Inclusive Growth and the Missing Goals

Inclusive Growth and Missing Goals

The cab stopped at the Traffic signal in Mumbai while on my way to the venue for my meeting at Mumbai from Santacruz west to BCK. A few boys peeped into my window with a few books – all of them are unauthorized print versions of famous novels at reduced prices. Since there was some traffic  jam, the car stopped for more time than usual. I thought I would ask the boys how much they earn per day through the sale of books and what margins they get. Sab, ‘hum ko roti, chaval milta with some pocket money of about Rs.50 to Rs.70 per day depending on the sales we get. There could be some days when we don’t get any margin. 

The next day I happened to visit Crawford Market and took a stroll on pavements where a string of shops and anything and everything one wants is available and all one may have to do is to do a bit of bargaining. I asked about fifty such shops whether they have a bank account; they answered in the negative. Then I asked them where from they get the money to do their business. The reply was simple: ‘we get money for the asking as long as we promise a good return at the end of the day.’ I asked them what is the price they pay for this money. The answer was no surprise: They get Rs. 900 to even Rs.9000 in the morning to return Rs.90 to Rs.10000 in the evening as they fold up their shops for the day. The person who gives money in the morning comes and collects it back. Sometimes the transaction is carried out on weekly basis. Where do all these businesses figure in the country’s GDP? Nowhere. Neither the small retail businesses they do nor the money transactions that take place between the dealers and shops.

A friend of mine narrated to me his experience with some of the other big shops – the scrap dealers. Everything is transacted in cash and cash alone. Then move the Zheveri Bazar. Most un-branded shop keepers do not accept cheques nor do they give receipts. Where does their purchase or sale get taxed? Do they pay income tax? Do they pay service tax? Some do. But many do not. Where they pay taxes, they pay on whatever record they choose to disclose and with a certificate from a Chartered Accountant!!

There are high pried doctors in private clinics where even income tax officers would not dare ask for receipt or insist on tax liability to be recorded scrupulously; lawyers; even Chartered Accountants and the movie actors. Most do not dish out receipts. To the list movie actors we can now add the TV anchors. The grapevine that we see often in print in most weekly popular news tabloids that some of the leading actors demand as much as Rs1-5crores or even more is also beyond the tax net. 

These listings are the surest routes of black money and this is the colour that most seem to like. Will the Finance Minister look at these guys to fulfill his growth dreams and enlarge his budget receipts? The time is ripe but the routes are rough.

Published in the digital journal: Business Advisor dated February 10, 2013

Elections to AP Cooperatives are over: What Next?

Notwithstanding the Constitutional impropriety in the wake of the 97^th Constitutional Amendment Act 2012 that should take effect from February 14 2013 in the States, Andhra Pradesh in the name of democracy, forgotten for two and half years, conducted the Elections to the Cooperative Societies in the State. 

All the newly enrolled members were voters to the extent of 100 percent while the active members, that is, those who availed services from the cooperative societies for which they were members, who constituted around 40% muted the queue at the election booths. The candidates report having spent lakhs of rupees to win the election and are eager to run up to the Chairman and Board positions to recover their expenses.

A day after the elections one District Collector, a functional Registrar of Cooperative Societies, made an anguished public announcement that the applications for gas and public distribution would not be accepted if they bear the account numbers of the cooperative banks! The Government any way does not allow deposits of public institutions to be kept with the Cooperative Banks – urban or rural! This is the trust that the Government has in the system to which it enthusiastically conducted the Elections. The Government feels that these institutions are fragile and have weak governance. Democracy makes it weak in governance?

Public memory lives short – the debacle of Charminar Cooperative Bank, Prudential Cooperative Bank, and a few more in the State and elsewhere alerted the financial regulator to put in a strong coordinated mechanism to revive the Urban Cooperative Banks through the Task Force on Cooperative Urban Banks. While there is no such mechanism for the District Central Cooperative Banks, with lackadaisical implementation of Vaidyanathan Committee recommendations that called for professionalization in all the States, the non-professional Chairpersons now elected would like to make a fast buck in credit sanctions and releases for the large number of vulnerable farmers, small business owners, weavers, and artisans apart from the greedy real estate builders. Most of those elected keep their own deposits with the commercial banks, both of their own and of their families!! These trusted ‘public servants’ have to revive the trust in the cooperative banking.

