Some random thoughts on inflation.

 

The theory on inflation needs to be relooked. Some random thoughts on Inflation

“Many of the economic challenges we face today stem from the neglect of supply side policies over the past decade or more” Augustine Carstens  In Times of India.

At 14.55%, March Inflation hits four Months High  In  Business Line

Price Rise, geopolitical woes offset gains after third wave ended.---- RBI

 Is it not time for the policy makers to think of some practical measures through improved administrative means to contain inflation? While inflation affects generally all, the fact remains that poorest of The poor gets affected the worst, the lower middle class suffer very badly and the middle class also gets hit to a great extent. The only class perhaps untouched by inflation is the Rich and the inflationary conditions enable them to become richer and enhance their wealth eventually. Money begets money.

 Inflation also has its impact on the family bonds as the masses having hand to mouth existence are also subjected to emotional, physical, financial, psychological and social pressures which the practitioners of monetary theory containing inflation seem to miss out very badly. Mr Kaushik Bsau is right when he said" Inflation is an emotive matter and it gives rise, understandably,to popular resentment."  The theory ‘Too much of money chasing too few goods does not appear to be fully relevant these days where war or geo political tensions induced inflation, imported inflation thanks to dynamics of exchange rates, interest rates, flow of international trade, funds seeking better avenues of investment also cause inflation when majority of the population remain poor and do not make any money. Similarly domestic inflation due to unexpected spread of pandemic disturbing all round growth of goods and services, faulty distribution of money caused by inequitable tax policies resulting in a few people accumulating wealth, lack of accountability and administration in the supply chain bottlenecks all cause inflation of a different kind where too shortage of money keep people away from demanding even the essential goods to survive. Demand driven inflation is understandable provided majority of the population enjoy reasonably good income, employment is high, production, and storage, transportation, and marketing and distribution of essential goods among the people are carried on smoothly by provision of cheap credit and other logistics. The Concept of Maximum Retail Price without relevance to the cost and the margin of profit, the applicability of GST to mass consumption goods without adequate justification  to the affordability of the people  linked to their  income levels, non inclusion of fuel under GST, and all sorts of malpractices at ground level starting from greedy pricing without any check, hoarding, black marketing and operations of money lenders abetting  all rules and regulations, corrupt practices, etc add to the supply chain bottlenecks resulting in high costs of the products. Man made inflation is more than money made inflation. Unfortunately and ironically, the irresponsible behaviour of media and not so enlightened public with all sorts of superstitious beliefs to live a life fulfilling religious sentiments in a competitive spirit get fully exploited by the market men by jacking up prices, a feature perhaps unique to our economy.  Being an abnormal situation this sort of inflation needs an abnormal solution.     

The honest and the people who care for ethics and values silently suffer the worst from inflation and its related consequences. The scenario of suffering due to high and uncontrolled inflation is more visible and pathetic in poorer countries as the affordability of the Rich and the Poor to withstand the cruel face of inflation varies drastically helping the Rich remain unruffled fortunately for them and allowing the poor to succumb to poverty driven pressures without being even noticed unfortunately. Poorest of the poor whose ambitions and aspirations are very limited cannot be expected to appreciate the difference between imported and domestic inflation. Even a one rupee increase in his expenditure without a matching increase in his income affects him financially, emotionally and psychologically is a fact which unfortunately does not seem to be appreciated or understood by the powers that be managing money and people. All are born equal but many get social and economic status based on manmade rules and regulations and majority live on hopes and expectations of Ache DIN which is elusive.          

 A very large segment of the population has no money to think of two square meals a day leave alone chasing goods even by thoughts. Shortage of money with many and surplus of money with a few cause imbalances in the society in such a way that frustration, desperation and depression multiply among the people leading to loss of productivity and the linked vicious circle.  People do not have money and the gap between haves and have nots has been widening without any body’s concern though freebies rescue some at a very high cost and values to the society. Corruption plays havoc and those who make money by all possible means do not suffer from inflation and this segment of population is on the increase adding to demand induced inflation and miseries and worries to many as to how to survive,  without any hope. Welfare living is almost forgotten.

The need of the hour is to reduce taxes for the poor for all their essential consumption goods, enhance administrative skills to contain all sorts of malpractices seen at various stages of production, storage, transportation, marketing including disposal of wastes,  reduce corruption, enhance accountability, reduce black money and enhance tax collections through attractive and incentivised tax compliance and pursue soft policies encouraging very smooth flow of  supply of all essential goods and services Public transportation system like Railways can definitely make the movement of essential goods fast, safe and cheap.

