Sunday, April 12, 2015

Mudra Bank for the poor - Confusions Galore

http://www.moneylife.in/article/mudra-bank-confusions-galore/41221/62915.html

Will MUDRA Bank put its stamp on the Indian Financial System as the institution to resolve the Financial Inclusion dilemmas in the rural areas?

Piper calls the tunes. Inauguration of Micro Units Development and Refinance Agency (MUDRA) Bank by the Prime Minister before he left for Canada, Germany and France on a nine-day tour is being seen as a landmark akin to ‘Garibi Hatau’ and IRDP of the forgotten decades. People say that name has a lot to do with institutions. The name and style of MUDRA has built into it an agency and a bank. It has in it, development and refinance as functions.

Friday, April 10, 2015

Growth has to pare with human development

Business Advisor, Vol.X, Part 1, 10th April 2015 carried this article of mine.
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February 2015, towards the close was crowded with the vision-led railway budget, the release of Economic Survey and the Union Budget. The next twenty days in Parliament did not have so much to discuss on the approach to the budget as on amendments to the land bill, the rape incident of West Bengal and some unholy acts in Haryana. The most significant budget discussion related to the allocations to AP and Telangana states and the devolutions under the 14th Finance commission. The strategic intent and the road map for growth laid out in the FM Budget speech, would seem to have got full endorsement.

Growth by itself even if in double digit, would be inconsequential if it escapes the human development. The 300mn poor are not so much worried about how the dollar is moving against the rupee or how the rupee is globally pared although its consequences will have definitive impact on them. In an event crowded out during the last few days of February 15 was the release of a book: ‘India’s Growth Resurgence.’

In spite of the change in the base year from 2005 to 2012, the CSO credibility of the growth figure is still in question in the context of lowest/negative manufacturing growth and not too impressive growth of services sector. The statistical jumble did not in any case put the human development in a better frame than what was on hold till 2014 with 134th rank out of 183 nations surveyed by the UN.

The near two and half decades of reform process were literally in waves with turfs and peaks between 1991. Never ever in the past has the Indian economy been so keenly watched by global community with hope, expectation and anticipation. The sheer size of the economy and the potential it holds has global investors, multi-national corporations, and players in different sectors, queuing to take part in the country’s economic progress and the growth agenda, what with, Make-in-India, Swatch Bharat and Jan Dhan, the new instrument of inclusive growth.

Tuesday, April 7, 2015

Indian Agriculture - Transforming a Natiion


Can Modi’s eloquence respond to farm credit vows?
Mobile Banking can show the way.



Poverty in riches and riches of the poor - both are now with the banks. The Prime Minister has also asked the bankers to see the red herring in farmers' suicides with compassion and advised passion for extending credit to the farmers. Banks should now see how their machines can be taught this human touch beyond the click of the mouse!!

http://www.mlmsoftwarezindia.com/images/mlm-mobile-banking.jpg

 “India accounts for only about 2.4 % of the world’s geographical area and 4 % of its water resources, but has to support about 17 % of the world’s human population and 15 % of the livestock. Agriculture is an important sector of the Indian economy, accounting for 14% of the nation’s GDP, about 11% of its exports, about half of the population still relies on agriculture as its principal source of income and it is a source of raw material for a large number of industries.” (State of Indian Agriculture 2013-14, Ministry of Agriculture, GoI, New Delhi)
 
Policy Brief
‘Agriculture credit is one of the main drivers of agricultural production.’[1] Farming and credit have been highly interdependent for ages because the farmer would have his cash stashed either in soil or in silo and never in liquid form for him to spend for both production and consumption requirements. So is the case for credit at any cost and anywhere for the farmer. This is where the roots of money lender lie. He sits in the village close to the farmer.
Efforts at institutionalizing money lender started with the starting of primary cooperative agricultural credit societies. Post nationalization, nationalized banks, regional rural banks took to agriculture lending in a big way. NABARD was established in 1982 to accelerate productive agricultural credit flow with focus on improving the lot of the small and marginal farmers.

Post liberalization, with India becoming an important constituent of the WTO, Agreement on Agriculture and Market Access has also witnessed diversification of agriculture and rural economy. The wide ranging definition of farming encompassing dairy, poultry, piggery, fisheries, and all animal husbandry and horticulture activities led to inadequacies and delays in extension of credit from institutions. Public sector banks are mandated to extend credit for agriculture that now includes agro-industry and agri-businesses up to 18 % of the total credit.

Friday, February 27, 2015

Cyber Risks

http://www.moneylife.in/article/the-threat-of-increasing-cyber-risks/40639.html?utm_source=PoweRelayEDM&utm_medium=Email&utm_content=Subscriber%2320149&utm_campaign=Daily%20newsletter%2027%20Feb%202015

Hyderabad City Police commissioner in a press conference recently revealed that the city police registered 21,035 cyber crime cases in 2014 as against 19,011 in 2013 and 18,744 in 2012. A near ten per cent rise in just two years is a cause for alarm. The rise is attributed to the large scale use of technology and mobile phones.

