RBI The Sovereign Scapegoat:
This refers to the article on RBI : The Sovereign Scapegoat (Business Line dt,1/04/10). The very title speaks volumes of the so called autonomy or independence enjoyed by the Reserve bank of India, the monetary authority of the country and the regulator of the financial system. The institution originally set up as a shareholders bank in 1935 was nationalized in 1949 and since then has been functioning as an independent institution but owned fully by the Central Government with adequate overruling powers in terms of The Reserve Bank of India Act 1934.
Political agenda of the ruling party will always override the economic agenda and the institutions like RBI in a democratic set up cannot expect to have the full freedom as some of the central banks of the world enjoy perhaps. With all the limitations , the Reserve Bank has done an excellent job and successfully completed 75 years managing the economy and the financial system well and earned a reputation as one of the well run central banks of the world only indicates how independently the Governors carry out their responsibilities although they are appointed by the Central Government. The working autonomy is achieved and not defined anywhere. This is where RBI and its Governors can be proud of.
Dr T.V.Gopalakrishnan
Thursday, April 8, 2010
Thursday, April 1, 2010
Banking Challenges
Both The Reserve Bank and the banking system deserve kudos for their mighty performance and demonstrating to the world Financial system as to how to survive the varieries of risks banks are exposed to in these days of liberalisation, emergence of exotic products and linkages with various markets. This should not, however, make them complacent and sit on laurels. The challenges ahead are different and they have to be prepared with different skills,knowledge and dynamism to continue to perform better and remain sound and healthy.
The major challenge would be in the area of operational risk and risks arising from international markets involving liquidity, interest and forex risks. Asset -Liability mismatch will be another area of serious concern for Indian banks to deal with. In the absence of adequate attention to develop the human resources to meet the challenges ahead, any sound regulatory system will not prove to be of any help. Human Resources management particularly in Public Secor banks needs a boost and this itself will be a challenge as the cost to train and retain them would be something enormous.The advantages of being in public sector cannot be expected to remain so in a competitive atmosphere and should not be so to provide a level playing field to the private sector.
Dr.T.V.Gopalakrishnan
An edited version of this appeared in Business Line Dt,30/03/10
The major challenge would be in the area of operational risk and risks arising from international markets involving liquidity, interest and forex risks. Asset -Liability mismatch will be another area of serious concern for Indian banks to deal with. In the absence of adequate attention to develop the human resources to meet the challenges ahead, any sound regulatory system will not prove to be of any help. Human Resources management particularly in Public Secor banks needs a boost and this itself will be a challenge as the cost to train and retain them would be something enormous.The advantages of being in public sector cannot be expected to remain so in a competitive atmosphere and should not be so to provide a level playing field to the private sector.
Dr.T.V.Gopalakrishnan
An edited version of this appeared in Business Line Dt,30/03/10
Eternal Vigilance
Eternal Vigilance
Dr.T.V.Gopalakrishnan
Edited Version of this appeared in ET 29/03/10
This refers to your edit 'So far so good' (ET,27 March 2010). Though Indian Banking System as rightly pointed out is largely healthy, it requires continuous monitoring and remedial action to withstand unexpected shocks and dangers. Holding huge amounts of restructured loans which are potential Non performing assets and financing of infrastructure projects with short term deposits consisting of whole sale and bulk institutional deposits would create Asset- Liability mismatch. In the absence of suitable take out finance and with the presence of more and more new products including the derivatives in a vast and fast growing financial market with international linkages, the risks faced by the system are unpredictable. The confidence level presently enjoyed by the system,(70% being in the public sector) cannot guarantee business success and security for ever which require, skill, expertise, knowledge, dependable system and procedure and above all efficient regulatory and supervisory environment. The banking system has to be dynamic, proactive and vigilant to keep it safe and healthy.
