Tuesday, December 15, 2015

Debt and Disaster

Disasters may be frequenting the coastal regions. But not like the one that we saw in Chennai till yesterday, in the recent history. It may take months for the city to recover from the shock and may need billions of rupees for recovering the lost infrastructure and assets. This signifies that no disaster will be like its predecessors and they manage us and not us managing them.

The estimate for the insurance sector outflow for the rescue has been put at a measly Rs.500cr.  It may have excluded the assets insured in the financial sector. Several industries, export-oriented auto components industry, leather industry, several MSMEs alone have assets worth around Rs.2lakh crores in and around Chennai, the marooned metro for a century.

Friday, November 27, 2015

SpiceJet becomes SourJet

A Travelogue

Jetting off to Tirupati ?
‘Air India’ – Not liking to be in the air
Feels homely on the land;
‘SpiceJet’ – ‘seating’ – sorry;
Mistakenly spelt – ‘cheating’;
‘Checking in’ – you are checked out;
Baggage – gaming in numbers;
‘Free meal’ – Damn it you paid for it;
‘Bag out first’ – Pay up first;
‘Enjoy extra leg space’; keep your legs short;
Long legs? Choose the first two rows;
Just it costs you only five hundred bucks!!
‘Smiles’ Miles apart for, they are spicy;
Crew, Arrogance is their virtue;
‘Convenience’ – a dream;
‘Comfort’ – whose is it any way?
Merry ride? Nay, a dreary ride;
SpiceJet  joining the Sourjet league!
Any way the stocks are fully subscribed.

 * SG 1042 27.11.2015 - Tirupati to Hyderabad 

Economics of Education

Volume XIII Part 4 November 25, 2015 Business Advisor

Economics of Education

B. Yerram Raju

National Education Policy is scheduled for release shortly. The fears of FDI in education are looming large. Already the privatization of education during the last two decades has eroded the values and loaded the backs of children with loads of books. Lower middle class bemoan that qualitative education is unaffordable.

Several private schools even at kindergarten charge a lakh of rupees for admitting a child. The non-public ‘public schools’ charge the fees much above. At the high school and college levels per candidate fees is touching the roof. And there is no guarantee for quality delivery of inputs. Most have teachers less than deserving qualifications.

Government schools and colleges have poor infrastructure and poorer delivery mechanisms. Had all the civil servants, elected representatives chosen to send their wards to the government schools, their plight would be not what they are: with no toilets, no power, no play grounds, and in several of them even no teachers!! Yet, the threat of transfer or other punishments to teachers make them adopt unholy means to assure pass for all their wards.

Banks have no time for customer

What you get instead are hidden costs for supposedly myriad services, most of which don’t seem to exist.

One leading new generation private bank does not disburse cash other than through ATM/debit card withdrawals. Yet it charges Rs.1,000 annually for issue of the debit card, on top of keeping the minimum average balance of Rs.10,000 for a basic savings bank account for a customer.

Why choose such a bank? Because other banks, though with lower minimum balance requirements, are worse when it comes to customer service.

I credited a couple of cheques to my pension account with the SBI drawn on another local PSB branch on November 6. While one of the instruments for Rs.10,000 got credited on the same day, the other for Rs.70,000 was credited only six days later after relentless pursuit. A complaint email gets the standard response: “This is a system generated response. Your complaint takes 48 hours to respond. Please do not reply.”

Sunday, November 1, 2015

Capital Infusion in PSBs – Need and the Deed

Capitalization of Public Sector Banks has been incorporated as one of the seven items in ‘Indra Dhanush’, dubbed as part of Banking Sector Reforms.  Before addressing the issue of such capitalization it is important to understand some of the historical developments in banking globally and the way different countries responded to addressing the issue of refurbishing capital in the banks.

As part of the global financial system, Reserve Bank of India made us to believe that banks in India have to fall in line with capital adequacy norms under Basel regulations. Even prior to the embrace of capital regulations of Basel India had CRR and SLR as regulatory instruments to safeguarding the financial stability of banks. 70 percent of the Banks’ assets in India are in the public sector.

A Consensual Agenda for Labour Reforms

‘Creating an ambience where both workers and managements understand their rights and duties is no tall order’.