Over and above this, the DCCBs are today licensed by the RBI unlike in the past and this would require strict conformance to statutory ratios, liquidity norms, a strong relationship with the Apex Bank and credit and financial discipline. They can no longer indulge in the luxury of postponing their annual closing in their books to window dress their recoveries. The RBI after a few warnings and punishments to the errand would not hesitate closing down such banks. Even the Maharashtra State Cooperative Bank today is in trouble for getting its license.

Government does not trust cooperatives but conducts elections for political mileage:

The Chairpersons of the Commercial Banks, with private and local area banks being no exception, are selected following certain due diligence and fit and proper criteria to hold such positions. In the case of DCCBs, now licensed, the Chairpersons are elected through the ballot. 

If the Chairpersons of these cooperative banks were to be transparent and knowledgeable, they should be on the roll-call of the Bank. It is desirable to put them on monthly salary and defined perks with certain boundaries of personal expenses. This would make them accountable to the institution. None of them shall have any personal security guards at the expense of the Bank. They should be trained to read the Bank’s Books of accounts and balance sheets. They should submit their statement of election expenses; should declare their personal and family assets and liabilities in a sealed cover to the CEO of the Bank. . They should take oath before assuming their position as Chairman regarding a well defined code of conduct to be prescribed by the RBI.

Public money has proved a bane at the hands of a political executive, in most cooperative institutions and institutional mechanisms should be put in place to prevent abuse of power and resources.

(The Author is also Member, RBI Expert Committee on Short Term Cooperative Credit Restructuring; can be reached at yerramr@gmail.com)

Union Budget 2013-14 (3)

In my last article I have dealt with the direction in which the Budget 13-14 should move. Since the CSO has come up with the revised estimate for growth at only 5% by this fiscal end, and some reasonable estimates of revenue and expenditure during the current year have also come off from the Secretary Revenue on the 8^th February, more can be added to the discussion. India is no longer in the league of fast moving economies. The IMF downsized it to 4.5% for the next fiscal. The Royal Bank of Scotland estimated however puts the next year’s growth on a higher pedestal at 6.3% on a lower base than before. Montek Singh's expectation is more a hope and hype than closer to reality and he feels that the CSO erred in its expectation downturn. But unlike the last few years when inflation was shown going down from January down to February, and rising growth expectations to tame the fiscal deficit, this time around, the CSO seemed to have pitched rightly.

The CSO lowered the growth in agriculture and allied activities to 1.8 per cent compared to 3.6 per cent last fiscal, while manufacturing is also expected to drop to 1.9 per cent, from 2.7 per cent. The most worrying phenomenon is the rate of savings in the economy that has been on the decline since last year when it moved to a 8-year low of 30.8% of GDP. This fiscal it is expected to move down to 30%. Inflation tripped the savings. The FMs moves to restore the savings to the previous high of 37% will be watched with interest.

Finance Minister hopes to contain the fiscal deficit at 5.3% as against the estimated 5.1% and has also announced that there would be no further divestment of stocks this year. The primary deficit is likely to be around 3% of the GDP.

The CGA data revealed that during April-December 2012, the revenue receipts stood at Rs 5,70,536 crore or 61 per cent of the estimate. This is less by 2% than in the corresponding period of 2011.

The government is eyeing Rs 935,685 crore revenue this fiscal. Tax collection (Rs 4,84,156 crore) slipped to 62.8 per cent of the Budget estimate compared to 63.3 per cent achieved in the same period last year.

Government receipts during the period totaled Rs 5,86,424 crore while the expenditure worked out at Rs 9,91,123 crore.

Fiscal Budgetary Management Responsibility and Outcome Budgets are the brain children of the present FM. While he has not succeeded in making the Output and Outcome Budgets with the various departments, he has been thriving to achieve the FRBM. What really came in the way of dilution of Direct Taxes Code and delay in introduction of GST. Even during the ensuing budget announcement the hope of introduction appears remote.

The Parliamentary Standing Committee on Direct Taxes has suggested the base income exemption limit to be Rs.3lakhs. Middle class and salary earning classes are sore with the Government due to rise in oil prices and severe impact of food inflation. This is a vote bank that cannot be ignored and therefore the FM may increase the threshold limit to Rs.2.5lakhs and keep Rs.3lakhs for the Senior Citizens. Since women constitute an important vote bank, he may like to give the same threshold as for senior citizens.

The Minimum Alternate Tax introduced after a gap between 1991 and 1996 by Chidambaram in 96-97 at 12% for profit earning companies may see only a marginal increase as he would like to see midsized companies to perform and contribute to the growth of the economy. This now stands at 18.5% and could move up to 20%.

