints, of late, faced by the banking system. The borrowings of banks from the Reserve Bank have been exceeding the limits and often much higher than the RBI's comfort level of Rs 60,000 crore.
These borrowings add to the cost of funds whereas banks do not get any return on their cash reserves kept with Reserve Bank out of their costly deposits. The reduction in CRR is expected to release funds to the tune of Rs 32,000 crore and this can be used to expand the credit particularly to the manufacturing sector. This should also help the banks to reduce the rate of interest to the borrowers to the extent they save on their borrowings from the Reserve Bank.
The banks got partially what they want but they also have got a lot to do in the economy taking into account the fiscal, monetary and economic conditions of the country. They have a major role to play to make inclusive growth a reality by taking advantage of financial and banking inclusion through innovative methods as a great business opportunity.
Improved offerings
The potential to increase deposits is manifold and the tendency of people to go in for other types of investments, particularly in gold and real estate, needs to be curbed by offering improved savings products. The NIM continues to be high in banks and this needs to be checked and brought down by improving the credit portfolio and recycling of funds.
The Asset-Liability management needs fining and cost of funds need to be brought down further. The Reserve Bank has been liberal with the banks by deregulating the SB NRI deposits rates and permitting them to restructure the sticky loans to improve their competitiveness and project a better balance-sheet.
The Reserve Bank has, however, moderated the GDP growth at 7 per cent as against 7.6 per cent projected earlier in its October 2011 review of credit policy. Considering, the external and domestic factors, even the 7 per cent growth is good enough to keep the confidence level high and to better the performance further in the next fiscal.
The need of the hour is the development of infrastructure which impedes the growth of the economy. Making available quality coal at reasonable price to the power sector through all possible means i.e. by rail and road will itself go a long way to give a boost to the economic growth.
The ease of doing business by removing administrative and legal bottlenecks, facilitating FDI investments in infrastructural developments, improving productivity both in agricultural and industrial areas without too much of interference by the Government and bringing in efficiency in the marketing and distribution of products, particularly agricultural products, need urgent attention which only the Government can provide. There is also an imperative need to activate and coordinate all rural development related agencies to give a facelift to the rural economy which requires more freedom for State Governments to take initiative.
Now, it is the turn of the Central Government to do its bit to contain fiscal deficit, improve supply constraints and provide the much needed infrastructure to give a boost to GDP growth and bring down inflation.
On the fiscal front, the Reserve Bank has made its message explicitly clear to the Government by saying that “considering the egregious implications of large fiscal deficits, which are well known , there is an urgent need for decisive fiscal consolidation, which will shift the balance of aggregate demand from public to private, and from consumption to capital formation. This is critical to yielding the space required for lowering rates without the imminent risk of resurgent inflation. The fourth coming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way.”
Hope the Government does its part fast and the economy will flourish.
Dr.T.V.Gopalakrishnan
(This article appeared in The Hindu-Business Line dt29/01/12).
Monday, January 23, 2012
Dr.T.V.Gopalakrishnan , Mumbai , says: NO.Aviation industry requires structural changes and it cannot be set right by permitting FDI.Air India and King Fischer are made sick by total mismangement and fresh investments whether by way of FDI or otherwise will only help help good money chasing bad investment and negative return. Entire aviation system and its operations need to be thoroughly revamped as they suffer not due to paucity of funds but due to lack of accountability in utilising public funds both from the Govt and the banking system. it is better to understand the issues involved in aviation industry and then think of reviving them with or without FDI.
23 Jan 2012, 1809 hrs IST
(This appeared in ET e paper dt23/01/12)
23 Jan 2012, 1809 hrs IST
(This appeared in ET e paper dt23/01/12)
Monday, January 16, 2012
Eurozone countries need to come out of this mess
Dr.T.V.Gopalakrishnan , mumbai , says: Yes. Eurozone countries have no choice but work together to come out of the mess.World Financial Institutions particularly IMF have to play a key and dynamic role to save the european countries and the world at large.This is where the world leaders have to exhibit their statesmanship and save the european countries. US is gradually recovering and this should help the European countries to arrive at some solution.Brics can and should come to the rescue of European economy at this critical situation.Financial institutions and the Govt should coordinate well to ensure that the international financial stability does not get disturbed too much in future by framing suitable policies and creating checks and balances.
(This appeared in ET dt/16/1/12).
(This appeared in ET dt/16/1/12).
Why not a Joint review of Monetary and Fiscal policy ?
The economy needs a morale boost and this can come only if the Government and the RBI jointly initiate measures to revive the confidence of the investors.
January 15, 2012:
The Indian economy, which till a couple of years back was going strong and raising expectations of overtaking even China and other strong economies, has turned weak.
The US financial crisis of 2008, which brought down many economies, did not affect the domestic economy as the crisis was well managed both by the Government and the Reserve Bank of India.