Dr.T.V.Gopalakrishnan
Edited Version of this appeared in ET 29/03/10
Thursday, March 18, 2010
Inflation and Poverty
Inflation Index
The inflation has risen to 16 month high at 9.89 percent and the contributory factors are higher prices of fuel, supply problems due to draught conditions and increase in demand for the limited supplies caused on account of disproportionate and unequal level of incomes in the society. The steep rise in Minimium Support Prices may be one of the factors as the food inflation remains extra ordinarily high at 17.79 percent. The immediate cause for sudden increase in prices is because of the fuel price increase effected trough the budget which could have been avoided for the present although,the prices need to reflect the market trend and oil companies deserve relief. The timing was not favourable and inclusion of diesel price increase which had a cascading effect could have been intelligently postponbed.
Fighting inflation is fighting poverty and this requires altogother a different approach. The policy to contain inflation has to factor in among other things,the level of poverty in the economy, the consumtion pattern of majority of population, income levels,cost of production,distribution of products involving transportation,marketing,storage facilities,intervention of middlemen who take a major share of the profit at the cost of producers particulary farm products producers. Comparing global level of price trends,although ,needed in these days of interlinkages of economies, will not mean anything to a common man when he finds difficult to survive and make both ends meet.
It is time to have a relook on inflation index and the components which account for high inflation in an economy which has all the potential to perform well particulary on the inflation front.The economy should go in for two sets of inflation index one exclusively to take care of the poorest of the poor and the other to reflect the general price level for all. Poor peoples'needs and non-poor peoples'wants differ and the inflation index cannot be same for both categories.
Dr.T.V.Gopalakrishnan
The inflation has risen to 16 month high at 9.89 percent and the contributory factors are higher prices of fuel, supply problems due to draught conditions and increase in demand for the limited supplies caused on account of disproportionate and unequal level of incomes in the society. The steep rise in Minimium Support Prices may be one of the factors as the food inflation remains extra ordinarily high at 17.79 percent. The immediate cause for sudden increase in prices is because of the fuel price increase effected trough the budget which could have been avoided for the present although,the prices need to reflect the market trend and oil companies deserve relief. The timing was not favourable and inclusion of diesel price increase which had a cascading effect could have been intelligently postponbed.
Fighting inflation is fighting poverty and this requires altogother a different approach. The policy to contain inflation has to factor in among other things,the level of poverty in the economy, the consumtion pattern of majority of population, income levels,cost of production,distribution of products involving transportation,marketing,storage facilities,intervention of middlemen who take a major share of the profit at the cost of producers particulary farm products producers. Comparing global level of price trends,although ,needed in these days of interlinkages of economies, will not mean anything to a common man when he finds difficult to survive and make both ends meet.
It is time to have a relook on inflation index and the components which account for high inflation in an economy which has all the potential to perform well particulary on the inflation front.The economy should go in for two sets of inflation index one exclusively to take care of the poorest of the poor and the other to reflect the general price level for all. Poor peoples'needs and non-poor peoples'wants differ and the inflation index cannot be same for both categories.
Dr.T.V.Gopalakrishnan
Wednesday, March 3, 2010
Budget 2010-11
The budget for 2010-11 is neither growth oriented nor imaginative. It also lacks direction in which the economy is expected to move. The positives of the budget are the tax benefits passed on to income tax payers,some social security measures and minor concessions here and there in some areas which can at best take care of increases in costs on account of inflation. The negatives in the budget particularly the increase in excise duties on petroleum products, however ,offsets the positives and will have adverse impact on the economy in the form of inflation because of its cascading effect all around.
The expected budget deficit and containment of Government borrowings are only expectations and in the absence of any incentives/motivation to attract long term investments in the areas of industry,agricultural and exports how far they are achievable is a major question without any answer in the budget. The steps to contain the present and future inflation are not figuring in the budget.On the contrary the inflation can further move up with more money in the hands of tax payers, increase in fuel prices and not so impressive support system for growth in agricultural and industrial production provided in the budget.
Dr.T.V.gopalakrishnan
(Edited version of this appeared in Business Line dt27/02/10)
The expected budget deficit and containment of Government borrowings are only expectations and in the absence of any incentives/motivation to attract long term investments in the areas of industry,agricultural and exports how far they are achievable is a major question without any answer in the budget. The steps to contain the present and future inflation are not figuring in the budget.On the contrary the inflation can further move up with more money in the hands of tax payers, increase in fuel prices and not so impressive support system for growth in agricultural and industrial production provided in the budget.
