Reopening of Bofors Case

Dr.T.V.Gopalakrishnan

Truth should come out. Since the case seems to have not been properly dealt with, the people should know the truth and the atrocities happening in the country with political support. The masses suffer for want of food ,water and minimum basic necessities to survive where as the money is looted by the mighty and powerful.This is not justifiable and who ever is responsible for such high level corruption and manipulation does not deserve to be enjoying the confidence of the innocent masses. Since 25 years have elapsed, many have lost their life whether benefited or not from this scam, at least people can be aware as to how such things are being carried out. They have a right to know as to who is behind this great scam.Truth only triumphs is what this great nation believes and follows and this should continue to be the force behind all public dealings.

 

(This comment in response to an opinion poll in Times of India on Bofors case was published on 26/04/12)

S&P's rating of Indian economy

DR.T.V.Gopalakrishnan , Mumbai , says: Based on the past two or three years performance and taking into consideration the deteriorating fundamentals of the economy,the S&P's projections are realistic.Unfortunately, no serious actions seem to be coming from the Govt to set right the issues to give a boost to economy although India has got the strength to perform better. The budget did not provide any concrete measures to revive the confidence.On the contrary, the measures announced to reopen cases with retrospective effect by bringing in amendments to act has shaken the confidence of investors of present and future.Besides, there are no specific measures to contain fiscal deficit, current account deficit, inflation and unemployment,inequality of income, corruption and black money. only the Reserve bank seems to be worried a little and the coordination between the Reserve bank and the Govt is also gradually missing to tackle the economy's problems of late as revealed by the latest monetary policy of the Reserve bank. 26 Apr 2012, 0728 hrs IST (This comment under opinion poll was published in ET dated 26/04/12).

Basu's effect on Reform Comments

Dr.T.V.Gopalakrishnan (Mumbai)

Mr Basu has done a good job and drawn the attention of the Government to its inaction on reforms front. Hope such comments from very seniors will help the politicians in power to introspect and take some positive steps to take the economy forward. Other than legislative reforms where opposition parties cooperation is required, the Govt can take some intiatives in the administrative areas and remove the bottlendecks and expedite proposals leading to improved investment, production and distribution. Doing business in India is reported to be most discomfortable and with administrative measures, this can be taken care of to a great extent. Systems and procedures can be minimised to improve efficiency in the sanction of approvals and project clearances. The infrastructural bottlenecks in the area of power,transports and distribution of raw materials and finished products etc need to be made more transparent and more result oriented with adequate checks and balances to minimise delay and corruption. The Govt functionaries need to be made more accountable and less of having corrupt practices. These things do not require references to parliament to face opposition from the opposition parties. It is time for the Govt to identify areas where they can initiate action and speed up the decision making processes. The issue of corruption and delay in taking decisions for the fear of getting caught etc for some wrong decisions etc can easily be tackled with proper administration, incentives and motivation etc.The confidence in the economy needs a boost for that legislative sanction is definitely not required. Readiness is all that is required to be exhibited by the Govt.(This is in response to the Editorial on Basu's effect appeared in Times of India dated 24/04/12)

Investments in PSUs

Dr.T.V.Gopalakrishnan , Mumbai. , says: PSU stocks are no longer a good ivestment bet since they have become more greedy than private corporates and do not have any ethics to safegurad either investors money or the Govt interest.SEBI and the Govt owe a lot in enticing middle class investors to invest in PSUs by advertisement gimmicks and exploiting the sentiments of investors.All PSU IPOs so far issued need to be investigated for their luring investors by giving attractive advertisements and quoting very high prices and not offering good dividend and bonus shares.This tendency of taking money from public and institutional investors by resorting to unethical practices by PSUs are not appreciable and justifiable. This is perhaps one of the reasons for loss of confidence in PSU IPOs and the failure of ONGs's issue held in early 2012. Most of the PSUs shares after their IPOs are quoted below the issue price and investors funds are locked indefinitely. It is time for SEBI to come out with prudential guidelines for PSU IPOs and protect investors particularly retail investors and Govt owned institutions like LICs and banks. Capital market needs to be healthy and sound and for that PSUs should be role models in attracting investments.
This is in response to an opinion poll in ET dated 24/04/12.
24 Apr 2012, 1704 hrs IST