In terms of broad parameters such as GDP growth, inflation, financial stability, exchange rate stability, and so on, the economy was doing well. But the situation changed since 2009.
Erosion of confidence
Many scams, one after another, were detected, revealing governance deficit. Corruption and black money attracted much attention and affected decision making at various levels.
Inflation raised its ugly head and continued to remain unabated. Industrial production declined, with hike in interest rates being cited as one of the major reasons for it. Infrastructure development did not get the priority it deserved.
Favourable monsoon did not bring down food inflation as supply chain constraints and periodical increases in fuel prices affected the marketing and distribution of food products at reasonable prices.
The trade gap widened due to increased imports and reduced exports. And exchange rate fluctuations added fuel to fire. The rupee depreciated by around 17 per cent since August 2011.
Administrative policies were not implemented as expeditiously as the economic conditions of the country demanded. Investments, especially FDI, slowed. And FIIs started pulling out their investments, creating volatility in the stock market.
The downgrading of the US economy and the European crisis have aggravated the situation.
Inflation focus
The Reserve Bank took a series of measures, basically to contain inflation. The approach was to make money dearer and reduce the purchasing power. The RBI raised the repo rate 13 times since March 2010, and brought it to 8.5 per cent in October 2011. The reverse repo was revised to 7.5 per cent and the Marginal Standing Facility was fixed at 9.25 per cent.
Interest rate on savings bank and NRE accounts was deregulated. And sensing the mood of the investing community against further interest rate hikes and seeing some respite in inflation, the RBI decided to keep the rates unchanged in its policy review in December 2011.
But production costs have increased, not only because of the hike in interest rates but also because of input costs going up, reducing thereby the profit margins and fresh investments.
The fiscal policies have not been moving in tune with monetary policies. The general opinion is that the RBI alone is taking action and the Government has been keeping quiet on various fronts.
Direct and indirect tax revenues, which are directly linked to GDP growth, have not been keeping pace with Budget expectations, and the Government is falling behind in achieving the disinvestment targets due to poor market and other conditions.
Infrastructure required for industrial production, particularly energy, has not picked up for want of fresh administrative policies and proper implementation of existing ones.
Fresh impetus
The economy needs a morale boost and this can come only from the Government. To start with, the Government and the RBI should jointly review the monetary and fiscal policies pursued so far and initiate measures to revive the confidence of the investors.
Since food inflation has started declining and the overall inflation is expected to fall to around 7 per cent by March 2011, the RBI can consider effecting some reductions in its policy rates.
Dr.T.V.Gopalakrishnan
(This article appeared in The Hindu-Business Line dt16/01/12)
January 15, 2012:
The Indian economy, which till a couple of years back was going strong and raising expectations of overtaking even China and other strong economies, has turned weak.
The US financial crisis of 2008, which brought down many economies, did not affect the domestic economy as the crisis was well managed both by the Government and the Reserve Bank of India.
In terms of broad parameters such as GDP growth, inflation, financial stability, exchange rate stability, and so on, the economy was doing well. But the situation changed since 2009.
Erosion of confidence
Many scams, one after another, were detected, revealing governance deficit. Corruption and black money attracted much attention and affected decision making at various levels.
Inflation raised its ugly head and continued to remain unabated. Industrial production declined, with hike in interest rates being cited as one of the major reasons for it. Infrastructure development did not get the priority it deserved.
Favourable monsoon did not bring down food inflation as supply chain constraints and periodical increases in fuel prices affected the marketing and distribution of food products at reasonable prices.
The trade gap widened due to increased imports and reduced exports. And exchange rate fluctuations added fuel to fire. The rupee depreciated by around 17 per cent since August 2011.
Administrative policies were not implemented as expeditiously as the economic conditions of the country demanded. Investments, especially FDI, slowed. And FIIs started pulling out their investments, creating volatility in the stock market.
The downgrading of the US economy and the European crisis have aggravated the situation.
Inflation focus
The Reserve Bank took a series of measures, basically to contain inflation. The approach was to make money dearer and reduce the purchasing power. The RBI raised the repo rate 13 times since March 2010, and brought it to 8.5 per cent in October 2011. The reverse repo was revised to 7.5 per cent and the Marginal Standing Facility was fixed at 9.25 per cent.
Interest rate on savings bank and NRE accounts was deregulated. And sensing the mood of the investing community against further interest rate hikes and seeing some respite in inflation, the RBI decided to keep the rates unchanged in its policy review in December 2011.
But production costs have increased, not only because of the hike in interest rates but also because of input costs going up, reducing thereby the profit margins and fresh investments.
The fiscal policies have not been moving in tune with monetary policies. The general opinion is that the RBI alone is taking action and the Government has been keeping quiet on various fronts.