 Time has come to seriously think of something more than traditional, rhetoric and initiate concrete measures in the equitable distribution of income rather than equitable levy of taxes from those who earn and those who do not earn. The affordability of a single person earning even around 2.50 lakhs and his struggle to survive with two or more family members including school going children caught in the ugly phase of inflation even for a few days and persons earning in lakhs and crores with multiple avenues to multiply incomes with or without taxes needs to be clearly recognised, realised, and factored into while making policies and implementing measures to contain inflation. Those who earn even Rs 2.50 lakhs per annum, the standard of life for them has no standard in these days of high inflation is the reality and hence there is a paramount need to have a comprehensive taxation policy benefiting the people, the Government and the economy by factoring to bring in under tax net all segments of population and sectors. While GST seems to be a wonderful option but excluding items like fuel from GST need to be reviewed and changes brought in early to rationalise tax rates and simplify tax collections for enhanced compliance.  There seems to be no relationships between the outflow of money towards taxes from a poor man’s income and the outflow of money from a rich man’s income towards taxes. The money left with the poor for procuring very essential consumption goods needs to be considered while rationalising the taxes under GST, Direct taxes and other levies.   

 At ground level, majority of the masses do not differentiate between Fiscal and Monetary policy or imported inflation and domestic inflation. Their only aspiration is to survive I.E; eat to live, coexist with others and enjoy a peaceful, happy contented and safe life. By force or by design they lead a simple life and add values and ethics in the society.  Simple living and High thinking preached by high and mighty is perforce practised by majority without thinking and they are by nature, following simple living. A blessing in disguise.  Inflation should not spoil very simple aspirations of the majority of the people and they should not become poorer and poorer because of adverse effects of inflation.

Money is what money does. However, it cannot and should not be the cause of suffering for many. Inflation caused by money and its mishandling by a few ignoring the welfare of many needs to be tackled through very strong Governance System, sustainable, highly need based and result oriented fiscal and monetary measures in tune with the aspirations of the majority of the people. Interest in life has a direct link with real rate of interest is a reality and the need to protect real interest rate from high inflation rate is paramount. Health of the economy and health and wealth of the people cannot be exposed to the dangers of any form of inflation for want of effective and meaningful governance system.

Inequality widens faster if not checked in time. The fiscal and monetary policies if not aligned and aimed at growth and price stability simultaneously, inflation gets incentivised as a little poison to spoil the food. All said, the Country is fortunate to have all the potential with best of human resources to skilfully  manage other resources abundantly available in the form of natural resources, technology, brain power, support systems like good culture, values, ethics and all ethos needed for making the economy a super power. The Readiness to move forward without any negative thoughts and actions is all that matters.

 To end this write up, I would like to quote our famous Cartoonist late Mr R K Laxman on the issue of price rise that “True, our reforms have caused inflation, unemployment, increased debt, and sent prices soaring. But you will be happy to know that we have taken all these into account. We had to increase the prices on account of the fact that the cost went up because we put up the prices which was due to our hiking the prices”. (The best of R K Laxman pages 50,51)

 As the taste of pudding is in eating, the result of various measures to contain inflation is to be judged from the happiness of the people in procuring very essential consumption items for survival within their affordability.      

Dr T V G Krishnan  

( This article appeared in Money Life on 28/04/2022).                

Customer Service and poor Customers.Better to Be philosophical

Less said the better about the Governance and Justice being meted out to the ultimate Customers from Service organisations particularly banks and Financial Institutions . Technology has become a cover to evade very customers with whose support the very entity survives and being in business. KYC has been done based on documents and KEEP YOUR CUSTOMERS AWAY has been practised and KILL YOUR CUSTOMERS eventually has been going on unquestioned from any corner. Technology being the most efficient and supportive way of easing the work has unfortunately become very handy to keep customers silenced and make them suffer desperately. Nothing can be done is the fait accompli. What a miserable and pitiable Change in the human attitude behind the wonderful technology is what the people / Customers wonder and suffer helplessly . God Save the people and the totally indifferent service providers.

Service depends on Contacts , Influence and good individual employees having some good brought up background, conscience, empathy and human consideration. These numbers dwindle day by day. Unfortunately these qualities are becoming liabilities and head aches. Better for Customers  to put up with what  are destined to get. Be philosophical and accept what comes in our stride.  Make Life Less Miserable by avoiding Service Providers to the extent possible. Create ones own peaceful  Destiny by being creative and innovative and  by all means  minimising dependence on service providers as far as possible. 

