Thursday, February 28, 2013

The Policy Muddles at Mint Street

The RBI (Reserve Bank of India) has been the master of all weather and seasons concerning India’s financial sector. It holds the pulse of the national economy with tempestuous effects. But even with all its prominence, the RBI has seldom crossed the contoured spirits which obfuscate the existing macroeconomic scenario. The scrimmages from its side are causing the fixture of topsy-turvy status in the policy domain, finally making the broad brush more frequent than the desirable spunky actions.

Until two years back, the world was witnessing the central bankers’ sullen acts; India was indeed a sort of exception so far. But things have entered in torsion once India’s impregnable finance ministry and the RBI got struck in the endless war stimulated by the egoists.

It’s clear that the finance ministry is the most important place in India after the Prime Minister’s Office. This sounds awkward, but becomes evident when seen against the recent reshuffling in ministries, when the serving home minister was called to hold the command of the economy.

This marks the moral bankruptcy, as the new finance minister will be hardly reckoning the plight of the economy which originated through the clash of interest between real and rave components. Moreover, he lacks the critical tributes like acceptance and expertise for handling a diverse economy like India’s.

This mischance will boost many inside the RBI, who earlier relied on static and soft monetary policies that at least in the last one and half years have cut India from both of its central economic ideologies based on “half-willing socialism” and “half-sighted dreams of reform.” Among the list of blunders, the RBI’s extraneous policy regarding the licensing of new banks under the private sector refers the unique misunderstanding of the whole issue.

It’s obvious that the RBI is not keen on banking licenses for corporates, not to work with any neo-egalitarian model of banking based on the “maximum happiness” of clients of different types and figures, but for securing the power to supersede the boards of existing banks and leaving the case of banking expansion in its backyard.

The insistence of the central bank on amendments to the Banking Regulation Act by the Parliament as a prerequisite for any potential flex on banking licensing is flawed and objectionable. It may be true that none of India’s NBFCs (Non Banking Financial Companies) are fit enough for the award of banking business, though the many interested public sector entities could be taken for a ride under the joint venture in private partnership.

Also, there would have been nothing wrong by downing the obstination on allowing the corporate world at large to enter the fray of banking based on competency, not by the channel of cronyism.

By the impression of numbers, India’s corporate sector is performing, but by the spirits, in no manner is it worth calling robust. For example, almost all heads of India’s private sector banks have downplayed the chances for a few more private banks, citing the already high competition and its aftereffects on their businesses.

These were all untoward statements with no technical precision or understanding of a height of possible stagnation with which India’s banks will be reckoning sooner rather than later. Banking should be a means for the profit, but not for the oligopoly; unfortunately, the reverse is the case in India today. Not surprising in the present scenario, if the SBI (State Bank of India) has lost its tag of being the most valued bank in market terms from one of its shrewd peers.

Notwithstanding its actual role, the RBI is maintaining silence over the future growth of India’s financial sector, which has been safe, more for its undersized ambition than the claimed prudence. This is totally ironic watching the curtain coming down on the future of India’s more than 55 percent unbanked citizens, and overall the growth of the financial sector at large.

The path India’s banking has traveled so far hardly allows one to part the views between progressivism and ultra-materialism; here the things have to be seen in the right context. Public sector banking was more a hedging intervention, so it would be unfair considering the nationalization of banks as the complete socialistic manifestation. PSBs/RRBs (Public Sector Banks/Regional Rural Banks) played their role immensely well and would do more good under the perfect competition around every nook and corner.

Not even remotely, the arrival of a few more banks would harm their business; contrarily it would help the sagging market sentiments to get an upward touch. Instead of fearing and sharing those misleading apprehensions, the RBI should create a true healthy work culture in PSBs/RRBs, which are remarkable by their business and reach. RRBs especially deserve a much better deal in terms of human resource policies. It’s shocking to see the RBI/finance ministry’s dualism in taking them as at par with the PSBs, where the service benefits like pension are now the part of system.

This discrimination should be ended by introducing the service provisions, including pensions for the RRBs employees on the line of PSBs. With more than 17,000 branches across India’s rural heartlands and small towns, RRBs can be seen as the engine of rural growth in India -- so they need an immediate broad unification at the national level with an effective professional board, which can lead the rural banking for more inclusive businesses.

India’s jobless growth or the slow industrial momentums are the outcome of chronic pessimism from the RBI for the mass issues. It’s not more than an excuse in passing the fault on global financial uncertainty by India’s policy regime for the present mess-up at the domestic front. The last two decades of India’s growth story were based on the domestic consumption strength, rather than on any other fancied factors.

This is high time for India’s central bank to move clearly and with a well- defined goal for keeping the Indian economy robust and promising. Certainly this would be a better replacement over the current placid show off, which exudes nothing except the aura of gloom. The change in attitude of the RBI will determine the course of India’s growth story and its global economic status.

