Real Esate Inventory

Greed and corruption account for a major cost of Construction. Further,the interest rate, cost of construction materials, transportation costs and establishment cots add to the over all cost of inventories which are becoming unaffordable to the majority of the people who are finding it extremely difficult to pull on the days in these days of unstoppable price increases effected all round thanks to the mismanagement of the economy leave alone going for a shelter. Builders have no choice but to bear the cost and carry on or offer houses at a discount. Those who have already bought two or three flats for speculative purposes cannot think of investing further as their money is also locked up. Black money holders have other avenues for investment without being noticed or tracked.Banks will have to bear the brunt of these inventory build up as most of the builders use public funds for their business development activities. Some of the losses are borne by the shareholders of these companies. This is a vicious circle and cannot easily broken. First time purchasers have no scope at all.

Dr.T.V.Gopalakrishnan

( This comment is in response to an article Real Estate owners build up of  inventories cross 58000 crores that appeared in Business Standard dated 23/9/13)

The Concept of Time Management is totally absent

The author has hit right on the head of the nail by pointing out the inadequacies and problems in commissioning a project. In India the major handicap is time management. Right from the top to the bottom , the value of time and implementation of Projects on time has never been given a serious thought and the loss incurred by the economy is something incalculable and not  easily repairable. Neither the politicians, nor the bureaucrats, nor the bankers nor the investors have any sense of time management which is the essence of success of developed countries in all their ventures.Corruption is tolerable and perhaps acceptable if things move and delay can be avoided in getting the whole process on.This is the crux of the issue and if some solution can be seriously considered, the economy can be brought back on fast track.Who will bell the cat?

 

 

Dr.T.V.Gopalakrishnan

( This comment appeared in ET and TOI in response to SA Iyer's article)

Dr Subbarao proved right by Dr Rajan, the new Governor

Once in RBI chair as Governor, one cannot erase the footsteps of all predecessors, as RBI has no political agenda and it has only the mandate to maintain the value of rupee, monetary and financial stability, contain inflation and provide adequate support to growth in the over all interest of the economy. This is what Dr Rajan also did through his monetary policy review though he has not even completed four weeks after taking over charge as Governor and lot of expectations were there from him from the Government, markets and corporates. Traditionally and historically, the Governors do provide support to the Government and facilitate the economy to grow but they can and will never be a party to the Governments' profligacy and ineffective economic policies leading to catastrophic economic conditions as we see it today. This is clearly a message to the Government that inflation needs to be brought down first for any other improvements in the economy. Low inflation itself will lead to better savings,investment,growth and employment. This is the theory successfully pursued world over if people's welfare is the objective of the Government. The policy from the new Governor clearly demonstrates that  RBI is perhaps the only and unique institution which cannot be easily pressurized to dance perfectly to the tunes of the Government.

Dr.T.V.Gopalakrishnan

Capital Infusion to cover up NPAs of PSBs

Instead of taking steps to recover the bad debts of banks through some very serious steps, injecting tax payers money as capital into the PSBs is unjustifiable and cannot stand public scrutiny. The bad borrowers have enjoyed public funds and are allowed to go scot-free. The depositors who have kept their life savings in banks are paid 4% interest rate when the inflation is in double digits. All stake holders of banks and the economy bear the brunt of non performing advances of banks and this sort of subsidization has been going on for decades without being questioned by stakeholders of banks or resisted by the authorities. This approach of financing banks when the banks themselves finance the capital of corporates started by unscrupulous borrowers cannot be considered as good economics . The culprits should be penalized and discipline should be introduced among the borrowers and banks.

Dr T.V.Gopalakrishnan

( This comment in response to an article Government to infuse Rs  14000 crores in PSUs in next 15 daysthat appeared in Business Line dated 19/9/13).  

Onions and Inflation

Inflation is not under control and people are suffering.Vegetables and fruits are beyond the affordability of even middle classes whose earnings are in five digits a month. If one carries Rs 500 note, one can have a very items of vegetables and one or two fruits for a day for a four member family is the ground reality. Of course onions avoided. The economics practiced by the Government cannot be understood even by the economists is not an exaggeration. The inflation is demand driven or supply constraints is the look out of the authorities but the people at large have no clue as to what is the way forward with their limited income. The feeling of frustration is visible everywhere among the lower middle class and lower classes and this can be easily experienced and felt in the markets, bus stations and trains when they curse and condemn the Government .Their helplessness creates tension in family and society is a fact which the authorities cannot ignore any more. Family budgets are in astray and this has reflection on the house hold savings and the demand for non essential and essential goods. Black money holders and those who earn well and those who do not pay any taxes only are able to bear this unheard of rise in prices is what the authorities should realise and take appropriate measures. Suffering of the masses cannot be allowed to go on any more. Corruption, black money and greed have become the order of the day and the ordinary masses have absolutely no say but to silently suffer and sacrifice even the minimum essentials required for survival.This can have adverse impact on the society and the restlessness will increase out of frustration and desperation.

