Uncalled for scare- aftermath of Rating by Standard and Poor of the US.

Standard & poor's decision to bring down the US of its triple A rating has created a scare in all international markets about the health of the US economy and its repercussions world over. The rating should not be taken to view that everything has gone wrong in US and there is no scope for revival of the economy in the immediate future. No doubt, the 2008 financial turmoil had forced the authorities to go in for some economic policies which failed to bring in the desired recovery, but it should not be construed that all decisions taken were wrong and the economy has gone from bad to worse. As the saying goes, problems always come in battalion, the crisis in Europe, Japan and other parts of the developed and developing countries as well has added fuel to fire and made a mess of all well intended policies pursued meticulously in US. The rating given by S&P at best can be taken to mean that the policies pursued need a relook and fresh efforts are needed to revive the economy . The two major issues faced by the economy are debt ceiling and fiscal deficit.
Both debt and fiscal deficit which are complementary to each other, however, failed to help the GDP growth and aggravated the economic problem. Standard and Poor, without presumably going into the reasons for the lower rate of growth of GDP taking into consideration other world contributory factors for poor performance and inherent strength of the US economy which has successfully weathered earlier crises, has come out with a rating at an inappropriate time when serious thinking and measures are in progress to take the economy out of the present predicament.
The damage such a rating has done to the global economy in general and US economy in particular is something enormous and the rating agency has to be made accountable for such an unwarranted untimely rating and making it widely transparent. Advance warning by rating agencies are welcome but bringing damage to an economy and creating widespread losses and attendant consequences in the form of higher interest rates, loss of credit market and erosion of values in various securities is something undesirable and perhaps avoidable in the overall interest of the economies. Rating an instrument and rating a country are two totally different matters and there should be some standardised norms in assessing and making transparent the rating of a country. Since negative assessment compared to positive assessment has more of an adverse impact, it is advisable for rating agencies to have a different approach to caution the rated economies in the case of a negative assessment even if the assessment is very objective and accurate.

Dr.T.V.Gopalakrishnan

Enhance the Confidence level in US

It is essential that in the interest of the whole world economy the US economy needs to grow and for that the only immediate solution is all round development of public transportation system in entire US through encouragement of construction of needed infrastructure involving more of private participation.

It is time for US to have a relook on its energy spend particularly on oil and power and divert the resources saved therein to develop state wide transportation system in particular without in any way losing its glamour for private transport system presently in vogue.

The US economy has all the potential to attract international tourists and ways and means should be found to exploit its potential to the optimum level to make international tourism an opportunity and reality to support its further growth.
Employment opportunities will get an immediate boost and consumption and demand would increase necessitating fresh investment and production. Massive tourism to US from all over the world particularly from fast emerging economies like BRIC countries will help both the emerging economies and the US to mutually exchange trade, technology and other expertise for everybody's benefit. The avenues for revenues of the Government will automatically increase once the tourism picks up considerably.

Special incentives to industries who create additional employment opportunities can perhaps be another solution to tide over the present crisis. The need of the hour is to give a boost to the confidence in US economy and this country has fortunately everything to give that much needed boost.

Dr.T.V.Gopalakrishnan

US Debt Pangs - Response to the editorial on Business Line

US problem of debt has only been postponed and the solution arrived at will have its own adverse impact for the future unless the US Government comes out with some innovative new economic policies to give a boost to its economic growth and enhance the confidence in international markets. Deficit and debt burden caused due to the banking crisis continue to haunt the US economy and the crisis management has only aggrevated the problem indicating the urgency to have a relook on the policies so far pursued and bring in a totally new approach keeping in view of the changes witnessed in international economic scenario particularly in emerging economies like China and India.
It is again an opportunity for India to take advantage of the position and go in for massive economic and financial reforms but unfortunately the present Government has been in a paralysed condition as rightly pointed out in your editorial and is unable to concentrate on economic issues faced by the nation.

from: T.V.Gopalakrishnan
Appeared on Hindu Business Line e-paper on: Aug 3, 2011 at 04:47 IST

The black money and corruption

Black money generation takes place through umpteen ways. Corruption is prevalent literally from cradle to grave. Except politicians and bureaucrats, every body knows how to prevent corruption and minimise geration of black money. The simplest method is to track high value transactions through insistence of PAN card and payment by means of plastic cards and Cheques above Rs 5000. If this is introduced on a trial basis the result can be visible within a period of six months. Through out the world Indian IT strength is well recognised but unfortunately In India,It has not been put into optimum use to keep track of all transactions,tie up with the transactions with their origin,destination and link them ultimately to tax revenues, GDP growth etc intelligently. If there is a will there is a way. Readiness to trace black money and prevent corruption is all that matters. Will the authorities viz Politicians and bureaucrats bell the cat?

Dr.T.V.Gopalakrishnan

(This appeared in The Hindu Business Line E paper dated 2nd August 2011).

RBI's solution for inflation

No doubt the solution offered is bitter but unavoidable to contain the high level of inflation,but the question as to whether this hawkish measure of RBI will contain inflation still remains unanswered.Growth will come down with such measures is a reality but containing inflation requires more measures other than monetary is a fact which is being ignored for long.This sort of hide and seek game keeping the problem of inflation at high level only shows lack of real concern for the masses who suffer from poverty and unemployment /underemployment.

This appeared in ET's blog dated 2nd August 2011.


Dr.T.V.Gopalakrishnan

Lies and Damn Lies

Your editorial on ‘ a poverty of statistics’ ( June 30,2011) is very timely and most appropriate. Policy decisions based on false data are perhaps one of the reasons for all ills of the economy viz; high inflation, black money, inequality of income, unemployment, poor GDP growth, poverty levels etc. The strength of the country’s Information Technology has not been fully exploited to improve the data base of the economy and there is a growing feeling that people below poverty line do not reflect the correct position. Even the number of people paying taxes and filing return do not compare well with the welfare of people and luxury exhibited by many particularly after the liberalization of the economy in early 1990s.
The data on the economic activities and income levels of people particularly under self employed categories do not seem to be correctly reflecting in employment and poverty levels. The economic liberalization has improved the earnings of many particularly in urban semi-urban and metropolitan centres and both skilled and unskilled labourers are not available in many parts of the economy. Distribution of income in terms of economic activities though has improved, but where it reflects in terms of employment and poverty level is a matter of serious concern. It is time some serious attention is paid to capture the data on earnings, employment and poverty level of people so that policy decisions on subsidies, taxation, inflation and welfare of people can be better targeted and achieved.
T.V.Gopalakrishnan
The edited version of this came in 1st July 2011

Prime Minister and the Press

The editorial is well balanced and conveys the message that the Prime Minister's office, and not necessarily the Prime Minister himself, should interact with the media regularly.

These are the days of allegations and charges on anything and everything, and the sensationalisation of even small things has become the order of the day.

The Prime Minister's office has to come out with its official stand and views at frequent intervals to clarify the issues of importance raised by reporters.

Even a news bulletin from the PMO on some of the major issues highlighted by the media and the Opposition parties would clear the doubts of the people, who will have the satisfaction of having heard of the Government's stand through Prime Minister's office.

T.V. Gopalakrishnan

This appeared in the Hindu Business Line 2nd July 2011