The Centre is engaged in serious discussions with trade unions over the new labour code, with a view to improving the ease of doing business. But missing from the debate is the issue of the obligations of workers. During the 1960s and 1970s, workers’ education, aided by the government, provided them with the opportunity to know their rights. But the whole campaign was on rights and not obligations. Once rights are conferred on any group, and they become binding, it becomes difficult to reduce or deprive such rights.

Saturday, October 24, 2015

Mergers and Acquisitions among Indian Banking?

Banking Sector Reforms Committee in 1998 itself suggested consolidation of banks –the SBI and Associates into a big state-owned bank and five or six such big banks through consolidation of other PSBs, mergers of private banks and even FIs with NBFCs. There were noises of consolidation in the UPA-1 government too. And now, the Working Group on mergers and acquisitions set up by the Union Ministry of Finance again called for a similar action.  The major issues relating to capital, assets and human resources need to be looked at from the points of view of growth, financial stability and global experiences. Chairman SBI Arundhati Bhattacharya recently strongly fielded the arguments for large scale consolidation. Is the Indian financial system ripe for the call?

Monday, September 21, 2015

Ending Debt Cycle Suicides in Telangana


The State government can take a leaf out of Kerala’s book and enact a law against usury
Recently, the Telangana Agricultural Advisory Forum, consisting of a few university professors and scientists, deliberated on the causes and consequences of the drought and farmer ‘suicides’ in the State. The unofficial number of suicides attributed to farm families is 1,152.
An inquiry into some of the recent suicides reveals an interesting picture. The farmers were not indebted to cooperative credit societies or commercial banks. The case of a farmer in Nalgonda district is typical. He took on lease ten acres of land, dug five bore wells — none of which hit water — incurring huge private debt in the process. On top of this, he cultivated cotton. The crop failed without water, and the debts pushed him to suicide.

Thursday, September 10, 2015

Loan Melas Land Again


‘Disasters never come singly but in bundles’. This seems to be the position of PSBs in this country at the moment. They are already in the melting pot of nearly Rs. 6lakh crores. Loan melas seem to have come back with a bang – the Mudra Loan melas. It was mid 1970s that Pujari the then Congress Minister started with the loan melas having seen that this is the greatest opportunity to get crowds at no expense of either the party or the government.

It all started when one of the then enthusiastic regional managers of a public sector bank organized such mela at Anantapur in Andhra Pradesh. The Minister was given an elephant ride with the buglers financed under the DRI scheme walking in front to reach the big maidan for distributing agricultural loans, if I recall right in the year 1979. He could see huge crowds in the ground waiting for his honour to arrive. He was amazed for he knew what it meant: loans and votes without the party having to spend for a single vote. Having tasted the meat would the tiger leave it? He ordered such melas throughout the country.  After the banking sector reforms such melas became history. Several of us thought that those dark days would not revisit the financial sector.

Friday, August 21, 2015

Our Decrepit Debt Recovery System

A consolidation of laws and legal processes is called for at the earliest

India’s debt recovery apparatus is an alarming mess. Consider this: we have four Acts, two sets of tribunals, ₹2 trillion worth of debt recovery tribunal (DRT) cases and ₹6 trillion in NPAs. These NPAs are a subject of labyrinthine discussions, appraisals and reappraisals – carried out by the RBI, Finance Ministry and even TV channels. None of all this seems to be getting us anywhere.
To get a fix on the debt problem, we need to understand the tangle of laws dealing with it and the system of courts and tribunals responsible for the implementation of these laws. The four Acts in question are: Sick Industrial Companies Act, 1985 (Act 1 of 1986), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFA), 1993, The SICA Repeal Act, 2003, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act (Sarfaesi), 2002.
Apart from Debt Recovery Tribunals we also have the National Company Law Tribunal under Companies Act (Second Amendment) 2002 to settle BIFR cases.

Monday, August 3, 2015

NPAs - the perpetrators go scot free

If the RBI and MoF representatives on the Boards of Banks had prevented approvals of some corporate loans and brought collective wisdom to do due diligence, NPAs would not have reached the current unsustaining levels. Otherwise, how could one explain the debacle like that of King Fisher sanctioned on the basis of Brand as collateral thousands of crores on the instance of the then Chairman of the SBI. And this Chairman goes scot free royal. The successors have to cool their heels. 