Dividend Deduction Tax at higher rates could be a disincentive for investments. Growth orientation may prevent the FM to raise the DDT from the existing 15%. Even if he would like to exercise an option for raising this, it would be in the margin of 1-2% and would be more symbolic.

Inflation Indexed bonds as investment oriented instruments could get attention this time, with some exemptions in the investment ranges of Rs.2-5lakhs.

What he does for the farm sector is keenly looked at. Growth of farm sector is critical to the rest of the economy. Fertilisers moved away from the protected regime with the energy sector moving to market related pricing. This has put onerous burden on the farm. Additionally labour non-availability has put pressure on the farmer to move to farm mechanization. Rising input costs if not contained, the FM open the window on market stabilization. If he indulges in the luxury of loan write-off once again, the farmer would be distanced much more by the institutional lenders and their dependence on private money lenders at usurious rates would drive them to suicides that the country can ill-afford. Therefore, the FM has to calibrate his incentives in a transparent and on instant delivery mode. Most subsidies to the farmer move at a snail pace in delivery wherever they are available. The track should change. This Budget, the last in the current UPA regime as a full-fledged budget, should target and nurture this vote bank more carefully. It is desirable that the FM announces a fixed pension of Rs.10-15 thousand for the marginal farmers of sixty years age. The Pension Fund Regulatory Development Authority could be asked to look at avenues for mobilization and disbursement.

Direct Cash Transfer, the ‘game changer’ has become a non-starter in a few states as Aadhar the base instrument has not been delivered with the requisite integrity and speed. This may find some mention in the Budget.

This pre-election Budget is the most challenging for this experienced Finance Minister.

NPAs loom large: spare the tax payer

During the recent meeting the Secretary, Financial Services had with the public sector bank chiefs anguished concern surfaced over the looming NPAs. As the owner of PSBs GOI is naturally upset since it has to refurbish the capital from its budgetary resources for the shortfall in capital. If the PSBs fail, it will be a sovereign risk. Can we look at the areas and causes for the rise in NPAs to the extent the RBI data has thrown up in its Report on Trend and Progress of Banking in India 2012?

PSB NPA data reveals that the actual amount of NPAs is equal at Rs.563bn for both the priority sector and non-priority sector credit dispensation. While accretion of further NPAs in priority sector is prevented by reducing the credit flow to such category, in respect of non-priority sectors, corporate debt restructuring has been liberally resorted to, to convert non-standard assets to standard assets. This is what made the regulator think of introducing 5% additional provisioning for the restructured assets classified as standard assets. That most Banks did not achieve the priority sector credit allocations stands in evidence for this reasoning. NPAs of 2012 compared to 2011 in agriculture moved up marginally by 0.2 percent while for the micro and small enterprises it declined from 17.6% to 14.9%. Correspondingly, the NPAs in non-priority sectors increased from 48.2% to 53.1%.

During the last ten years these banks moved to credit risk assessment of non-priority sector to technology platforms and due diligence of enterprises and directors is more by the data they have been able to secure and not by proper enquiry. Credit origination has gone more by macro analysis of the industry than by prudential micro analysis.

Public sector undertakings, real estate sector lending, infrastructure lending to airlines like the Kingfisher, roads and power sector take the blame. The origination process is through videoconferencing and group review of the credit parameters. Larger the credit faster it flowed. A more discerning analysis reveals that the export oriented manufacturing industries sharing approximately 8-10 percent of the credit to manufacturing sector are actually under the guaranteed mechanisms of ECGC and therefore, their migration from the standard to NPA would take more time than the normal. On the other hand, credit to the commercial real estate, tourism (tourist traffic increased during the last three years going by the increased occupancy in the star hotels), Hotels and restaurants, NBFCs are not impacted by the global economic forces. The asset value deterioration is more a result of faulty credit origination than global impacts to which recourse is invariably taken when accountability for rise in NPAs is sought. Fall in growth rate of the economy and inflation are the visitors to the rationale. Systemic risk and provisioning norms also join the blame game.