Dr.T.V.gopalakrishnan
(Edited version of this appeared in Business Line dt27/02/10)
Tuesday, February 23, 2010
Wealth from Waste Management
Wealth from Waste Management
It is time to have some innovative research in the area of waste management and initiate follow up action to realize the Economy’s dream of becoming the super economic power of the world.
Men, Material, Money and Time are the factors contributing to production and creation of wealth in any economy. The optimum use of these resources in an economy depend on the educational standards, quality of people, competence of management and conducive environment in the form of political stability, governance standards, physical ,financial and social infrastructure. How far the resources are utilized without allowing wastage beyond a tolerable level will reflect on the awareness of people in general and management at various organizations’ and institutions’ levels in particular about the economic value of each and every resource. Wastage of all resources does occur often knowingly and very often unknowingly in the economy particularly in production and services areas.
Non-performing Resources are like Non performing assets in the Banking system and they only help to tax the nation and the people ultimately. It is time some serious attention is paid to Waste Management and initiate appropriate measures to convert waste into productive resources of the economy and bring in wealth for the nation and welfare for its people.
Management of MEN( Human resources):
This is the richest wealth of our economy and the prospects of India’s achieving the super economic power of the world in a few decades is basically based on taking advantage of the demographic dividend the country is blessed with. It is the responsibility of the nation to introspect and find out whether these human resources are well developed or provided with opportunities for their full development. Potential of our human resources is identified but attention paid to exploit the potential seems to be inadequate.
Waste of human resources or under utilization of the resources at Macro level i.e. at national level and Micro level i.e. at various organizations both public and private is enormous and needs a separate study by itself to arrive at the loss of wealth to the economy and individual institutions. Providing employment and fully benefiting from employment are two totally different aspects and this is an area where waste management needs to concentrate in all undertakings particularly in Government and public sector.
Management of Materials : Management of Materials in the form of fixed assets and current assets used in the production of goods and services in the economy leaves a lot to be desired. Waste of electricity, water, petroleum products and all sorts of assets and inventories that go into production of wealth is a well acknowledged truth, but efforts to quantify the loss to the economy and the exchequer and remedial measures to contain the waste or convert the waste into wealth have been rare and far between. The reasons for such waste are to a great extent avoidable.(For example waste of petrol and diesel due to octroi / checks on interstate movements of goods and toll levies at various places cost a fortune to the nation and are definitely avoidable or can be minimized with some innovative plans using Information Technology).
Similarly the country has vast stretches of waste lands and unused lands which can be put to productive uses and give a boost to our sagging agriculture and agro based industries or leased out to industrialists for manufacturing activities. Both land and unemployed human resources can be employed gainfully. Examples of under utilization / non utilization of these resources are aplenty and call for specialized attention.
Management of Money : This is a crucial area requiring professional approach to ensure that every rupee that is invested fetches some return. Whether it is allocation of resources under National Rural Employment Programme or investments made for development of infrastructure or provision of utility services or whatever may be the objectives of investments they should be subjected to review to ensure that money does not go down the drain. The concept of asset liability management and risk management is not followed( except perhaps in banks) where ever investments are made and returns seldom assessed/or assessed perfunctorily. Wastage of money through different means such as corruption, delay in the execution of projects, frauds and embezzlements, keeping the funds idle, investing surplus cash without adequately assessing safety, liquidity and return go often unnoticed and the nation bears the loss directly or indirectly ultimately.
Management of time: The concept of time management does not seem to have been understood in the area of investments particularly under government and public sector. Delay in the execution of projects and cost overrun are regular features in the economy and the loss on this account alone is enormous to wipe out our deficit partially if not fully. The loss on account of delays in getting justice alone will amount to huge wastage of resources in our economy and legal reforms are long overdue. Time consciousness is generally missing all over the country and conscious efforts are needed to create the awareness that time is wealth and no one at least for those engaged in the economic activities of the nation has the right to take extra time for granted.
