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).
Showing posts with label Governor RBI. Show all posts
Showing posts with label Governor RBI. Show all posts
Monday, April 16, 2012
Tuesday, March 13, 2012
Banks and Liquidity Crisis. It is their own mess
Apropos the edit “RBI waits for FM” (March 12), the central bank’ move to cut the cash reserve ratio by 0.75 percentage point a week ahead of its policy review was quite unexpected. This indicates that the Reserve Bank of India (RBI) recognises the liquidity tightness in the market because of large borrowings by banks. The present liquidity crunch is partly owing to banks’ inefficient management of assets and liabilities. The slowdown has affected banks’ credit portfolio since there is no credit expansion or repayment of loans. With high non-performing assets (NPAs), it is only natural to be more impacted by the liquidity crunch because of lack of recycling of funds. More NPAs mean less profit since there is no repayment of interest. Given the high inflation rate, banks raised interest rates on short-term deposits and deployed resources in long-term government securities and long-term advances. There is a mismatch between banks’ short-term liabilities and short-term assets. Adjustment of interest rates will enhance demand for credit and banks will see more liquidity tightness. The escape route is to drastically bring down NPAs but that, again, is dependent on several other factors. Things can improve only after the government announces the Budget.
T V Gopalakrishnan Mumbai
(This appeared in Business-Standard dt14/03/12)
T V Gopalakrishnan Mumbai
(This appeared in Business-Standard dt14/03/12)
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
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