In a drastic shift from conventional approach to governance, immediately after being sworn in as CM of Delhi, Mr Kejriwal has got cracking and taken decisions to deliver on two major promises made in AAP’s election manifesto. These are reduction in power tariff by 50% on supplies to households consuming less than 400 units and supply of 20 kilo liter of water per family per month ‘free’ to all those families having a metered connection. For decades, established political system has either reneged on commitments given to the public or acted with a huge time lag giving much less than what was promised. Quite often, winning parties have even slept over till it is time to face electorate again. This pattern...
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2014 dawn – on shaky economic foundation
For Indian economy, 2013 has ended on a sombre note. The beginning itself was tumultuous as growth during fiscal ending March, 2013 plummeted to a decade low 5% and current account deficit (CAD) high of 4.8% GDP, US$ 88 billion in absolute terms. In the third quarter of that year ending December 31, 2012, CAD had hit a scary 6.7% of GDP. Despite reduction in subsequent quarter to a little less than 4%, overall CAD was close to 5%. This was almost double RBI comfort level of 2.5%, reminiscent of 1991 crisis. Fiscal deficit though lower than target at 4.9% was fortuitous – made possible by huge compression in plan expenditure by Rs 90,000 crores (around US$ 17 billion) and...
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Are Indian banks tottering?
The banking system in India is considered to be a rock solid foundation of its economy. Its ‘strength’ and ‘resilience’ was tested during the global financial crisis of 2008 when India survived the mayhem that gripped most parts of the world. However, a glance through the latest Financial Stability Report (FSR) would make us believe that cracks have started developing in this foundation. The Rs 81 lakh crores (US$ 1.3 trillion) banking industry is facing heightened risk. Gross non-performing assets (NPA) – a euphemism for bad loans – of 40 listed banks increased 37% to Rs 229,000 crores (US$ 37 billion) during the second quarter ending September, 2013. Besides, banks have restructured loans worth Rs 400,000 crores (US$ 64 billion)....
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Governance AAP style – will it deliver?
Despite not having an absolute majority and on ‘crutches’ from Congress whose so called ‘un-conditional’ support cannot be taken for granted (already, ex-CM has clarified that this is ‘conditional’ and issue based), the Aam Aadmi Party (AAP) under Mr Arvind Kejriwal has caught the bull by horn in deference to the wishes of majority public opinion of Delhi citizens. Mr Kejriwal draws his confidence not just from overwhelming support AAP got from public during elections and through referendum thereafter but more so from his ‘complete’ and ‘intrinsic’ surrender and dedication to the welfare of the people and no less important, his willingness to govern in an ‘open’ and ‘transparent’ manner. It is precisely this ‘openness’ and ‘transparency’ that gives him...
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Lok Pal – a potent weapon in India’s crusade against corruption
Corruption is the most formidable challenge India has ever faced. This menace has got fully entrenched in the system at every level of governance. It is the biggest enemy of development and well being of the masses. A corrupt politician or bureaucrat in charge of policy making, implementation of welfare schemes, allocation of resources, grant of approvals or licenses, making laws etc is capable of undermining good decisions and causing huge loss to exchequer. Imagine, if this malady afflicts a large cross-section of the bureaucracy and political establishment, the consequences can be horrendous. This is precisely what we have seen especially during the last decade of governance under UPA–I&II. GDP growth has plummeted to a low of less than 5%,...
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Growth held hostage to bureaucratic red-tape
In a recent address to captains of Indian industry at FICCI, Mr Rahul Gandhi, Vice-President, Congress lambasted the ‘arbitrary’ powers enjoyed by an Environment Minister as major stumbling bloc in granting approvals to projects. In this backdrop, it was not just a coincidence that the Union Minister for Environment & Forest, Ms Jayanti Natarajan submitted her resignation though this was camouflaged as being necessaited by the need to enable her focus on party work. At a time when India is trapped in to a low GDP growth trajectory of less than 5%, projects worth Rs 10 lakh crores (US$ 160 billion) are pending clearance at the level of Minister despite approval already granted by environment appraisal panels. Of projects worth...
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Hike in price of domestic gas – defaulter rewarded
In June, 2013, Cabinet had decided to double price of domestic gas from US$ 4.2 per mBtu to US$ 8.4 per mBtu from April, 2014 based on recommendations of a Committee under Dr C Rangarajan, Chairman, PM’s Economic Advisory Council (EAC). However, a notification in this regard was held back in view of a dispute with RIL-BP-Nikko operator of the D 1, 3 fields in KG basin off the AP coast. The bone of contention was a huge shortfall in supply of gas versus the committed quantity under the PSC (production sharing contract). While, Ministry of Petroleum & Natural Gas (MPNG) argued that this was due to a deliberate act on part of RIL not to drill required number of...
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QE taper – Is India prepared to face onslaught?
The QE (quantitative easing) ‘tapering’ – though coming earlier than anticipated – has not led to the kind of turbulence that a mere indication/hint about this had led to in May, 2013. The impact on emerging market economies (EMEs) including India is minimal. Contrary to expectations that quantum of tapering would be steep viz., reduction in asset purchase by US$ 20-30 billion per month, US Fed has announced a reduction of US$ 10 billion a month – commencing January, 2014 – from current US$ 85 billion per month. The FOMC has also alluded to proposed wind down being ‘gradual’ and ‘calibrated’. Thus, unlike May when uncertainties gripped the scene, this time around there is an element ‘predictability’ and ‘certainty’. This...
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RBI must not see ‘inflation’ through prism of bank credit
Too many accolades are being showered on RBI Governor, Mr Raghuram Rajan for maintaining status quo in regard to repo rate (rate at which RBI lends money to banks) and cash reserve ratio (CRR) (portion of deposits bank keep with RBI). In view of consumer price index (CPI) spurting to over 11% during November, 2013 and even whole sale price index (WPI) increasing to 7.5%, stakeholders were anticipating an increase in repo rate by a minimum of 0.25%. Mr Rajan has surprised them by not increasing thereby sending them in a celebration mode. However, there is no room for complacency as the under-current of RBI policy statement continues to be hawkish. The Governor has made it abundantly clear that inflation...
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An introduction to the website
Recently, IMF came out with a statement that giving direct cash support to intended beneficiaries would add 0.5% to India’s GDP. That is a big sum Rs 55,000 crores (US$ 10 billion). Dr Rangarajan’s recommendations on ‘doubling’ price of domestic gas from US$ 4.2 per mBtu to US$ 8.0 per mBtu have put fertilizers & power – prime user industries – on tenterhooks. The ‘red lines’ drawn by Mr Chidambaram for reining in fiscal deficit during current fiscal & 3 years till 2016-17 have profound implications for resurrecting economy to high growth trajectory. Mr Pranab Mukherjee in his Budget speech for 2012-13 gave a road-map for containing subsidies (fuel, food & fertilizers) at 2.5% of GDP in that year...
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