Burning Money in the SKY

T.V.Gopalakrishnan (Mumbai) 2 hrs ago (12:29 PM)The article reads well and and a good time pass. The problem is known to all and the solution is unfortunately with our netas and babus and they have a vested interest in keeping such white elephants at the cost of tax payers money for their own benefit and enjoyment. The banks are there to finance and tax payers who have not even experienced an air travel or seen an airport are there to bear the losses. The author has nicely elaborated the problem but what is the solution? This has been going on for decades and the losses written off by banks for decades for maintaining such companies are beyond the imagination of even the best of minds. Officials cannot openly bring out the problems as they will lose their job The solution if it comes from the best brain will not be accepted as babus and netas stake will get affected.Indian public are destined to suffer and such articles help them to understand the sufferings they undergo.This freedeom of expression is really appreciable. Well done Mr Bhagat. . (This is in response to the article"Burning Money in the Sky" by Chetan Bhagat in Times of India dated 21/04/12)The comment is published in Times of India.

IS RBI RIGHT IN ORDERING PSU BANKS TO CUT RATES?

Dr.T.V.Gopalakrishnan , Mumbai , says: The Govt is not expected to issue orders direct to psu banks.The regulation and supervision of banks is the prerogative of the Reserve Bank and if at all the Govt wants banks to act in a different manner, it can take up the matter through the Reserve Bank.This approach of the Govt shows its dominance and arrogance as owner of the PSU banks ignoring RBI's presence and entitlement in terms of statutory provisions under the Banking Regulation Act, 1949 to issue directions to the PSU banks. This sort of dual control on banks will only weaken the banking system as it happens in Cooperative Banks.This way of excercising control over banks by the Govt is neither advisable nor desirable nor permissible in the interests of the healthy and sound banking system. The banking system in India is strong and the credit goes to the Reserve Bank and this sort of interference from the Govt would only undermine the powers of the Central Bank and that is not good either for the economy or for the financial system.
20 Apr 2012, 0816 hrs IST
(This is in response to an opinion poll in ET dated 20/04/12.This appeared in ET on 20/0412).

RBI's Gamble with growth

This refers to your edit “No excuses left for Centre” (April 18). The Reserve Bank of India’s (RBI’s) monetary policy measure of effecting a sharp reduction in the repo rate by 50 basis points sends out a clear message to the government that it has to initiate action on several fronts to stimulate growth and give the much-needed sentiment boost to the investor community. No doubt, RBI has surprised the market and shocked theorists by demonstrating that monetary policy can deviate from fundamental requirements and adopt a different approach if the situation demands it. The economy has been lagging for the past three years and the government has failed to show any fiscal discipline despite several bold measures from the central bank. Though the rate cut may have an adverse impact on inflation, if RBI’s gamble pays off, renewed economic growth may have some softening effect on prices.

T V Gopalakrishnan Mumbai

(This appeared in Business Standard dated 19/04/12).

RBI"s cup of many woes

The article is well written and captures very accurately all the ills the economy face today for the action and inaction of the Govt. The author has also brought out the inadequacies on the part of the Reserve Bank in tackling the issues purely as a central bank and as a professional institution. Instead of the Govt giving support to the Reserve Bank for tackling the issues of the economy, the move of the Reserve Bank in playing to the tunes of the Govt is something unintelligible and unbecoming of an autonomous institution in case it is. The article should serve as an eye opener for all concerned and measures to prevent the economy from entering into a crisis situation similar to that of the earlier 1990s need to be initiated. It is not the issue of prestige of institution.it is the issue of a growing economy and this realisation is the need of the hour. As rightly warned,CentralBanking like politics should not become the art of possible. Kudos to the author for such a timely warning.

(This is in response to an article by Mythili Bhusmurmath appeared in ET dated 16/4/12)

Is RBI right in cutting the interesr rate by 0.5%

Dr.T.V.Gopalakrishnan , Mumbai , says: The RBI's cutting interest rate is influenced more by market sentiments than economic fundamentals. It suits the market and satisfies the Govt. But purely from a Central bank's monetary point of view the action carries no conviction and cut could have been better avoided. A token cut of 0.25% would have satisfied the market. However, it is a very clear message for the Govt that it has to perform its role in taking appropriate action on the fiscal and administrative front to give a boost to the GDP growth or else will have to face the criticism from all corners. RBI has exonerated itself by its bold action though not fully justifiable based on the economic fundamentals.
18 Apr 2012, 1553 hrs IST
(This is in response to an opinion poll by the ET dated 17/04/12).

Will RTE address India's literacy deficit?