Direct and indirect tax revenues, which are directly linked to GDP growth, have not been keeping pace with Budget expectations, and the Government is falling behind in achieving the disinvestment targets due to poor market and other conditions.
Infrastructure required for industrial production, particularly energy, has not picked up for want of fresh administrative policies and proper implementation of existing ones.
Fresh impetus
The economy needs a morale boost and this can come only from the Government. To start with, the Government and the RBI should jointly review the monetary and fiscal policies pursued so far and initiate measures to revive the confidence of the investors.
Since food inflation has started declining and the overall inflation is expected to fall to around 7 per cent by March 2011, the RBI can consider effecting some reductions in its policy rates.
Dr.T.V.Gopalakrishnan
(This article appeared in The Hindu-Business Line dt16/01/12)
Wednesday, January 11, 2012
Public Sector Banks, Borrowers and Basel iii
This refers to your editorial Capital Idea (Et,dt 9/1/12). The objective of the implementation of Basel 111 guidelines is basically to improve the banking systems' ability to absorb shocks arising from financial and economic stress caused due to circumstances beyond the control of banks, regulators and borrowers. No doubt situations arise in an atmosphere of globalised banking and interlinkages of various domestic and international markets involving exotic products and dynamics of economic forces where additional capital resources would come to the rescue of banks. But in india,the way borrowers like King Fisher and many healthy corporates but bad borrowers conduct themselves and banks are made to aborb losses are beyond any tolerance limits. Ultimately, making the Govt being the majority shareholder of these banks to bear the cost resorting to budgetary resources despite its poor fiscals is something unthinkable and this is where the BASEL 111 guidelines needs to be customised in India. The indiscipline of the borrowers and their mismanagement of bank funds need to be dealt with separetely and the Govt should not liberally fund the banks without making them and borrowers accountable for loss of public funds. The NPAs in Indian banking system is basically due to the failure of banks and borrowers and this needs to be factored in while injecting capital by the Govt in Public Sector Banks.
Dr.T.V.Gopalakrishnan
( This letter was sent to ET on 9/1/2012)
Dr.T.V.Gopalakrishnan
( This letter was sent to ET on 9/1/2012)
Tuesday, January 10, 2012
Recovery of Dollar
Dr.T.V.Gopalakrishnan , Mumbai , says: The recovery of US dollar will sustain as its GDP and employment growth have started picking up and the momentum will be maintained. Once the confidence level improves,the economy will pick up fast and the strength of dollar will improve. It is time for president Obama to project his image and improve his prospects of getting reelected.The economic policies initiated by his Govt have started yielding results and the problems in other economies particularly the European economy will get sorted out to a great extent once the US economy picks up.The year 2012 will be good for the US economy as its downward cycle has almost come to an end.Earlier the US economy and the dollar improve, the better for the rest of the world.
10 Jan 2012, 1813 hrs IST
(This appeared in ET dt,10/01/12).
10 Jan 2012, 1813 hrs IST
(This appeared in ET dt,10/01/12).
Monday, January 9, 2012
Prices of Real Estate
Dr.T.V.Gopalakrishnan , Mumbai , says: Property prices will come down in 2012 provided Govt is seious in curbing black money and corruption.The prices do not reflect the purchasing power of an average Indian. The rate of interest and the cost of funds in the economy have been ruling very high and the EMI and cost of real estate are beyond the reach of many. The mismanagement of the economy if rectified and administrative reforms which include accountability are introduced in all regulatory areas the cost will automatically come down.The real estate transactions need to be made more transparent and brought under a monitoring system using information technology. Cash payments need to be eliminated and there needs to be a tie up among banks,the purchasers,sellers and registrars of properties.All real estate transactions above a particular cut off limit should be tracked bY Income tax DEPT. If the Govt is willing,the property prices can be brought down considerably.
9 Jan 2012, 1845 hrs IST
(This appeared in ET dt 9/1/12)
9 Jan 2012, 1845 hrs IST
(This appeared in ET dt 9/1/12)
Sunday, January 8, 2012
India and Hybrid car, Affordability of people
Dr.T.V.Gopalakrishnan , Mumbai , says: Manufacturers are ready for hybrid cars,but in terms of infrastructure,inequality of income and ever increasing oil prices, persistent level of poverty,the economy is not ready. Some industrialists and well off people who enjoy lots of black money can certainly afford high brid cars. If black money holding is the criteria many can afford and will go for these hybrid cars. But an average honest Indian cannot afford even to own a vehicle is a fact if one goes by the poverty level, rate of inflation, unemployment, hand to mouth existence etc.Reality cannot be and should not be hidden by displaying prospirity and wealth among a miniscule percentage of population who can afford and who are eager to own hybrid cars.