The old saying Customer is the King is literally forgotten as the present generation of service providers has not even heard the  word king leave alone understand the status of a King. One can perhaps innovate a new saying like Kick the Customer if he expects some service. Better to be wise and enjoy peace by avoiding service providers. Of course most of the service providers have disconnected the phone contacts and all written complaints are given automatic  standard replies  . But not to be concerned anymore is the net result.

In the absence of effective Governance and no hope of any improvement in customer service, the easiest  practical approach would be to develop contacts  with powerful people and also be prepared to spend money towards some specialist service available in the market . Frustration at least can be minimised. Values and principles have their limitations is what one can  learn. The positive side of negative customer service is that both public and private sector have narrowed their differences in the matter of customer service thanks to presence of technology everywhere. No doubt  technology is a blessing but with disguise.      

       

 T V G Krishnan

( from personal experience as a Customer and dependent on various service organisations. A senior citizen in late70s.  ) 

( A part of this comment appeared in Business Standard dated 15th SEPT 2021 against the article Good Governance despite differences). 

 

IT PORTAL, INCOME TAX COLLECTION AND TAX PAYERS.

 The Glitches in the IT PORTAL are only  due to the complications and problems in the taxation policy basically suspecting all tax payers for evasion of taxes. No doubt tax evasion is huge but harassing the tax payers as such will not fetch any result . The tax augmentation can only be  through to target the tax at source and be after the tax collectors.  The dividend tax , the capital gains tax , the exemptions , and two methods of taxes with exemption and without exemptions all create complications and blaming the INFOSYS for complicated tax policies is of no use. The need to augment revenue to the Government is genuine but the approach should be simple, supportive of the measures and as easy as possible to collect. It is time to have an Introspection and debate and discussions on the subject involving tax veterans ,Chartered acountants, bureaucrats having noble intentions and thoughts,  IT wizards,and representatives of tax payers . AS far as possible, tax at source is the best option and filing of returns for non salary earners above a cut off point can be a workable mechanism. Machines alone cannot do the magic to satisfy the Government's needs.

Tax collections can improve only through enhanced GDP,  EFFICIENT AND CORRUPTION FREE ADMINISTRATION, SIMPLIFIED TAXES,  SYSTEMS AND PROCEDURES,   ENLIGHTENED AND VERY RESPONSIBLE, TAX COMPLIANT CITIZENS AND HIGHLY COMMITTED BUREAUCRATS, CORPORATES AND ABOVE ALL ENCOURAGING  POLITICAL, SOCIAL  AND ECONOMIC ENVIRONMENT SUPPLEMENTED BY HASSLE FREE TECHNOLOGY AND  ADHERENCE TO HIGHEST STANRDS OF ETHICS.THE TASK IS ENORMOUS BUT DEFINITELY ACHIEVABLE . IF THERE IS A WILL, THERE IS A WAY.       

TVG KRISHNAN.

IPO boom , Capital market , general degeneration of values and less of regulatory controls.

The new crop of investors  in capital market seem to be comparatively well off compared to those investors of the 1990s thanks to ever widening gap between the rich and poor. Further, unlike in the past , people get used to the frauds and loots which are becoming a routine for reasons not so far fathomed out. Frauds in banks have become a business model and loot through insurance business is becoming a way of life. Unlike in the past , the meticulous approach to save, calculate , be prudent with expenditures etc. are fast disappearing thanks to invasion of technology and planned / unplanned erosion of values coupled with lack of accountability. People feel helpless but prefer to suffer silently seem to be the only way out to have peace and be free from hassles. JANE DO attitude is widely prevalent and the acceptance of loss of money as part of modern living and minimizing risk of loss is becoming a philosophy. The next bigger scam after the Harshad Mehta and NSE scam , in line perhaps would be general Insurance in general and Life Insurance in particular, closely followed by IPOs loot and vanishing of companies . Stock market boom is a proof of growing inequality and despite sane alerts from knowledgeable quarters , fresh investors get attracted is a reality indicated by ever increasing number  of D mat accounts. All said some right thinking wise people and perhaps some old generation and aged people have some worries about all these but how far they are heard is a big question mark. Silence is becoming better part of valor and discretion. 

Dr T V G Krishnan

15/08/21.

( This comment appeared in Money Life against the Article on IPO Boom ) 

Re

RBI , Banks, RTI and Inspection Reports.

 

RBI RTI and Inspection Reports.