It is important that the regulators get out of Boards of PSBs. Government of India, as owner, would do well to provide equity and discipline by sending more qualified representatives on the PSB boards and not the persons who are trying to learn the alphabets of banking. By being in the MoF for donkey years does not make one an expert in banking and finance!!

This is my response to Mrs Usha Thorat's article on the subject in Live Mint dated 15th july 2015.

Sunday, July 19, 2015

Limited Liability Partnership no good for banks

Last six months have been harrowing for a few SMEs who registered as Limited Liability Partnerships with the hope that they would sail more comfortably in their financials with equity and debt in good balance. But all of them faced the wall when they approached the financing banks for working capital loan. They advised these entrepreneurs to convert into private limited companies or partnership companies where the liability is not limited.

You can find the edited version of the article in the Hindu Business Line of 17th July.

Thursday, July 9, 2015

Banks threatened with huge NPAs

There is a report in First Line that a Collector from Amravati threatened action against bankers for not reaching agricultural loan targets in a quarter under IPC. This is sheer arrogance on the part of the District Collector who does not know his job. There is another report of the UBS on the mounting NPAs in the Live Mint of 7th July 2015. Reading together becomes necessary.
UBS Report has been contested by 'Yes Bank.' while the other banks chose to ignore. The fact remains that the corporate debt today occupies major portfolio of banks. There is excessive interference from the administration in public sector banks.
Take for instance, the story of Maharashtra Government where one of the district collectors audaciously threatened the banks for not achieving the targets in farm lending as per his dictate just a couple of days ago. The news appeared in First Line. The banks in the coordination forums - District level Consultative Committees of which the Collector/DM is the chairman, have never pulled up the district administration for failing to provide reliable land records, for failing to provide the credit related infrastructure for farm schemes to succeed and they mention in their Annual Credit Plans and NABARD in its PLP for the administration to respond adequately. The Administration never adequately responded.

When the 20-point programme was introduced initially, District Collector, Guntur reacted similar to that of Maharashtra District Collector threatening with criminal action for failing to reach the targets under the programme in 1979. The entire banking community walked out of the DCC asking the Collector to go ahead. The then Secretary Planning Govt of AP had to counsel the Collector to behave!!
Thanks to the Live Mint for the chart.

Such interferences do not mean so much as unseating the top executives for not lending to the corporates or for taking any action on the NPAs of delinquent corporates that today reached unsustaining levels. The action on the top executives range from transfer from the portfolio handling to transfer out of place. These are taken without demur as no person would like to be at the risk of his career. The obliging top executives and Chairmen get the plum posts. Such games from the Banking Department should stop. Narasimham Committee -1 recommended in 1991 in its maiden report itself, that the time had come for the banking department of the GoI be wound up and stop regulating banks. This recommendation should be revisited by the GoI in the interest of healthy reforms to the financial sector. .

Wednesday, July 1, 2015

Slashing Centrally Sponsored Schemes

Different states have different poverty levels. Prudence and diligence in spending on social sector schemes would emerge with the centre taking minimum share and allowing states to carve out their budgets in a manner that their poorer citizens require. 

One thing that baffles me is the enormity of social expenditure budgets by states like Andhra Pradesh and Telangana with the percentage of poor in total population in the range of 10-12 percent spending more than 50 percent of their budget on populist schemes. They are not focusing even at that expenditure levels on giving free education to the poor by improving infrastructure in all the government schools on a mission mode and providing health care at the door step by improving the primary health care centres in villages.

Small, marginal farmers and lease holders should get protection from the wild market fluctuations through price buffering, beyond the horticulture crops.

Tuesday, June 30, 2015

Growth of the economy at 8%?

250mn poor of India are being ruled by over 500 crorepatis in the Parliament and thousands of such legislators in states. Arvind Panagariya, Vice Chairman NITI AAYOG would like to believe that the growth of the economy would hit 8% by the end of this year.