Atul K Thakur
Can be emailed at:
(Published in India America Today on February10,2013)

Tuesday, February 26, 2013

Inglorious trends!

The history tells that throughout the stretches of history, India has been plundered by the imperial forces. But still it remained home to every ethnic race known to mankind. Even the better social accords were attained in those adverse times, but sadly this nation drifted from such healthy course once it succeeded to force out the nefarious British Empire in 1947 from its land.

We know the truths of later time, how a nation turned into ‘three’ and the unresolved ‘Kashmir’ sandwitched for bad taste between India and Pakistan. Gripped through prejudices, and short on framing a suitable stand on Kashmir, India has been missing its chances to come in proper terms with the aspiration of Kashmiris’.

Naturally, this leads to ‘collective alienation’ among those who were never given the proper benefits of citizenship that India’s constitution essentially mandates for its citizens. Over the decades, leadership (including separatists) in Srinagar and New Delhi has shown indifferences to the basic notion of democracy and instead has followed their own chosen myopic path.

Consequently, Kashmir’s real issues were submerged in those ego clashes. Though turbulences never stopped surfacing in Kashmir, but in recent years, valley was moving towards an unusual normalcy. The disenchantment from external actors and growing self belief in a better future, based on sensible activism and leaning for the “beauty of compromise” were leading that positive change.

But the situation will not remain the same with the hanging of Afzal Guru-his trial would be remembered for misallocating judicial verdict for the falsely courted ‘collective will’. It was never true and it can’t be true. People never demanded such verdict and manner of inhuman prosecution. ‘Crime and Punishment' could be or not a classical case, but certainly the linking of 'collective will with hanging' by Supreme Court itself creates horrific sense.

Afzal was sent to the gallows after ten years in solitary confinement. Even by the record of ‘retributive justice’, one should not be given death sentence after a decade long harsh treatment. Even when the matter was sub-judice, such consideration was not given any heed and now when Kashmir is under siege, Supreme Court has extended the stay on hanging of four accomplices of Veerapan.

These four unfortunate persons will see the institutionally recommended death after having straight twenty years in the dark cells of Karnataka jail. The question arises, what makes India’s legal system so cynic and blood thirsty? Will it check the growing crime or make the situation worse? The Indian state is on the verge, where ‘thaw’ forms or ‘melts’ depending upon what a certain class thinks.

This confirms, today Indian state has its periodical choices and selective consideration over the crucial issues like ‘justice’. Again need is to remind, this is not a systemic collapse but it’s a position moulded by the virulent rise of violent identity politics. This is not a new phenomenon but a return of ‘sordid way of action’ from past. This makes the situation tense by dividing the existence as between ‘us’ and ‘them’!

Obviously 2013 is not 1984, and certainly Afzal Guru was not as firm as Maqbool Bhat was for a ‘separate Kashmir’. But still he was hanged and without even allowing a last time meeting with his family. Was he given the prosecution for his crime (as known for) or the Indian state suddenly found a taste for brutal overplay on the sensitive matter attached with mass sentiment?

Through the account of Afzal Guru’s letter, he wanted a normal life after he quit the path of militancy in mid nineties. That didn’t work out. This can’t be answered by any expert who has dealt with his case related to the attack on India’s Parliament in 2001. Because the points he made in his later, I am afraid would never get cross-checked. And if, they were cross-checked, why not the findings are in public?

The failure of legal processes and horrific compulsions of politics are in cocktail producing the most dangerous elements, upon which the radical voices would get louder. And those who are in Kashmir and suffering the ire of curfewed nights and forced curtailing of free voices would be prone to fall in another wave of alienation. This will do no good to India’s further maneuvering in Kashmir and in any case, to Kashmiris’.

The political class, who pursues the weird ideas, will keep staying in the corridors of power. The blind blow of ‘consumerist politics’ In India will give no chance to the voices from Kashmir or North East to challenge its heartless celebration of success, which is meant for few who dine and wine unrelentingly and in absolute bonhomie. India’s claimed commercial feet are so antagonistic that it easily appears like a consolidating disaster.

Pakistan couldn’t be shaped as it was dreamt by Jinnah because of chronic political deviation from the basic issues. Today, India is standing at a different but strikingly difficult cusp where its blind reliance on ‘cronyism’ is making its existence dubious, and hence less respectable. This worries me. This should worry all who really believe in the ‘Idea of India’ but feel cheated when the official authority surpasses even the minimum moral ground.

A nation, once hosted the dissents like Mahatma Gandhi and Bhagat Singh, should be more careful in misusing the authority of ‘violence’. The true rapprochement with the dissenting citizens cannot be established through the acts of coercion, or by denying the position of any genuine stakeholders.

