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)

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).

FIIS Investments

Dr.T.V.Gopalakrishnan , Mumbai , says: The budget is not attractive for investors in general and FIIS in particular. It has not helped to boost the business confidence as there are lot of irritants and scope for corruption.Nothing substantial in the budget to revive the economy through administartive,legal or financial reforms. Doing business is more complicated with the provision to reopen the cases relating to IT with retrospective effect.Overall the budget is not very imaginative to improve the economy by any measures.
This is in response to an opinion poll relating to FII's investments in ET dated 26/03/12.

Fiscal deficit at 5.1% is unrealistic

Dr.T.V.Gopalakrishnan , Mumbai , says: The budget 2012-13 is for the survival of the Govt and not for the revival of the economy which is sagging for the past few years for want of proper direction and crucial policy decisions. The fiscal target fixed is not only unrealistic and cannot also be sustained if one were to go by the past records.The expenditures are not under control and the subsidies for food,fertilisers and fuel are absolutely unmanageable.Economic growth alone is the solution for many of the problems including fiscal deficit and unfortunately the budget proposals and domestic and external environment do not favor an excellent growth prospects. The economy has to put up with all these problems till political stability is established first which is a stupendous task as of now.
19 Mar 2012, 1919 hrs IST





(This is in response to the opinion poll in Et dated19/03/12).

Railway Budget and Politics

Dr.T.V.Gopalakrishnan , Mumbai , says: TMC's reaction to the Railway budget smacks of bad politics over good economics.This is not pro-poor in the long run.The economy has to grow fast to remove poverty and Railways play a key role in facilitating this growth. This is a vital infrastucture and it needs to be developed to ensure equitable distribution of nation's wealth and inclusive growth. At this rate,the growth of the economy and upliftment of the masses will remain a distant dream and this sort of shortsightedness on the part of Powerful,influential and popular politicians has an adverse and damaging imapct on the economy.
15 Mar 2012, 1818 hrs IST
This in response to the opinion poll in ET.

(This appeared in ET dated 15/03/12)
Dr.T.V.Gopalakrishnan

The fall in the capital Market on 27/2/12

Dr.T.V.Gopalakrishnan , Mumbai , says: Market will continue to be bullish and the sensex will touch 20000 if not by March 16,but certainly after the budget.Economy is strong but unfortunately missing the direction and support from the Govt for reasons purely political.The ensuing budget is expected to be good and can boost the sagging morale and confidence of investors and mood of the people.Time for the Govt to act on the economic front taking advantage of the potential and resources of the economy.People are awaiting for that and the budget 2012-13 can do the trick.
28 Feb 2012, 1400 hrs IST

(This appeared in ET dated 28/2/12 under opinion poll)

Solar Energy in India

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).

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).

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).

Time for Exchanges for SMEs

The idea of SME exchanges needs serious consideration and at least four such exchanges should be set up in East, West,South and North regions. This will facilitate upcoming and already existing entrepreneurs to raise equity funds to set up SMEs and venture capital and Private Equity Funds can find some good avenues for investment. Such exchanges would facilitate distribution and better utilisation of wealth in the economy.It would also ensure improved participation of the masses in the capital formation and provide adequate resources for capital starved but well promising ventures.Banks continue to be shy in financing SMEs is a fact.The present exploitation of SMEs by large scale units needs to be given a go bye.This is possible only if well regulated and well run exchanges are set up in the economy.The country has all the potential in terms of resources,human power, technology including capital but it lacks the initiative and approach particularly from the Govt to take up new ventures in the form of setting up of exchanges for SMEs. The reasons can be adduced to the grip and control the industrialists have over the Govt.They want to take away all the facilities and benefits of policies for themselves hindering the growth of well deserving SMEs in the economy. Earlier the exchanges are set up,the better. The emergence of exchanges would help improve the functioning of the NSEs and other regional exchanges. This would also bring in the much needed discipline among Companies.

Dr.T.V.Gopalakrishnan

2G scam loss and the economy

(This comment is in response to the editorial'Telecom Turbulance' appeared in The Hindu-Business Line)

The fact that the Finance Ministry has failed to exercise its due vigilance on the proposal of the Telecom Ministry to jettison the auction procedure and adopt first come first served has led to the loss of the exchequer in crores of rupees needs an explanation from the Govt.This sort of leakage of revenue due to malpractices and lack of concern for managing public finance efficiently leads to avoidable deficit and consequent damages to the economy which has been facing problems one after another for want of resources.The failure of these Ministries should be viewed as the failure of the Govt as the damage caused to the economy is irreparable.Inflation remains unchallenged since 2009 and the basic reason is failure of fiscal policy and definitely not due to ineffectiveness of monetary policy.Easy money in the hands of a few due to failure of policies has adverse moral,ethical and financial impact in the economy. The confidence is shaken among public and the economy suffers.