Dr.T.V.Gopalakrishnan , Mumbai , says: RTE by itself cannot wipe out india's literacy deficit.People below poverty line and just above the poverty line cannot think of having any education as hunger needs to be sorted out first.Govt has to be practical and realistic in having policies and their implementation. One cannot preach of literacy when people are hungry and they aspire for some food. Solve the poverty first and then think of education.
17 Apr 2012, 1732 hrs IST

( This is in response to an opinion poll in ET dated 17/04/12).
This appeared in ET dated 17/04/12>

Economic Theory and well off people

This article reads well and is an indication that no economic theory what ever may be its proven success rate in any advanced economy does not work in India.This establishes another theory that well off people in Indian society are not affected by the general theory of price effect on demand.The fact that FMCGs perform well in India is evident as to how the well off society in India behave differently despite rise in prices due to their increased propensity to consume which is inelastic to the increase in prices.This only shows the prevalnce of black money and the ineffectiveness of the taxation policies and their implementation.In our economy which is characterired by predominance of black money, corruption,mal adminisration,it is uncharacteristic to compare the economic theories of advnced nations.The realities of poverty,unemployment and ever widening disparities of income and wealth have to be factored in while evaluationg the economic theories.This article should be an eye opener.

from: Dr.T.V.Gopalakrishnan
This is in response to the article that appeared in Business Line dated 15/04/12 by TCA Srinivasa Raghavan)

Posted on: Apr 15, 2012 at 09:05 IST

Data Revival

This refers to the aptly headlined edit “Death of data discipline” (April 13). Policy decisions based on inaccurate data can only yield bad results. This has been highlighted by none other than Reserve Bank of India Governor D Subbarao when he stated, in one of his speeches in 2009, that the weakness in the country’s data system are posing challenges to monetary policy formulation. The expression “garbage in, garbage out” seems to apply to statistics relating to almost every aspect of the Indian economy — be it exports, imports, inflation, poverty levels or employment levels.

The transmission of monetary and economic policies will continue to be ineffective as long as the database remains weak. It is time for the authorities to improve data collection with respect to all economic activities and strengthen the existing database with accuracy and timely reporting.

T.V.Gopalakrishnan,
Mumbai
(This letter appeared in Business Standard dated 16/04/12).

Import of Gold and high CAD

Dr.T.V.Gopalakrishnan , Mumbai , says: The high Current accout deficit can be attributed to several reasons which include the import of gold. The oil price hike,depreciation of rupee,poor inflow of external funds thanks to lack of confidence in the economy,decline in GDP growth etc have contributed to higher CAD and gold imports have added to the burden.The craze for gold can be contained and the gold holdings in the country need to be converted into productive assets to support GDP growth.Containment of gold imports will help to improve CAD but the economy has to perform well in terms of GDP growth, exports, inflation,and stable exchange rate.
12 Apr 2012, 1830 hrs IST
(This is in response to an opinion poll in ET dated 12/04/12 on import of Gold and high level of CAD. This comment appeared in Et dated 12/04/12).

Expectations from RBI and the Economy

The article has brought out well about the need for RBI not to fall prey to the pressures of politicians,industrialists, and top Govt officials to reduce the policy rates. The economy is in fact in reverse gear and in case the RBI decides to change the policy rates as wanted by all including the bankers, neither the economic growth nor the price stability can be achieved. It will worsen the situation and damage control will become a difficult tasklater on and more than anybody the masses will suffer.The inflation, the ccurrent account deficit, the fiscal deficit, the GDP growth, the severe fall in exchange rate, poor flow of both FDI and FII funds, loss of confidence in attracting foreign funds thanks to retrospective changes proposed in some of policies relating to tax on international investments etc are not favourable for investment and growth in the near future, the Reserve Banks' policy is the only hope left to put the economy on right and growth track. Will RBI heed to the requirement?

from: Dr.TV. Gopalakrishnan

(This comment is in response to an article in ET dated 6/04/12)

Posted on: Apr 5, 2012 at 22:28 IST

Indirect Tax and price Hike

T.V.Gopalakrishnan , Mumbai , says: The indirect tax hikes will further worsen the inflationary conditions.Though inflation is stated to be the worst enemy of poor people, nothing is done to contain inflation.The savings rate has been declining and if one analyses even the pesent savings, it will be from upper middle class and hign net worth individuals. The savings from poor strata of society and lower middle class people have been on the decline because of inflation and this trend is not good for the economy.Any economy which maintains low inflation and low cost of funds will always be performing well interms of GDP growth and unfortunately, this is one aspect which has been ignored by policy makers. Aam admi is suffering and the increase to this lot will be the result of price hike through indirect taxxes.There is paralysis in thinking and action and common man suffers.
(this is in response to an opinion poll in ET dated 2/04/12

Know your Customers or keep them away?

