Monday, November 26, 2012
India’s financial regulator at loggerheads!
Ironically, unrelenting mysterious smiley’s from the RBI’s head is troubling for this dreaming nation alike, as finance ministry responds every such move with the irritated doses of ‘we will march alone’ and other principles, which are practically unconquerable. A close look on the financial policy making suggests the inherent contradiction within it. The ambiguity on two goals, respectively, lower inflation and high growth is the basic reason behind the unusual mock and verbal tussle between north block and mint street. This unworthy raw is a fruitless exercise without having any clear end in its sight.
The RBI’s stubbornness on keeping interest rates in anti-growth mode has deteriorated the chances of bouncing back for Indian economy, which is grappling with a very odd combination of high inflation and lower growth. In all, the rational part of governance is completely lacking even now, for pushing up the momentum in right course. Earlier, the meltdown sentiment had favoured RBI and its conservative role with ‘no touch and playing safe’ approaches were hailed like ‘concert of chimes’.
Those difficulties have given a new sort of complex time for the Indian financial market, where the issues of working or not on the stated agenda are heavily depends upon the rapport, finance ministry and RBI maintains. It utterly disappoints, the way RBI is losing ‘ease’ with the government and attention from the core issues. Here, it will be also worthwhile to recall that somewhere government too is overstepping in the shoes of central bankers-the abrupt announcement of more private sector banks in the budget speech of Pranab Mukherjee and later lax handling by the RBI on this shows the prevailing s state of affairs.
After twenty-one years of liberalisation programme, Indian economy has grown up in the size and maximization of the wealth is also no longer a ‘non-reality’ for the different income groups. But in these years, the income gap has also spiraled up like never before and the ‘income security’, which both the good socialistic and capitalistic system necessitates, as the programme to execute has been cornered over the years. The system, which walks with the two foremost powers- regulation and capital, is not keeping concern for an equitable system under immense pressure from the cronies and political classes, with large though hidden business interests.
However, not to miss the case of allowing fair and advanced banking in the country, the RBI must ensure the action requires without stopping the strict regulatory watch over the players in the fray of financial sector. As at some point of time, the buzz of innovation too needs careful handling. On this count, the RBI has so far responded well with treating the exotic financial products quite stringently. But its proactive part remained in hibernation, when chances arose to lift the Indian financial market out of working below potential.
Once the RBI was a well shaped moderator but under the changing pattern of financial businesses, it’s falling in the league of its peers, where the desperation is virtue in dealing with the stagnant economies. Much to dismay of the optimists, finance can no longer be handled with the extreme of liberal or stringent set of rules; instead believing in the capacity of spontaneous action by the leadership would make tone much better. In all weather and season, the RBI’s governor should know the pulses of economy down from the rural terrains to the up-market areas of metro cities.
The balancing exercise would be critical here to the further course of action for India’s financial market. The combination of populist politics and over mechanized economic bureaucracy would do no well to the India’s economy, which is in perplexed state on its own future. Knowing where to act effectively in the policy making would solve the petty issues in the high circle that causes endless troubles to the believers of sound financial administration. Access to the institutional finance plays vital role in ensuring the fair chances of employment for the youths.
The entrepreneurial zeal is not weak in India albeit more practical banking approaches are the need of this hour. Still, it would be wrong for the RBI or finance ministry to compare India with the western economies, which have shaped through the different historical developments and ofcourse with the support of colonial projects. India can’t go artificially in the history for overlooking on odd economic issues.
Unlike, India as a new nation and old civilisational land, needs to keep growing and under the aegis of its commendable democratic system. Neither the totalitarian China nor the lightly floating USA would make India, what its majority of people dreams relentlessly. The loggerheads must stop and RBI should think for the common men and business communities too, as nothing would go untoward hereafter!
Atul K Thakur
November2nd, 2012, Friday
(Published in Governance now,dated on November10, 2012)