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).

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)

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)

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

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).

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

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).