To open an account, identification of the person is what the bank should insist on initially. Knowing the customer comes only after a person becomes a customer.

It is no wonder that financial inclusion does not take off — most people would prefer to remain outside the banking system than comply with the Know Your Customer (KYC) norms of banks as reportedly prescribed by the Reserve Bank of India. My experience with the country's largest bank, the State Bank of India, is something worth recording to bring to the authorities' notice that the KYC procedure should be a simple one to understand your customers and not to keep away or kill your prospective customers. Very recently, my wife and I approached the State Bank of India to open a Special Tax Saving Fixed Deposit Account in my wife's name to enable her to claim tax rebate under Section 80c. Being retired bank officials and having a fair knowledge of KYC requirements to be complied with, we carried our PAN cards, a telephone bill as a proof of residence and our passports along with copies of all these documents. The account opening forms were filled up and handed over to the dealing official with all attachments as per the KYC norms. The official perused the documents minutely and carried the papers to her superior for approval. He scrutinised the documents and sought to clarify in whose name the account was to be opened in. When I clarified that it was for my wife, he insisted on proof that the lady with me is my wife and a separate piece of evidence that she resides with me in the same address. I had the shock of my life for a moment and having had a very harmonious married life for more than 34 years, I am required to produce sufficient proof to the official. I made a futile attempt to convince him that her passport carried my name indicating that I am her husband and for my identity I gave him my identity card as a retired senior official from a well-known bank along with the PAN card. After showing whatever evidence I had and even after giving a written declaration that the applicant for opening the Tax savings FD account is my wife, the chap was not convinced and insisted that unless I provided some proof that she resides with me in the address mentioned, he would not be in a position to open the account. Of course, the gentleman was very polite and courteous in his behaviour and expressed his helplessness that unless such proof was given, his higher authorities would return the documents and the account would not be opened. I had no other choice but to make a final effort with the branch manager, who after acknowledging my identity and work experience, immediately approved the application for opening the account and the whole transaction was over after spending about a couple of hours in the branch.

Document trouble

This episode I narrated is not to complain about the bank and its officials but only to highlight the practical difficulties people encounter to open an account — that too a deposit account — in a Government-owned bank. This incident should make one ponder seriously how an ordinary person without proper employment, income or shelter can open a bank account and get himself included in the banking fold and enjoy the benefits of economic growth under the much talked about inclusive growth. The basic understanding of KYC norms at the ground level is unfortunately missing and this is perhaps the major stumbling block in making inclusive growth and financial inclusion a reality. I understand from my own informal survey of people of poor means that they shell out Rs 1,500 to Rs 2,000 to make the documents as the banks want to open an account.

No doubt, knowing a customer is a must and understanding a customer thoroughly through observing his transactions closely over a period to ward off frauds and antisocial activities is inevitable, but keeping away the prospective customers or killing the customers before entering the bank premises in the name of KYC is something surely not intended or desired by the authorities.

Time to rethink KYC

The issue of KYC — the procedure to be followed, the documents needed and its implementation at the operational level — should be revisited by authorities for a serious review. To open an account, identification of the person is what the bank should insist on initially. Knowing the customer comes only after a person becomes a customer. The operations in the account can give more information about the customer and in case of shady deals the banks can call for more details and documents from the customer. The banks should also be able to distinguish between a deposit customer and a borrower customer. Further, there should be a difference in approach between a small depositor and a heavy deposit customer. Perhaps the banks may have to call for additional information from a heavy deposit customer to establish that the deposits emanate from genuine deals and do satisfy taxation laws of the country.

The banks' approach of insisting on certain documents — which in the present nature of the family set up, cultural, social and educational background of the country and its people are difficult to produce by all segments of the population — helps only to harass the prospective customers and keep them away from banks. It is in the banks' own interest, from a social and commercial point of view, to be innovative in making inclusive growth a viable business opportunity. KYC norms presently pursued need to be reinvented and made workable for economic growth.

The authorities can once in a while get feedback from people on their experiences. Continuous rapport with people of ordinary means through informal and formal surveys will be of great help in eliciting information particularly on financial inclusion. Bank officials should be mentally attuned to serve people as a way of life and for career growth. The beneficiary is the economy and there will be welfare of the society and this is what is expected of financial inclusion and inclusive growth. Wrong approach to KYC should not be allowed to come in the way of the country's growth and peoples' welfare.

(The author is a Mumbai-based consultant and the views are personal)


This article appeared in Business Line dated 2/04/12.

Dr.T.V.Gopalakrishnan