The economy needs monetary resources to live up to the expectations of the world to emerge as super economic power. The economy has all the resources at its command in terms of men material money and time but it requires a very conscious approach to put into these resources for optimum use without allowing any waste anywhere. The simple suggestion is to have a Research wing in all universities to study the loss of wealth on account of non utilization of the resources / under utilization of the resources/ mis-utilization of the resources. A budgetary support specifically to have a research in the area of waste management can never go waste. The results of the research should enable to initiate action towards creation of wealth through effective waste control management.
India has among other things enterprising entrepreneurs, good quality natural resources, worldly acclaimed ITreasonably sound and stable banking system and several unknown strengths to support any venture and as such it is for the Government to identify the areas of wastage and create wealth from waste. A momentum is called for in this direction which will work wonders for the economy.
Dr.T.V.Gopalakrishnan.
It is time to have some innovative research in the area of waste management and initiate follow up action to realize the Economy’s dream of becoming the super economic power of the world.
Men, Material, Money and Time are the factors contributing to production and creation of wealth in any economy. The optimum use of these resources in an economy depend on the educational standards, quality of people, competence of management and conducive environment in the form of political stability, governance standards, physical ,financial and social infrastructure. How far the resources are utilized without allowing wastage beyond a tolerable level will reflect on the awareness of people in general and management at various organizations’ and institutions’ levels in particular about the economic value of each and every resource. Wastage of all resources does occur often knowingly and very often unknowingly in the economy particularly in production and services areas.
Non-performing Resources are like Non performing assets in the Banking system and they only help to tax the nation and the people ultimately. It is time some serious attention is paid to Waste Management and initiate appropriate measures to convert waste into productive resources of the economy and bring in wealth for the nation and welfare for its people.
Management of MEN( Human resources):
This is the richest wealth of our economy and the prospects of India’s achieving the super economic power of the world in a few decades is basically based on taking advantage of the demographic dividend the country is blessed with. It is the responsibility of the nation to introspect and find out whether these human resources are well developed or provided with opportunities for their full development. Potential of our human resources is identified but attention paid to exploit the potential seems to be inadequate.
Waste of human resources or under utilization of the resources at Macro level i.e. at national level and Micro level i.e. at various organizations both public and private is enormous and needs a separate study by itself to arrive at the loss of wealth to the economy and individual institutions. Providing employment and fully benefiting from employment are two totally different aspects and this is an area where waste management needs to concentrate in all undertakings particularly in Government and public sector.
Management of Materials : Management of Materials in the form of fixed assets and current assets used in the production of goods and services in the economy leaves a lot to be desired. Waste of electricity, water, petroleum products and all sorts of assets and inventories that go into production of wealth is a well acknowledged truth, but efforts to quantify the loss to the economy and the exchequer and remedial measures to contain the waste or convert the waste into wealth have been rare and far between. The reasons for such waste are to a great extent avoidable.(For example waste of petrol and diesel due to octroi / checks on interstate movements of goods and toll levies at various places cost a fortune to the nation and are definitely avoidable or can be minimized with some innovative plans using Information Technology).
Similarly the country has vast stretches of waste lands and unused lands which can be put to productive uses and give a boost to our sagging agriculture and agro based industries or leased out to industrialists for manufacturing activities. Both land and unemployed human resources can be employed gainfully. Examples of under utilization / non utilization of these resources are aplenty and call for specialized attention.
Management of Money : This is a crucial area requiring professional approach to ensure that every rupee that is invested fetches some return. Whether it is allocation of resources under National Rural Employment Programme or investments made for development of infrastructure or provision of utility services or whatever may be the objectives of investments they should be subjected to review to ensure that money does not go down the drain. The concept of asset liability management and risk management is not followed( except perhaps in banks) where ever investments are made and returns seldom assessed/or assessed perfunctorily. Wastage of money through different means such as corruption, delay in the execution of projects, frauds and embezzlements, keeping the funds idle, investing surplus cash without adequately assessing safety, liquidity and return go often unnoticed and the nation bears the loss directly or indirectly ultimately.