Dr.T.V.Gopalakrishnan

(This comment appeared in Business Standard against an article Onions drive Whole Sale inflation on 17/9/13)

Vegetable prices and inflation

Inflation is not under control and people are suffering.Vegetables and fruits are beyond the affordability of even middle classes whose earnings are in five digits a month. If one carries Rs 500 note, one can have vegetables and one or two fruits for a day for a four member family is the ground reality. The economics practiced by the Government cannot be understood even by the economists is not an exaggeration. The inflation is demand driven or supply constraints is the look out of the authorities but the people at large have no clue as to what is the way forward with their limited income. The feeling of frustration is visible everywhere among the lower middle class and lower classes and this can be easily experienced and felt in the markets, bus stations and trains when they curse and condemn the Government .Their helplessness creates tension in family and society is a fact which the authorities cannot ignore any more. Family budgets are in astray and this has reflection on the house hold savings and the demand for non essential and essential goods. Black money holders and those who earn well and those who do not pay any taxes only are able to bear this unheard of rise in prices is what the authorities should realise and take appropriate measures. Suffering of the masses cannot be allowed to go on any more.

Dr.T.V.Gopalakrishnan

(This comment is in response to an article Onion ,vegetable Prices up inflation to 6.1% that appeared in Business line dated 16/9/13).

RBI and Inflation

RBI trained its gun on inflation and the Governor incurred the wrath of the Government and Dr Subbarao had to bear all the insults from the Government for his anti inflation stance pursued during a major part of his stint in RBI. Inflation is caused due to both supply and demand factors.While supply has been adversely affected due to low production and productivity, lack of storage, transportation and marketing facilities, high costs of inputs due to increased cost of fuel fertilizers and transportation etc,, demand is caused due to excessive income generated by wrong taxation policies skewed in favour of the rich, corruption and black money. The data in respect of employment and income earned by many do not seem to be reflecting in the statistics used to arrive at the demand potential is also a fact leading to wrong policies. It is for the Government and not for the RBI to seriously ponder over the whole issue of inflation control at this critical juncture where the failure of the government is predominant. RBI's balance sheet expansion is also a direct reflection of Government"s poor finances.

Dr.T.V.Gopalakrishnan

(This comment in response to the article RBI should train guns on inflation appeared in Hindu Business line dated 16/9/13).

Head aches for RBI Governor

Why only Inflation? All problems that the economy face today add to the head ache of the governor and there is no magic wand to set right things. He has to build up confidence in the economy through improved rupee value, savings of the masses in financial instruments particularly banks savings instruments, discourage build up of assets of gold and real estate by eliminating black money, increased health of banks balance sheets by being very strict with bad borrowers and finally through better rapport with the Government by getting some favourable fiscal incentives towards savings, removing the supply side constraints for containing the defiant inflation and inflation expectations. He can do it and he has to do it to save the economy from further crisis. DrT.V..Gopalakrishnan (This comment is in response to a write up inflation adds to head aches of the new Governor that appeared in TOI dated 16/9/13) 

An important message to the Government from RBI History volume 4

The author has not only captured well the essence of the RBI history Volume 4 but also brought out the message that RBI plays its role effectively and comes to the rescue of the Government by providing timely warning and suggesting ways and means to come out of the economic crisis which the Government cannot ignore. This history volume in particular conveys the message that RBI Governors never go wrong in their policy judgement and it is for the Government in power to evaluate the message and act decisively to save the economy from all impending dangers. This is what Dr Subbarao also did but unfortunately his advice has been not only ignored but also has been openly  challenged and  condemned inviting all troubles to the economy. Next volume of RBI history is sure to record all these differences of opinion between the RBI and the Government and how the lack of coordination between the two led to the avoidable consequences on the economy in terms of slow growth, high inflation, high fiscal deficit, high current account deficit ,rupee depreciation and volatility in all financial markets.

Dr.T.V.Gopalakrishnan

(This comment  is in response to the article 'History of economic crisis and reforms: Deja Vu?' that appeared in The Mint dated 16/9/13)

How to Counter FIIS in Indian Markets.

This refers to your editorial Reducing FII dependency (Business Line, September 9,2013) It is rightly said that there is  a paramount need  to counter FIIs influence in our financial market  in general and forex market in particular and the Pension Fund Regulatory can create a strong domestic institutional investor base in the long run., The  fact that FIIS  are able to dictate terms to the  capital and forex market since the days of liberalization of our economy despite the presence of Insurance Institutions, Mutual Funds, Provident Fund,  banks and a whole lot of whole sale and retail traders only reflects the weakness of our markets and these investors.  It is high time our investors and the authorities have a strategy to counter FIIS and see that some semblance of order prevails in the market and the volatility is range bound and some what predictable and manageable. The buy and sell policy of domestic institutions has to necessarily counter the buy and sell strategy of FIIS.