AGriculture with its 13.7% share in GDP providing sustenance to about 50% of population still is posing risks to growth. So is the MSME sector, not still the darling of credit agencies. Exports did not rise significantly during the first quarter.

One consolation is that on the external front we seem to be doing fine.Watch this in the backdrop of one week's closure of Greece Banking and Stock Markets.

 In fact, while one would very much like to be optimistic, the dreams of make in India being still in the dark, uncertainties on the farm front, manufacturing yet to gain, the buoyancy of tax collections still to surface, the sovereign debt continuing to rise, and the hidden inflation at embarrassing level, the hope of 8% for 2015-16 that too from the Aayog Vice Chairman is really fond. Adding fuel to fire is the current Greek Debt Crisis impacting on our engineering exports and rising exports is the hope of Arvind Panagariya.

Wednesday, June 17, 2015

Still too many go hungry


Despite the high growth years, malnourishment stalks the countryside. This calls for a small-farmer led focus
At a time when India’s GDP growth is hopefully pitched at 7.5 per cent this fiscal, touted to be higher than China’s, three global reports of significance also grabbed the headlines: The Global Findex Data Base 2014The Global Food Policy Report of the UN and the State of Food Insecurity in the World, 2014.
Ahead of all these, the IMF and the World Economic Forum reported that 25 per cent of India’s population still remains poor.
The Global Findex Data measured the financial inclusion around the world. The other two reports dealt with the food insecurity and the measures to tackle them.
It must be remembered that the data is mostly up to March 2014. The findings are of great import to this government for designing policies tackling financial inclusion, hunger and malnutrition.
The government would like to measure the poor by the JAM method — Jan Dhan account, Aadhaar, and the mobile. It has been acknowledged universally that there were no deaths due to hunger. But the farmers who produced food committed suicide were burdened by excessive debt.
The undernourished poor, like the Jan Dhan accounts, showed an impressive decline in the reports and these are counted once every three years.
A range of indicators can be used to measure a nation’s food security. These include average dietary energy and protein supply, access in terms of road and rail line density, domestic food price index, prevalence of under-nourishment, stability measured in terms of cereal import dependence ratio, political stability as well as absence of violence and terrorism, undernourished children below five years, anaemia among pregnant women, and vitamin A and iodine deficiency in the population.
Measuring insecurity

Malnutrition is redefined to include obesity and overweight. In India, child stunting (under five years) is 47.5 per cent while undernourishment is 15.2 per cent; whereas overweight population is 11 per cent. The country witnessed an average GDP growth of 8.7 per cent in 2003-08, 6.7 per cent in 2008-09, followed by 8.6 per cent and 9.3 per cent in the next two years.
When the growth of GDP was high and food inflation was also high, there was a decline in the percentage of under-nourished population.

Sunday, June 14, 2015

Health insurance

Whose health are we insuring?
thehindubusinessline.com · The new health savings plan appears more advantageous to insurers and agents than consumers
My comments as posted in the article:
Insurance industry in this country is just evolving. Neither the operators nor regulators nor the insured know the intricacies in full. Not that I also know something great. All I know is the risks attached to insurance are far different and have varying dimensions across ages and sex. Premium as the insurance companies say is measured by the risk associated. So as one ages, the risks become larger and therefore, the premium is charged higher equivalent to an ageing automobile. Women become more vulnerable to certain health problems far different from after a particular age - say 40-45years. Both men and women while they are earning more could be charged higher premium for insuring risks to cover those that become larger when they age or when they retire and for women after 45 years. The moment one says he is insured in a corporate hospital, the list of tests become longer; charges become hefty to take the maximum in the insurance pie. This exploitation should be stopped by IRDA.

Tuesday, June 9, 2015

Can Gold Monetisation Scheme succeed?

Gold Monetisation Scheme:

Some Suggestions:
I used to have my batch mate in the SBI, retired as MD of an Associate Bank, who used to buy Rs.100 worth of gold every month during his first ten years of service. Later, he may have increased it to Rs.500 or even Rs.1000 a month. Such is the urge for having gold in domestic vaults in India. South India or people from the South in the North invariably have gold in the shape of jewelery. Every village household, how so ever small it may be, has at least 500-1000gms of gold in the shape of jewelery. There are certain traditionally rich families where every day in a week has certain set of jewelery to wear for the house wife inherited from the mother in law. Such ornaments are at least 20-30kgs. These are invariably kept in the lockers and taken out for the festivals. This is a huge idle gold reserve in jewelry.