As Afzal Guru was an Indian citizen and he had already spent ten years in jail for the charge he was framed, the government and court should have spent more time in looking on the concerned tasks that could have assess those charges against him more precisely. Rather, he was awarded solitary confinement and finally snoozes on a particular time and date, suited for exhibitions of UPA governments’ tough stand on terror.

Another side of story is that juveniles and matured criminals are raping/murdering girls on street and some of them are the ‘honourable’ members of the Parliament. In such state of affairs, status quo would be a choice of option for the power holders.

Atul K Thakur
Can be mailed at
(Published in The Kashmir Monitor On February19, and syndicated in Rising Kashmir on February20,2013)

Simple, fair politics depicted in My Dear Bapu

Non-fiction; My Dear Bapu by (Ed) Gopalkrishna Gandhi; Published by: Penguin /Viking; Pages 343 pp; Price: Rs599
Over a short gap, after recollecting his old essays for Of a Certain Age, Gopalkrishna Gandhi has come up with another remarkably well researched book- My Dear Bapu. This time, the strength of the book is unusually coming through the letters exchanged from C.Rajagoplachari to Mahatma Gandhi, and also in former's affectionate correspondence with Devadas Gandhi and Gopalkrishna Gandhi.

The letters compiled into this book give a glimpse of the India's independence movement and quite broadly show the difficult circumstances, in which leaders worked to attain the independence. But it also exposes albeit mildly with some letters, how Raja Ji like many other senior leaders didn't play the same important role post independence.

A certain drift of idealism in politics could be found from the letters, written after 1947-it matters, as it's sensed very early by Raja Ji. This book in great deal brings out the reasons of close personal and well as the political intensity between C. Rajagopalachari and Mahatma. The frequent correspondence reveals the urge of these two iconic figures to maximise the chances for a future democratic republic, for which they were fighting hard and selflessly.

Both were finest communicator, and loved writing letters. Nehru had equally penchant for letter writings, he continued this till he remained in the helm of affairs. Both these leaders were not unaware from that fact that freedom struggle was much more than a struggle to end the British rule. It was more a struggle to come in terms with the ideas of freedom and universal rights. It was an imminent collective sentiment shaped by the early bearers on Indian democracy, and they were determined to end the wrong of past.

Unfortunately, only the parts of those dreams could be realised in actual, once the British left the ruling land. Probably a sense of complacency influenced few selective leaders, who were enjoying immense authority, which derailed the actual imagined course of nation making. If Gandhi was a Mahatma and CR his 'conscience keeper', that was because of their intention and not through the impression of moulded opinions.

CR was an independent thinker and politician, but it's essential to know, he was a true Gandhian in larger sense. As the book finds, he played formidable role to make South India completely in the fold of independence movement. The letters published in this book constitutes a rich document on a very critical phase of India history. In those phases, the fate of Indian sub-continent was on the cusp of a major shake.

The later part of the book streamlines those exchanges between the Mahatma and CR, which had family matters in centre. Devadas Gandhi became CR's son-in-law, though the bond between the two was close for long. CR remained Mahatma's 'conscience keeper' and he never availed his high political privileges for personal gain. Even when Devadas died early, he didn't try to push his family into politics, which was very much possible at that time.

The history of modern Indian politics would have entirely different, if majority of the first generation politicians had shown preoccupation for power. The letters have been arranged into a remarkable book. The editor has edge being insider and pre-eminent chronicler of modern India, so the book is here for showing the better picture how India's makers worked together in difficult period and later, the same tradition could not be saved. The letters are supported with the dates and sources, so provide authenticity.

CR's letters to Devadas Gandhi are filled with familiar nuances, though his letters to his grandson, Gopalkrishna Gandhi, are full of affectionate concern and pride in his intellectual progress. In sharing the qualities of Edmund Burk's writing to the normal but very essential wisdom with young grandson, CR appears a proud grandfather. Both shared very fine rapport and this book is result of that.

My Dear Bapu enables the reader to know the beauty of simple and fair politics. In the time politics is getting synonymous with all wrong, this book would be truly valuable for those who feel the 'sense of losses'. For looking back to the causes of deviation in public life, no source could be more genuine like the "letters" exchanged among the front-rank leaders. Those documents would not require the intervention of historians for judgments.

The editor of this book has appeared in the prolific role of enabler but he seems agreed to leave upon the readers to take the meaning of correspondence through their own will and understanding. This is the best merit, he infuses in the book and allows enthusiast to delve in deep, why nation is being adrift from its own ideal? The ideals came with innumerable sacrifices. The book begins in stillness of simpler time but ends with many question marks on the present state of affairs, India as a nation is confronting!
Atul K Thakur
(Published in IBN Live,on February18,2013)

The irony of paradoxes!