The suggestion to attract Indian households savings to capital market in this context is very apt and worth attempting. This requires incentives and a good amount of marketing. SEBI and the government have to work jointly to provide some incentives for retailers to enter the capital market. Some of these could be tax exemption up to Rs one lakh of investments in the Capital market, granting of  Loyalty bonus to shareholders who do not trade the shares and retain them for a minimum period of two years, tax incentives to companies who hold maximum retail holdings of shares and who declare regular and high dividends , and using STT as a major tool to  have a check on the buys and sells. The NRI’s should have attractive and flexible rules to invest in the market and this should be widely publicized. 

Dr.T.V.Gopalakrishnan

(This comment is in response to the editorial Reducing FII dependency that appearedin BL dated 9/9/13).

Election Gimmicks and winning election

The analysis is very realistic. The voting pattern has nothing to do with what happen in Delhi and parliament. It all depends how voters are wooed by local politicians and the Government in power. They have their own gimmicks to play around confusing the voters than convincing the voters. The success of 66 years of Governance is that our masses are not able to think rationally and intelligently as many of them are kept in perpetual illiteracy and poverty. Their worry is from where and how to get the next meal. This our politicians have realised very well and one or two days before the election they take care of them by some small incentives. This is the ground reality. Of course, there are exceptions to the rule as rightly pointed out by the author attracting the attention of the masses to national calamities which can influence the voting pattern a little for considerations other than economic development and welfare. The food security bill and land acquisition bill cannot have much of an impact as such on the 2014 election.

Dr.T.V.Gopalakrishnan 

( The comment is in response to an article "Bills wont win polls" that appeared in ET and TOI dated 8/9/13).

Govt Exposed for its failure

Dr Subbarao  did his job well despite pressures from the Govt and inaction on the part of the government to set right administrative lapse and lack of policy initiatives in vital areas of the economy. RBI alone cannot manage the economy is a fact. The Government is fully exposed for all its failures on policy matters. This exposure was possible thanks to Dr Subbarao's stubbornness to maintain RBI's limited autonomy.He deserves special kudos for exposing the Government.

Dr.T.V.Gopalakrishnan

(This comment appeared in ET datyed8/9/13)

Limitations for the New RBI Governor

In the present set up of RBI without any independent authority to have its way, Dr Raghuram Rajan cannot do much. As long as RBI has to dance to the tunes of the Government which has only political agenda to gain popularity and votes ignoring good economics and sustainability of welfare measures at the cost of financial security of the economy nothing can be expected of from Dr Rajan. The Government has to shed all its subsidies except perhaps retaining the fuel subsidy as it has inflationary impact when oil and gas prices are completely left to market forces, to bring strength to the economy. Profligacy on Government spending on unproductive areas needs to be completely eliminated / banned.Taxation policies need a total overhaul and those who can afford to pay need to be taxed more than squeezing those who find it hard to make both ends meet.It requires guts on the part of the Government. RBI cannot do anything in the matter. It can perhaps advise bankers to pay less by way of interest on the deposits of bigwigs who earns lakhs and crores through dividends and other means.

Dr.T.V.Gopalakrishnan 

(This comment appeared in Business Standard in response to an article challenges before the Governor)

Recapitalisation of defaulting borrowers by banks

The article has captured very well the traps that Rajan may have to encounter to discharge his functions. The Government's agenda is a hidden risk.
The fudging of banks' balance sheet has been going on for years and the regulators, auditors and all stake holders are aware of it and doing nothing seriously to prevent it or avoid it. These Non Performing Advances (NPAs) caused basically due to borrowers' failure and slow down of the economy increase year after year, but thanks to banks' provisioning and regulators' forbearance in permitting restructuring they are shown at tolerable and acceptable levels. But the cost of these NPAs are ultimately borne by all stakeholders other than bad borrowers and unfortunately by the common tax payers. There is a limit to penalise the innocent tax payers for some borrowers' flamboyancy, extravagance and total unconcern for public money. Unless and until banks introduce a self correcting mechanism through grading of borrowers and levy a penalty based on poor rating in the conduct of loan accounts, this menace of NPAs will be a burden on tax payers, and all other stakeholders of banks and the economy. In this context, the practical suggestion given in the book on Management of Non performing advances which carries a foreword from Dr C. Rangarajan former Chairman 12th Finance Commission and present Chairman, PMEAC is worth an attempt.Dr C Rangarajan has observed in his foreword that the author of the book has made several suggestions to contain the growth of NPAs.One suggestion is for the borrowers and lenders to contribute to a common fund called Precautionary Margin Reserve Fund.He has added that“ It is only an efficient banking system which can fulfill the socio-economic goals set for them.An aspect of improving efficiency is the containment of NPAs” Dr Rajan’s remark that such borrowers cannot expect the banks to recapitalize for their shortcomings is really commendable and it needs to be pursued in letter and spirit.The list for Dr Rajan is very long and hope he will live upto the great expectations notwithstanding the rough places in the level playing fields.

Dr.T.V.Gopalakrishnan

(This comment has been published by The Economist in response to an article Saviour Trap.)