T.V.Gopalakrishnan

( This appeared in The Hindu Business Line Dt,1/10/11)

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).

Abolition of Security Transaction Tax -A blunder

The move of the capital market division of the Finance Ministry to abolish the STT is not in the interests of the economy. This tax introduced through 2004 budget has been fetching easy revenue, non inflationary in caharacter and sparing the aam aadmi. It is basically affecting those who with their surplus income enter the capital market with a basic motive to save and speculate.Investors and brokers cannot ever favour such tax as their greed and clamour to curry favour from the Govt for all concessions and reliefs at any cost have always been considered, heard and adhered to. In case the Govt yields to this demand and abolish the tax the loss is substantial and it will be difficult to reintroduce at a later date. This tax needs to be reformed to emerge as an important administartive tool to regulate the capital market from the angle of controlling excessive speculation, volatility, raising recurring revenue without any inflationary implications, removing all other taxes like stamp duty, capital gains etc. The approach to abolish STT is only shortsightness and the Govt will repent later on. This levy needs to be made more dynamic and should vary from transactions to transactions.This tax should be different for retailers and whole salers based on certain cut-off limits,for individuals and institutions,for FIIs and domestic investors, equty, bonds and commodities, forex,etc. This will eventually lead to have a track of events in Financial market.

Dr.T.V.Gopalakrishnan

(This appeared in Et dated 27/09/11).

Indians and Gold

This is in response to the article "Do we know something about gold the world doesn’t?" appeared in ET. The link is here



The author has not come out with any suggestion or new insights in the presentation. Indian economy cannot afford to import gold at the presnt inflated value of gold and unfavourable exchange rate. It is time the sentiments attached to gold gradually disappear and the holdings of gold in India get converted into productive assets. India is far behind in infrastructure and this needs to be developed to make it a vibrant and fast growing economy. The money lying in the form of gold needs to be converted into cash and put into use for infrastructure development.The Government should discourage investment in gold and import of gold to save both money and valuable foreign exchange. The craze seen of late,to speculate on gold price volatility needs to be nipped in the bud itself. The rush after gold is widening the inequallity between haves and havenots and it is not good in the long run for the society.The approach by the Govt should be1) To Set up a Gold Bank and see that all gold holdings which include institution's and family holdings are taken as deposits on payment of some interest 2)Convert the Gold into cash and put into productive use in the economy3)Discourage speculation in Gold 4) Ensure that gold imports are well regulated 5) Gold encourages black money hoardings in the economy and it is the responsibility of the Govt to see that Gold hoardings are tracked.6)Purchase and sale of Gold above a cut off limit to be tracked by insisting payments through cards, cheques and internet and indicating PAN numbers.7) Educate the public not to run after gold and bring discipline through dowry prevention regulations.
8) The income tax wealth tax and sales tax for gold needs to be reviewed and reformed.
It is time for investors to realise that gold does not enjoy an intrinsic value and internal rate of return. The Govt should carry out a survey to assess roughly the Gold holdings and take appropriate steps to put them into optimum use to develop the economy.

Dr.T.V.Gopalakrishnan

Time to set up a National Gold Bank

The article highlights the benefits that Indian Economy can derive from the recessionary trends witnessed in US and Europe. The fact that prices of all commodities except Gold have been on the decline and India is favourably placed to import goods, particularly oil, and improve its economy has been well brought out by the author. It is the best opportunity to attract funds for developing our economy provided the Government finds time and concentrates on the management of the economy. Gold stocks are available in plenty in India and the economy should know how to encash the gold and divert the resources for infrastructure development. It is time to think of a National Gold Bank and mobilise gold holdings of families and institutions and convert the assets into cash for economic development. Opportunities now available should not be lost sight of. By the time, the international scenario changes, India can build its economy strong and become the super-economic power early.

from: Dr.T.V.Gopalakrishnan
Posted on: Aug 25, 2011 at 02:31 IST
(This appeared in The Hindu Business Line)

Sensible Decision of the Government of India.

The editorial is well written and the decision of the Government to extend the term of Dr Subbarao for a couple of years more is perhaps an indication that it cannot afford to ignore the economy any more. The Reserve Bank despite its limitations has been fighting a lone battle to contain the inflationary pressures and maintain some semblance of stability in economic growth for the last couple of years although, both internal and external conditions have been and continue to be a major constraint. Dr Subbarao has displayed his determination to challenge the odds which he has been facing since his inception as Governor. This extension is well deserved. Hope, the Government will continue to concentrate more on the management of the economy and come out with such decisions to enable the instituitions to perform well.The present international crisis is an opportunity to attract external funds and concentrate on infrastructure development badly needed for Indian economy to grow.

from: T.V.Gopalakrishnan
Posted on: Aug 11, 2011 at 06:10 IST (The Hindu Business Line)