Despite introduction of risk management practices under the Basel regime, why the Banks are moving on the ascending graph of NPAs? This is because such risk management is viewed as the responsibility of CROs than of the risk assessers. It is the lack of proper risk appetite and risk culture across the organization that is responsible. Risk management is viewed more as regulatory compulsion than as an essential ingredient of their micro operations. Enterprise risk management is yet to sink in the banks. Learning processes in acquiring risk culture are also at very rudimentary stage. The officials feel overburdened with work on the system and seem to have no time for learning! A few of the corporate head offices earlier used to send periodical industry briefs to their officers. With the introduction of sectoral information flowing through the various networks and private researchers, banks’ CEOs expect that their officers should get better informed than ever on macro and micro prudential sectoral and industry appraisal. Somehow this seemed to have taken a backseat bowing to rigorous timelines for sanction more than for the rigour in monitoring credit flow.

Even if 50% of priority sector credit that constitutes 37-38 percent of the ANBC or off-balance sheet asset exposure this would be far less than the 50% of the balance credit portfolio. The concerns of the Ministry may be justified from this angle. But what is required for growth of the economy is the increase in credit to GDP ratio that is dependent on risk appetite. The other aspect requiring attention is the involvement of the Government in refurbishing capital whenever shortfall arises. As long as the CRAR is far above the required 9% is it necessary to refurbish the capital? Second, is it not prudent to shed some share in capital when the market is responding well to investments in banks than meeting out of the tax-payers’ money? It is time that the Government gives a re-look at the recommendations of Narasimham Committee I and II in this direction. Governance has scope to improve when this happens with a diversified Board taking more accountability.

*The author is an economist and Regional Director, Professional Risk Management Association, Hyderabad. Contact: yerramr@gmail.com

Budget 2013-14 the tough lines

Budget 2013: Bold initiatives needed in a tough year ahead.

In the political context of the nation, it is difficult to expect the Budget 2013 would either be path breaking or reformist. General Elections are due in 2014 and the 2014 Budget would therefore be vote-on-account budget. The current budget is in the backdrop of low growth continuously for two years both in agriculture and manufacturing with no early hope of revival, unabated inflation albeit marginal fluctuations and rising current account deficit- the highest so far at 5.2%. Fiscal Budgetary Management has already been put on the backburner. RBI has put out a report on State Finances this month that dries up any further hope on States coming to the rescue of the Centre in containing the fiscal cliff we are nearing. FM started his discussions with the stakeholders to see where he can gain the corners.

One of the fundamental principles of taxation is: at the higher levels of income, the tax has to be progressive and at the lower level, regressive. The Direct Tax code kept this in view. It is not unlikely that as the system matures and cash economy gets lessened, the tax rates would be further rationalized from the existing three slabs of 10, 20 and 30 percent of the taxable income. All exemptions shall be withdrawn. But at the moment there seems to be remote possibility for any further rationalization of rates.

The recent hike in fuel and gas prices and the rationalization of related subsidies as also the rise in rail passenger fares leave no hope of inflation coming down. Monetary policy of the RBI towards the fag end of this month may at best make marginal changes bowing to pressures of the stakeholders and the government. Leaving to itself the RBI should prefer to keep the rates unchanged. Hence the fiscal measures are the only remedy.

Incentives for investments should come from the growth rather than through the exemptions and fiscal management. The measures to ensure growth need not necessarily come from patting the rich and an open invitation to the dollar economy to take over India. In the context of our poor rank in the league of nations at 97 out of 131 in the Economic Freedom Index, it is time to revisit the perverse incentives in health and education sectors and reverse them. If the FM tackles health and education sectors and increases investments to ensure good health, safe drinking water, universal free education up to class X, growth will emerge as a natural process due to enhanced people’s ability to work hard, save a good pie for productive consumption and healthy recycling of the economy.

My suggestion would be: let each corporate hospital provide 20% of every type of health service to the poor, women, and senior citizens on the basis of Aadhar and all such cost incurred by the Corporate should be qualified for exemption of tax. Similarly, all educational institutions that admit 20% of the students belonging to the poor for providing learning and learning tools, again on the basis of Aadhar information, not on the basis of caste or creed shall be also similarly exempt from tax. Universal education would be a goal nearer to achievement in the process.

In fact, I would venture to suggest that the best way to reduce imbalance and ensure growth is through increasing the share transaction tax from the current level of just 0.15% to 0.35% at both the ends of the transaction. There will be a hue and cry immediately after such increase but the dust would settle down eventually. The philosophy behind is that the buyer sells for a future gain and the seller sells for avoiding immediate loss (a loss of expected surplus). In a way both are gainers. The tax is paid out of only the surplus. The tax is not going to be regressive just because it is done at both ends of the transaction. The tax collection expenses is almost nil as the de-mat account generates the tax payable, deducts at source and immediately it gets into the Government Treasury. There is no tax collector or tax inspector here. The tax income so collected is available to the Government immediately for investment in either social expenditure like the pensions payable to the widows, physically handicapped and the like or for meeting the natural calamities immediately after their occurrence. Actually, to this extent even the corporate tax structure can be rationalized from the subsequent years. This would help the Fiscal Responsibility Budget Management significantly.