Thursday, May 7, 2015

Time for Governments to deliver

The year of coronation of the NDA Government is close on the heals of completion. People have seen lots of promises in the air. Corruption continues; delay in delivery of the benefits also continues; expectations of the people on various fronts are unfulfilled. Transparency is yet to be seen. What is the remedy?


Whenever a scheme is introduced by either the State or Central Government, it should also announce the mode of delivery: The department and officer concerned with contact number and email address; any legitimate charges for availing the benefits of the same, the window for payment - on line or physically at the department counter and the time that would be taken for delivering the announced benefit should also figure in the announcement. 

Grievance Redress:
In case of difficulty which authority should be approached, again with the email and telephone/mobile number details should also be announced. This is the only way in which correction could be minimised.

Wednesday, May 6, 2015

Bank Employees and Social Banking

Bank Employees and Social Banking

Bank employees and unions will have to recharge themselves to a new set of objectives that would enhance the business of banks on one side and help the society on the other.

May Day is usually the day to recall the assertion of their rights. For a change, the All India Bank Employees Association (AIBEA) during this 70th year thought of taking the initiative of enjoining social responsibility. Gone are the hard days of militant agitations as means to achieve fair compensation, safety, security and comfort in work places. Workmen and officer representatives are today part of the governance and management of banks. Machines dictate the employees’ ways of working. Discretion has less relevance now than in the past. Technology dictates the employees’ ways of working and management processes. But are the customers, a happier lot? The response is discouraging.

Ever since the introduction of banking reforms following the recommendations of Narasimham Committee 1 and 2 and the alignment with the global regulatory architecture through BASEL I, 2 and 3, technology and capital adequacy have become the prime drivers of growth in banking sector.

Mobile banking and micro finance institutions (MFIs) moved into the space left by the RRBs, weakened cooperatives, and rural branches of commercial banks. Banking correspondents and customer service points, White ATMs surfaced.  Who should we blame for providing this space excepting the lack of commitment and motivation of staff to align with the objectives of the nationalisation of banks?

Friday, May 1, 2015

Farmers Hurt

Farmer Hurt and Farming Needs Innovative Push
Priority Sector Credit Policy to Synchronise

The Scenario:

Agriculture, India’s largest employer is undoubtedly the engine of India’s economic growth. Agriculture is constitutionally a State subject, but, in practice, all policy decisions in its activity chain like Agriculture Credit, Procurement, MSP, fertilizer allocation and subsidy, and relief measures, etc., are in the domain of the Central Government. Indian farmer and the entire value chain in the farming sector, as a consequence, is strangulated by regulations of over twelve ministries of GOI and at least six ministries of the State Government.

While the priorities should be on improving soil health, conserving water and improving markets for assuring reasonable prices for the farmer, the present Government misplaced its priorities to introduce Land Acquisition Bill that now got into the second ordinance faced with stiff opposition on the floor of the house and in the streets of North India.

Sunday, April 26, 2015

Review of India's Growth Resurgence

Today's Free Press Journal carried a review of the jointly authored book: India's Growth Resurgence: Sectoral Issues and Governance Risks. The book is now available at Amazon.com and Flipkart. 

Sunday, April 12, 2015

Mudra Bank for the poor - Confusions Galore


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.

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!!


 “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


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.."

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.

Saturday, January 10, 2015

New Year Bites 2015

For the New Year:

Year 2014 can be termed as year in waiting. People waited with bated breath for the policy paralysis to end and for the economy to start growing to its potential. Post elections, the wait did not however end. There have been announcements more than achievements and promises more than performance. 2015 would therefore be a demanding year for the rulers.

The crude shocks elsewhere brought some cheer to India in containing its current account deficit and inflation that touched unsustaining levels in March 2014. Stock markets reacted favourably with the indices taking the highest ever jump of 6000 since the last General Elections. They shocked the investors with a peak in the crash on the 7th January 2015 led by yet another decline in global oil prices and other commodity prices.