8 Jan 2012, 2127 hrs IST
(This appeared in ET dated 9/01/12)
8 Jan 2012, 2127 hrs IST
(This appeared in ET dated 9/01/12)
Friday, January 6, 2012
SEBI and promoter shareholders of Companies
Dr T.V.Gopalakrishnan , Mumbai , says: This is not a good move. What SEBI should have done is to encourage promoters particularly promoters of well run companies to bring down their holdings in such a manner that retail holding works out to more than 25 percent. The reason for letting promoters auction shares through a special window is not understandable. IF SEBI's INTENTION IS TO allow promoters some exit route, it should be made more transparent and retailers participation in owning shares should be encouraged. Special window approach gives room for doubt.
5 Jan 2012, 2006 hrs IST
(This appeared in ET dt 6/01/12).
5 Jan 2012, 2006 hrs IST
(This appeared in ET dt 6/01/12).
Tuesday, January 3, 2012
Railway ticket through mobile phone
The advancement in technology is appreciable and from that angle this is welcome But it can be taken advantage of only by a few who are very comfortable in using mobile and latest facilities. Only a fraction of the population can take advange of this facility and that too at the inconvenience of many in the society is a fact which cannot be ignored.Physically handicapped, senior citizens and illiterates and semi literates are at a disadvantage and it is unfair.Practical problems of convincing the TC who is hard presssed with several bogies under his supervision will take away the charm of the traveller having a mobile ticket confirmation. This sort of technological advancement is more useful if put into tracking transactions in cash and detecting tax evasion taking place through out the country day in and day out particularly by the rich and literates.
Dr.T.V.Gopalakrishnan
(This appeared in ET dt 3/01/12)
Dr.T.V.Gopalakrishnan
(This appeared in ET dt 3/01/12)
RBI and the Govt to act togother
Your editorial comment on the economy was apt (“Little hope for 2012,” January 2). The year 2011 will go down in the history of our economy as the worst performing year since India’s economic liberalisation. The reason you have given for the poor performance – the mismanagement of the economy by the government – shows your unbiased approach and openness in assessing an economy and that is commendable. But it should be noted that the growth potential of our economy remains strong and a little more attention from the government and other institutions, particularly the Reserve Bank of India (RBI), can make 2012 a better year. Inflation is softening and the situation may improve with a favourable monsoon and credit support. RBI can consider reducing the interest rates and improving the liquidity further to ease monetary conditions and attract fresh investments. RBI and the government have to make a joint effort to instil economic confidence by all means. If they are able to do so, 2012 may not end up being such a bleak year after all.
T V Gopalakrishnan Mumbai
T V Gopalakrishnan Mumbai
Sunday, January 1, 2012
Govt and Lokpal bill
Dr.T.V.Gopalakrishnan , Mumbai , says: The GOVT has hot been observed to be sincere and honest in eradicating corruption and black money in the economy which take away the strength of the economy. The Lokpal bill could have been brought out by the GOVT right royally sensing the mood and demand of the people. The awareness among the people about the corrupt practices very cleverly perpetrated by politicians and bureaucrats has been well spread by Sri Anna Hazare and his team and it is not easy for any force to erase that from the people. Earlier the Govt realises the better for the present and future Govts. Time has come with or without a lokpal bill to remove corruption from society and a proper bill will only be a facilitator.With the passage of an effective bill the Govt can earn the lost image and goodwill and it should put all positive efforts to bring out a bill acceptable to the society. Trying to be oversmart in avoiding an effective bill in the name of politics will not be tolerated by any right thinking person.
1 Jan 2012, 1615 hrs IST
(This appeared in ET dt 1/1/2012
1 Jan 2012, 1615 hrs IST
(This appeared in ET dt 1/1/2012
The present slump in the world economy is an opportunity for India to perform well keeping aside the political differences among the parties and concentrating on economic growth.Inflation is on the decline and the supply side constraints need to be further removed.The instituions set up for various purposes should be made more accountable and deliver the goods.What the economy needs is accountability from all categories of people particularly politicians,bureaucrats,industrialists and professionals. The various administative,regulatory and supervisory wings functioning in the economy need to concentrate on their role and responsibilities and see that their contribution is reflecting in the economy.The foremost requirement of the economy isto ensure that the data inrespectofGDP,Poverty,employment,inflation,exports , imports tax collections,deficit,etc have some interlinkages and reflect more or less the realities. Corruption and black money create havoc in the economy and distort the very fabric of the economy leading to chaos in the implementation of polices. Infrastructure is the basis for economic growth and all efforts need to be made to strengthen it without allowing politics to interfere. Involve midle class and lower class as part of decision making in some segments to ensure that implementation of certain policies is a grand success.Create awareness about the need for the growth of economy and its benefits to the nation among the masses.TheGovt has to do the needful.
T.V.Gopalakrishnan
(This appeared in ET dt 1/1/2012).
T.V.Gopalakrishnan
(This appeared in ET dt 1/1/2012).
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