Budget 2013-14 Suggestions

Dr Rangarajan's  proposal to put a surcharge on the higher income brackets progressively is a worthy suggestion at the right time; this can be at the threshold of Rs.10lakhs-20lakhs: 3%; >Rs.20lakhs-30lakhs: 5%; >Rs.30lakhs: 10%.

Another progressive measure could be raising the share transaction tax above the threshold level of transactions, say above Rs.2lakhs where the small investor gets incentive to invest and the large investor pays to the exchequer a STT of 1% instead of the present nominal STT. The third measure to reduce fiscal burden would be doing away with the Parliamentarians and legislators getting Rs.5crores to spend in their constituencies through the Constituency Development Fund as most of such spending has been ill-spent as revealed by a number of studies. The fourth area could be to reduce the personal security provided to the legislators only for the Z category. The fifth area could be taxing the Parliamentarians and legislators for non-attendance and for the non-participation in the various standing committees of the Government. These would certainly reduce the fiscal burden of the Government.

The other most important area where subsidies have to be re-engineered is farm sector: Restrict subsidies to the small and marginal farmers so far as input subsidies are concerned. Provide a market stabilisation fund and extend support whenever the prices for farm products fall below the cost of production plus a minimum profit for the farmer. The recommendations of CACP could hold good for this purpose.

Bullock cart to Small car - growth story does not end here

Bullock cart to small car – growth story does not end here.

India’s bullock cart moved to motor cycle and small car economy. Most grooms in rural villages, tribal villages not excluded, demand motor cycle as part of the wedding gift from the in-laws. If this is a sign of growth, we did grow. Yet the farmers’ are committing suicides and still fight on the streets for their produce to reach markets and after reaching, for a fair price. All the predictions of rating agencies at the beginning of the year, CRISIL, CARE etc., that the economy would grow to 6percent in the least has been belied. That the economy would grow only by around 5.3-5.4 percent during the current fiscal remains a hard reality.

India’s economic growth is inextricably linked to growth in farm sector that constitutes around 14percent of GDP. This has slowed down to around 2.5percent. Manufacturing sector driven by poor farm supplies and global recession did not move up beyond 8.2 percent in the third quarter of this fiscal. Services sector that constitutes 56-58 percent is largely dependent on overseas markets that moved sluggishly throughout the year. We have to be content with 5.3 percent growth in the overall GDP in the third quarter, lower by four notches from the previous quarter.

Unabated inflation with no signs of easing in the next quarter has only exacerbated the weaknesses in the economy. Monetary authority could not accede to the demand for interest rate reduction to speed up credit for the lagging manufacturing and construction sectors.

Volatile capital markets, growing current account deficit at 4.3% of GDP and a budget deficit of 6%, dashed the hopes of revival of the economy, notwithstanding the ‘so called reform regeneration’ that was initiated amidst roaring corruption scandals and large scale bureaucratic inefficiency.

The policy paralysis hitting till the second quarter though relieved, action paralysis could not be overcome. The New Year has to less to cheer about with the weak law and order, reflected in the most concerned and agitating crowds forcing their way to the Rashtrapati Bhavan. 

Speaking of good governance is akin to smelling jasmine in fish and fowl market. There is brazen violation of the Constitution by even the UPA ruled State like Andhra Pradesh. The 97^th Constitution Amendment Act 2012 dealing with Cooperative legal reforms and governance statutorily seeks a State Election Authority to conduct elections to cooperatives and the States are to carry out all the amendments required before February 14, 2013. The State that has been postponing elections to cooperatives for the last two years announced them hurriedly to have the last laugh on their subversive methods of winning the elections. The New Act would not allow non-active members to cast their vote. The ruling party is afraid of losing hold on the cooperative societies that hitherto formed the bedrock of State politics.

A Model Cooperative Liberal Act drafted by a well-meaning NGO and circulated to all the States did not even merit acknowledgement, demonstrating the indifference of States to correcting misgovernance and mismanagement, the two evils that prevented the growth of cooperatives, through the Constitution Amendment Act 2012.