The banks suffer from bad borrowers and the entire economy, the people, investors, depositors of banks,general customers and the Government bear the brunt as the banks' contribution to the accrual of the economy and benefits to the society get nullified because of the bad debts. From this angle, there is nothing wrong if banks in their own interest make it public the list of bad borrowers and perhaps the reasons for bad debts , the difficulties in recovering the bad debts including the legal hurdles and other pressures. The losses that banks incur directly and indirectly because of the bad debts can also be brought to public notice if needed. The release of inspection  report can perhaps be made selective in such a manner that the trust  based on which banks function should not  be disturbed. Definitely public should know as to how banks misuse the depositors funds and where they fail to deliver because of lack of professionalism and accountability  and mismanagement of public funds. It is time for RBI to revisit and take a review of the Inspection Reports and make it clear as to what is to be released under RTI Act and what is  not to be released to protect the so called fiduciary responsibilities. The function of Banking is  unique and it cannot be equated with other organisations and corporates.All said the misuse./ abuse of technology, failure in Governance standards to exploit fiduciary responsiblities etc need to be very closely monitored by RBI and public should get the feel that the banks function very safe and all the stake holders benefit with tangible results. The banks' balance sheets also should carry  in brief if possible the STRENGTHS and WEAKNESSES of Banks as indicated by RBI in its Inspection Reports. The Much needed TRUST in banks cannot be allowed to be eroded because of the avoidable transparency as per RTI act but at the same time the release of inspection findings to public in a selective manner should definitely pave way for enhancing the quality of borrowers and performance of banks. 

Dr TVG 

( This comment appeared slightly in a modified manner in the Business Standard Dated 20/7/21.    

RBI Governor says RBI will bring in Financial Inclusion Index.Is there any Mindset for bankers?

 

If Financial Inclusion has to be made a reality it should start from down trodden and vulnerable sections of the society. Class banking and keep the Customers away approach  presently pursued  by banks including PSU banks using / abusing technology to the most disadvantage of all categories of deposit customers in particular needs to be totally stopped. Customers should feel confident and trust the banks for any deals. The way customers are taken for a clean ride by the most sophisticated banks keep away even small customers from approaching banks for any deals. This reflects in the growth of NON Banking FIN companies dealing in Gold loans. Banks have forgotten Customer Service is a fact and there are no grievance Mechanisms whatsoever is a tragedy. In this background, Financial Inclusion can only generate problems for the Regulator as banks have never the feel of Customers and their survival depends on customers is merrily ignored or rather not understood. The expectations of the Governor that the banks would entertain the lowest category of the society though a very laudable objective, are misplaced. High time RBI goes in for a survey among the people including those who need to be included under Financial Inclusion and decide ways and means to correct the banks first and then think of enrolling them for laudable objectives. Ground realities of late are gloomy. Financial Inclusion Index can come only if there is Financial Inclusion at ground level and bankers have a mindset to come to the rescue of the really deserving people from the lowest strata of society. Such bankers are yet to be made or invented.  

 

Dr T V G

 

July 16, 2021,

(This comment appeared in Business Standard dated 15th July 2021 ).

 

RBI to conduct customer satisfaction survey on impact of bank mergers

 This survey is welcome with the very limited objective of assessing how the Customers feel and satisfied with the changed bank and its services after the merger of banks.   But the better approach for RBI would be to have a full fledged customer service Survey  from all banks including the so called well run private sector banks. The survey should inter- alia  include collection of various types of service Charges , Credit card charges,, internet banking  and other services fees like Locker facility, issue of travel cards  provided by banks. The fact remains that the Customers cannot get in touch with the bank by any means unlike in the past where the Customers can lodge complaints to RBI and banks branches. Phone contacts are completely ruled out. In case by any chance he gets some official to discuss the problem, the ignorance of the staff gets exposed and the customer gets all the more frustrated / confused.Some techno savvy customers can perhaps with great difficulty register some complaints and they get standardised and recorded message /replies without having any reference to the complaints and attending to them.  The call centres set up by the banks are criminal waste of man power , energy and money.  Even if they answer after making  one to go through a series of hassles , the reply one gets only takes you back to square one. Of course it makes one to be patient and finally give up the complaint benefiting the bank. The sorry state of affair is that even the rudimentary knowledge of banking is unfortunately missing in the replies even if the replies come from a fairly higher level. If at all RBI can do something, better it should find ways and means to educate and enhances the banking literacy among bankers and financial literacy among Customers. Hope something concrete would be done by RBI by understanding the big disconnection seen between bankers and customers these days. While analysing the banks' profitability if any by the RBI, it should ensure that the miscellaneous charges and various other charges levied from customers of all kinds are as per RBI guidelines if any and banks do not exploit the customers ignorance of bank charges, technology and take advantage of regulation and supervision lapses and technology dominance .Fair trade practices seem to be absent  is what the Customers generally feel and there is no one to hear leave alone to address the Customers' grievances.

Dr TVG