Social media contributed significantly with the uploading of fake woman profiles, online payment frauds, blackmailing, hacking, skimming, identity theft and data theft etc. The police are trying to use technology again to track and trace the criminals. Global trends are no different although it cannot be a solace.

Tuesday, February 24, 2015

Budget Discussion - 1


My response to the above article is as follows and can also be seen in the Livemint discussions: 

GDP in itself is a poor indicator. It escapes several areas of income in the aggregation that has become the springboard for black money. For instance, all the waste and scrap dealers till date in all the cities deal only in cash. Several jewelry merchants take only self cheques from their clients and not account payee cheques. Several doctors doing private practice do not ever, ever give any receipt for the consultancy. Several leading advocates are no exception. Like this many areas still escape our GDP. All the ratios depend upon such aggregation as GDP suffer credibility.

Second, India's prism of planned economic development rested on the tripod of politics, poverty and patronage. We have traveled a long way from the erstwhile socialistic pattern of society. But inequities still persist. 

Areas which are the essential domain of public expenditure - universal education, health, safe drinking water and good sanitation moved to private or public-private domain. It is time that the government looks at what are its key responsible areas and provide resources adequately with periodical monitoring mechanisms as part of the Budget.

All the laws impacting on state finances should be subject to Regulatory Impact Assessment annually and the relative Report should be presented to the first session of the Parliament for discussion and modification.

Once these are done, the fiscal responsibility budgetary management exercise becomes simpler. The country is currently in transformation phase and this is the right time to plug all the loopholes in the existing system of monetary and fiscal management. 

It is good to recall John Stuart Mill: "It must always have been seen more or less distinctly, by political economists that the increase in wealth is not boundless: that at the end of what they term the progressive state lies the stationary state.."

Tuesday, February 17, 2015

Governance Reforms Imminent


Governance reforms are imperative in quite a few areas:  First Agriculture: Sustained technology interventions with amendment to the APMC Act that should provide for the farmers to have direct market access in the place of brokers and politicians do not brook delay. 
Second, Education - right from primary to technical and higher education should all come under one umbrella and one Ministry. Institutional reforms hold the key. Budgetary allocations appropriate to the task would be also extremely important. manufacturing sector: 
Ease of doing business is getting attention that is due, no doubt. The Land laws are a soaring point. This has to be addressed with a sense of proportion. In the services sector, finance and insurance sectors need a thorough review. 
Responsible and responsive public sector in these two sectors require good governance code and effective monitoring. Capital refurbishment has to be dome with accountability. Computer centrality should move to customer centrality. 
Judiciary reforms should precede many if the endemic corruption has to be rectified. We have unfortunately inherited delayed investigation and procrastinated action. It is necessary that a Committee of eminent jurists and the police is set up to suggest a system of speedy investigation into a variety of crimes that include the cyber crime as well and exemplary punishments for breach of law and order. More of governance reforms and sectoral issues can be read in the author's forthcoming publication 'India's Growth Resurgence - Sectoral Issues and Governance Risks' co-authored with M. Sitarama Murthy, and Singala Subbaiah. 

Sunday, February 15, 2015

Budget Hopes and Hypes

Fiscal balance
Union Budget 2014-15 was more on aspirations. It had to address the legacy issues. But 2015-16 Budget in the wake of series of policy announcements by the NDA government during the last nine months has promised to be progressive and inspirational. The recent statements of FM leave more expectations on this count.

Notwithstanding the hope of the World Bank President the dragging growth in farm and manufacturing sectors is still a matter of great concern and this led to pragmatic low pitch by the RBI at 5.5-5.7 percent growth at the end of this fiscal.

Inflation has come down but the fundamentals are still weak; gross domestic savings has not improved markedly; credit has not picked up. The domestic food and vegetable prices are yet to record the type of decline that would give confidence to the RBI to tame further the lending rates.

The 14th Finance Commission handed over its Report to the President. Once it is tabled in the Budget session, the new formula of dispensation of resources among the States and Union and between the States and the sub-states would lead the budget formulations.

Expectations on the Finance Minister:

Sunday, February 1, 2015

Ten Point Agenda for MSMEs in Brand India way

New Year leaves many in hope with the MSMEs no exception. Their share in GDP at around 8% currently has prospects of moving to 15% by 2020 according to a KPMG-CII Study in October 2014. Hopes are built on the double digit growth of a few manufacturing sectors by that time and the FDI interventions in defense, pharma and infrastructure sectors. Not so encouraging, however, is the decline in credit growth in the manufacturing sector from 13.7%  a year ago to 7.3% in December 2014.

The Government has no doubt infused some confidence building measures, like a few start-up Funds for SC entrepreneurs, revisiting the definition of the MSMEs and credit policies. Action seems to be far slower than announcements. Even earlier there were 32 Funds announced for the sector at different points of time that did not create the impact one would expect.

At least ten things need to be done by the Government if the MSMEs should move to building brand image for India and they will be all in any case, Make-in-India only.