The FM hopes that the Banking Regulation Act Amendments would pave the way for the foreign banks to open branches in India and that they would also contribute to financial inclusion while the Indian banks find branches to be expensive outfits and financial inclusion turning up as a ritual.

Cash subsidy linked to Aadhar trumpeted as ‘pure magic’ touching a fringe by the end of the fiscal 2013 in the experimental districts in the country would not take much time to be a cropper with the backing instrument yet to demonstrate its efficiency in content and delivery.

We have not been able to diversify our export markets significantly away from the US and Europe still fighting with recession woes. The sustained market is domestic market where the middle class is surging ahead fighting against odds. Youth continues to be the hope of the nation. These two green patches should leave some hope for revival. Nobel Lauriat Joseph Stiglitz sounded caution on growth model pursued by India with export markets as destination. On the other hand,  he wanted the rulers to concentrate on domestic markets and enhancing employment and enterprise promotion to drive the consumer spending.

A redirection of expenditures on education and health and continuous and responsible monitoring of investments in these two areas for prompt execution and conscious institution building efforts with the help of civil society organizations, sans foreign donations, could pave the way of quicker growth in 2013 and the small car economy gets the speed on smooth roads.

*The Author is an economist and Regional Director, Professional Risk Managers’ International Association, Hyderabad.

The Despair and the Hope 2013

The year ends on a note of despair. 

The NDA approved Twelfth Plan with a revised pragmatic growth of 8% for the plan period. From Kaushik Basu to Assocham predictions for growth of the economy this fiscal stay put at no more than 6%. European markets continue to destabilize global situation with less hope of revival than the US markets, where the fiscal cliff is addressed legislatively and affirmative action.

RBI is more pragmatic and makes it range bound 5-6 percent. All the Ministries involved in infrastructure development are bit by scandals galore and cases of corruption engulfing them. Welfare ministries have excess expenditure and ill-directed subsidies. Fiscal deficit has reached unsustainable levels. Public sector disinvestment takes a beating.

Poverty measured by the number of mobile users and the increase in the self-help groups though has declined; its definition from the altars of power created flutter and remains unresolved. No State can claim reliable statistics on the poor.

The so-called reverse of policy paralysis is caught in action paralysis at the end with the wasted days more than the functioning days of the Parliament.

For fifteen days, youth all over the country, are driven to streets with the most heinous rape incidents demanding legislative and judicial actions to remedy the gender crime.

RBI in its latest Financial Stability Report rings alarm bells. The non-performing assets of the public sector banks that occupy 80% of the country’s financial space are proving to be a perpetual worry in the backdrop of even extended start date for Basel III capital norms to come in from 1^st April 2013 instead of 1^st January 2013. Current Account deficit at 4.5% is at unsustainable levels.

Federal relationship has put the tax reforms on the edge. The Direct Tax reforms and the introduction of GST are in imbroglio.

Cash transfer scheme slated for 40 districts initially halved by the target date as the back-ended AADHAR has thrown up many data inconsistencies and corrections even in the districts that issued the ID cards to all the citizens. The schemes linked to PDS and gas distribution consuming more subsidies had to be put on hold for introduction till April 2013. Verification and validation of Aadhar card data is proving tough. Banks’ and Post Offices’ preparedness to introduce the scheme leaves much to be desired.

Inflation is still on the rise and measures to arrest gold imports to respond to demand pressures announced as though it is a New Year gift from the Finance Minister would hardly contribute to stabilization of the volatile commodity markets. Supply side issues have been addressed inadequately.

Both Health and Education sectors are bogged down with insufficient budget allocations and inefficient administration in most States.

States’ respect for the Constitution is on the wane demonstrated by the unresponsiveness to the only progressive legislation of the UPA Government in 2012- the 97^th Constitution Amendment Act 2012 that targeted correction to mis-governance and mismanagement of the Cooperatives, the fourth economic pillar of the country.

Still the ethos of India built largely on optimism hopes for turning the tide in favour of value-driven growth and equity.

The basis of my hope is that the Federal Relations are under review by the veteran past Bank Regulator and a former civil servant, Dr Y.V.Reddy. second, the tough measures suggested by the RBI for arresting the concentration risk from NBFCs dealing with gold-based financial products, and the revised pricing mechanisms for fixing the gas and energy prices suggested by Dr Rangarajan in his latest Report awaiting clearance from the Governement. SEBI has already moved in for more reforms in the capital markets.

  I would certainly join the chorus of hopefuls at the beginning of 2013.