Management of time: The concept of time management does not seem to have been understood in the area of investments particularly under government and public sector. Delay in the execution of projects and cost overrun are regular features in the economy and the loss on this account alone is enormous to wipe out our deficit partially if not fully. The loss on account of delays in getting justice alone will amount to huge wastage of resources in our economy and legal reforms are long overdue. Time consciousness is generally missing all over the country and conscious efforts are needed to create the awareness that time is wealth and no one at least for those engaged in the economic activities of the nation has the right to take extra time for granted.
The economy needs monetary resources to live up to the expectations of the world to emerge as super economic power. The economy has all the resources at its command in terms of men material money and time but it requires a very conscious approach to put into these resources for optimum use without allowing any waste anywhere. The simple suggestion is to have a Research wing in all universities to study the loss of wealth on account of non utilization of the resources / under utilization of the resources/ mis-utilization of the resources. A budgetary support specifically to have a research in the area of waste management can never go waste. The results of the research should enable to initiate action towards creation of wealth through effective waste control management.
India has among other things enterprising entrepreneurs, good quality natural resources, worldly acclaimed ITreasonably sound and stable banking system and several unknown strengths to support any venture and as such it is for the Government to identify the areas of wastage and create wealth from waste. A momentum is called for in this direction which will work wonders for the economy.
Dr.T.V.Gopalakrishnan.
Friday, January 29, 2010
Subsidy and GDP
Subsidy and GDP
This refers to your edit Investment,not subsidy(ET Jan,26).It is shocking to observe that the subsidy under various heads had touched a staggering figure of Rs,2,19,582 crore ie from 1.4% of GDP in 1999-2000 to 4.1% of GDP in 2008-09.
The subsidy to help the poorest of poor is understandable and needs to be provided and met provided the benefit reaches the beneficiaries directly and without any leakage . Other than food subsidy,all other subsidies presently extended need a re look and deserve to be taken out of budgetary provisions and investments to that extend need to be augmented in the same areas to improve the production,reduce the cost and benefit the consumers and producers alike.
As rightly indicated reforms in the area of investment and subsidy are the only way out to improve the situation and reduce the budgetary expenditure towards subsidies. The benefits that accrue to the economy in general and the weakest sections of the society in particular should be the considerations in arriving at the subsidy and cost to the exchequer. Perhaps food subsidy and kerosene subsidy which are intended for the people below BPL can continue for some more time till the inclusive growth become a reality.Even in these areas transparency in accounting is essential and transfer of benefits directly will bring in tangible benefits.The data relating to people below BPL need to be realistically arrived at so that there is no scope for any leakage.
Dr.T.V.Gopalakrishnan
This refers to your edit Investment,not subsidy(ET Jan,26).It is shocking to observe that the subsidy under various heads had touched a staggering figure of Rs,2,19,582 crore ie from 1.4% of GDP in 1999-2000 to 4.1% of GDP in 2008-09.
The subsidy to help the poorest of poor is understandable and needs to be provided and met provided the benefit reaches the beneficiaries directly and without any leakage . Other than food subsidy,all other subsidies presently extended need a re look and deserve to be taken out of budgetary provisions and investments to that extend need to be augmented in the same areas to improve the production,reduce the cost and benefit the consumers and producers alike.
As rightly indicated reforms in the area of investment and subsidy are the only way out to improve the situation and reduce the budgetary expenditure towards subsidies. The benefits that accrue to the economy in general and the weakest sections of the society in particular should be the considerations in arriving at the subsidy and cost to the exchequer. Perhaps food subsidy and kerosene subsidy which are intended for the people below BPL can continue for some more time till the inclusive growth become a reality.Even in these areas transparency in accounting is essential and transfer of benefits directly will bring in tangible benefits.The data relating to people below BPL need to be realistically arrived at so that there is no scope for any leakage.
Dr.T.V.Gopalakrishnan
Subscribe to:
Posts (Atom)