Studies show that the overall effect of micro-credit is not essentially income enhancing but mostly in income smoothing, in making credited people more capable to buy goods or services that they cannot otherwise afford.
In all the ideas of financial accountability, financial inclusion is most important. Nevertheless, the policy circle represents it awkwardly and measures it by the number of new enterprises created which is flawed. The primary concern of the lending should be to target the prepared individual, who is capable to run a business and nurture entrepreneurship. In most cases, beneficiaries of the institutional credit do not use it for the sake of enterprise or for the purpose of income-generation.

Rather they spend credit given to them on conspicuous objects or for household expenses. Studies show that the overall effect of micro-credit is not essentially income enhancing but mostly in income smoothing, in making credited people more capable to buy goods or services that they cannot otherwise afford. The need is to create more micro-enterprises through the credit disbursement, but that requires the Indian financial sector to be more robust and responsible.

The wrong driving notion of ‘innovation’ is sabotaging the basic aims of banking in India. The point should be that we need something more than buzz of mobile banking and business correspondents. Giving prominence to undeserving ideas causes as much irritation as seeking ‘financial inclusion’ through the ambiguous financial products like-Participatory Notes and Sovereign Wealth Funds. The grim fact is, banking in India has failed to either catch the best spirits of socialistic planning or the goodness of open economy.

One of the big issues of financing in India is the ‘credit culture’. This is not strong and effective. In blurred vision of lending and unethical faith in not returning the credit makes the credit culture highly unsustainable. The proof of ‘Priority Sector Lending’ holds primacy among those India’s beautifully made constitution has absorbed this to ensure fair credit to the weaker sections and enterprising activities at bottom level.

Unfortunately, it was totally mistaken by the banks operating in India as guard against any extra demand of inclusive banking. Except Regional Rural Banks (RRBs), no other banks in India completely follow the constitutionally enforced PSL-the commercial banks lend as required, 1/3of the total credit on easily sourced fictitious enterprises or by buying the loans of RRBs or from some functional cooperative banks.

Even this worst comes up when RBI makes tight effort of attainment.

Though the small businesses are important, they cannot be a major source of job creation. They create jobs but many walk away from business. Growing or established businesses can create sustainable jobs. In that case, small local banks such as RRB benefit by lending to SMEs to keep them floating. If business thrives on bank credit, naturally the lending banks will be equally benefitted. Private MFIs have failed to function in desired competency, as their working model is not supported by the rationale of inclusiveness.

The static structure of large banks is a disadvantage when it comes to offering micro-credit. For SME credit in an example, an important consideration is the kind of structure which enables them for credit.

That is less transparent and recede chances of positive lending. In effect, the engines of growth/SMEs starve for funds. Here the basic argument is India’s large banks are relatively bad in giving customised loans. They ignore the marginal utility of the time and specific financial requirements, which matters earnestly to the small local customer.

This tendency mars the idea of inclusive banking, whatever the size, Indian banks could reach by having segmental business focus, but it would be not able to hide the unrelenting follies at ground. The local area banks, like RRBs are still doing well and could do better, if given them the parity as equal as the PSBs are getting from the government and regulators. The smaller banks can serve local populations much better and here requires lot of work to be done.

In popular perceptions, nationalised banks are trusted because these could be identified with the government. But the concern is their service levels, which is not good in rural areas. Another grave trend is not having the private sector banks’ concentration on agri-business or in promoting the farming. It’s very surprising as all second generation Indian private sector banks have presence in tier-III&IV towns.

The RBI has to act fast in making banks more open for compliance and also infusing the spirit through policies. The understanding should be that ‘social concern’ doesn’t make any adverse impact on core banking businesses. At this point of time, India banking cannot afford the ‘static mode’ in which Western financial institutions are addicted to function. Comparatively, Indian banks are stood with better chances to thrive on the huge domestic demands; this way the aim of ‘financial inclusion’ will be also meet.

But the RBI has to work very hard for this as Indian banks follow no voluntarism most of the time. After the long spell of policy inertia, the RBI is finally making plans to allow more licenses to new banks but that alone will not guarantee its entering of bonhomie with the finance ministry. Still they stand at distances while discussing the fate of economy. This dumps the prospect for change.

Progressing into 21st century amid volatile global financial scenario, Indian policymakers must heed on the larger questions related to the economy.

It will be nothing more than ‘complacency’, believing that Indian economy has really overcome the harsh outcomes of economic meltdown. With a directionless capital market, almost fridged insurance sector and passive banking structure, this claim will not go too ahead. Lately, the realization about mishandled policies and passed time would be more rational. Also this will help in dealing the situation, which is no longer as rosy as it was before 2008.

The double digit growth is now a distant dream and even for a timid target, struggle has to be intense!
Atul K Thakur
(Published in Governance now on February05,2013)