Monday, March 26, 2012






General V.K.Singh has done well to come out with revelations about the rise of corruption in the Armed Forces.

Putting aside the inconsequential and directionless sparring matches that happen between the Congress, the BJP and other Politicos in the media – the fact of the matter is that neither the Hon’ble Minister for Defence Sri A.K.Antony  nor General V.K.Singh  can be the butt of any investigation  either by the CBI or by any organization on the sum of Rs.14 Crores that was very casually mentioned in a casual conversation between the General and a retired Army official. 

The instant case of Rs.14 Crores is not the  important aspect that needs investigation. For one reason that – no one has really offered this Rs.14 Crores nor has any one accepted nor is there any credible, legally acceptable evidence of bribery in this instant case. 

Whom are we going to prosecute for a casual conversation in which a casual remark was made? It looks extraordinarily na├»ve – from my personal view point to castigate either General V.K.Singh or the Defence Minister – for not acting more seriously on this casual Remark at the time it was made. Even Now, simply for the reason that the General has revealed it in press, a CBI or such other investigation is not called for on this Rs.14 Crores against either the General or the Defence Minister.  

In other words, This huge uproar on this one case of Rs.14 crores which was neither offered nor accepted nor is there any credible, legally acceptable evidence of an actual bribe – is therefore meaningless. But, if there is an investigation exclusively on this Rs.14 crores, which doesn’t exist, the CBI investigation has to look at the laxity of both the Minister and the General – and neither can be excluded from the purview of the investigation – for not taking preventive steps  - which is also a crime. 

Will Government accord sanction for investigating the General and the Minister – and then for their prosecution?

The direction of this effort, the chasing of these shadows, looks ridiculous to me.

Leave the General and the Minister. They are both Honest Men. The General’s whistle blowing focuses attention on  the corruption on Defence Purchases. And, it is Good – coming from the senior most officer of the Army.

What matters to be seriously considered and accepted therefore is – that there is huge corruption in Defence purchases and that needs to be totally eliminated. 

Dr. Manmohan Singh, the prime minister, needs to decisively tell his colleagues – that “India needs a strong Lok Pal Bill. We can’t waste a single day on this. Let there be a strong LokPal Bill, which is acceptable to the Majority in Parliament.”- and he must ensure that Parliament passes a Strong Lok Pal Bill. The whole country will remember him for this one noble act – for all time to come.  Like - we remember Dr.Seshan for his bold measures in cleaning the election processes.

Aiming for consensus on this issue is meaningless.

It is in this context that - whatever Team Anna members are saying, makes sense. Some members of Parliament may not want a strong Lok Pal Bill – for purely personal reasons – that they may become the immediate target of the strong Lok Pal. So, they will oppose a strong Lok Pal Bill. So, there can never be CONSENSUS on this. Saying this – by Arvind kejriwal or other Team Anna Members should not be construed as an affront to Parliament itself.

The point they are asking is – Is there huge corruption or not? If yes, why are you not passing a strong Lok Pal Bill? Why is there a very weak Lok Pal Bill before Parliament?

With the stink of Corruption emanating from all corners of Government, can we still hold on to an elusive consensus – which implies support for the Anti-Corruption bills from the corrupt people also – and can we go on postponing the passing of a strong Lok Pal Bill on that pretext?

Today, it is the General who blew the whistle. He is an honest man and he has brought the attention of the whole Nation to this urgent task of cleansing the Defence Purchases from the stink of corruption. Did he put out a paper yesterday on this? Why did he not act as per law this way or that way – are meaningless questions – in my view. 

Had he done that – somebody would have tried to find some small omission or commission on the part of the General in his service career and put him in a dock for a flimsy reason – which is what happens in India. That is what is happening to team Anna. That was what happened to Baba Ram Dev. Many RTI activists and whistle blowers are actually getting killed – by the corrupt and the mafia – and still we are not serious about the corruption. And, we want to proceed against whistle blowers. 

In this case, it is the General. Why doesn’t the Government proceed against CBI itself which came out with startling figures of Black money? After all, somewhere, CBI also may have failed – which is why ( we can say) so much Black money has reached foreign banks. Can we say, why didn't you give the info, when the amount was one fourth of this? why did you not stop the black money from going out?

But, is this a sensible direction to take, when the CBI has given valuable information, even if a little belatedly,  to the Government  - to act? It is for the Government to act on this - not to castigate CBI for coming out with these figures.

We must proceed against corruption and Black money and not against people who point at it or against people, who agitate against it. If CBI has said something against Black Money, it is for Government and Parliament now – to act – to bring back that Black money and arrest their further channels. If the General has said some thing - it is for the Government to act on the larger issue he is focusing on.

I think, the country must wake up to the useless diversions that we are taking and we must demand a commission consisting of higher judiciary, the CVC and some retired Generals to investigate the whole gamut of corruption in the Army and put in place strong measures to root out corruption in the Army. 

At this point of time, witch hunting will only demoralize the whole Army – by taking directions which we do not intend today.

In other words, stop the diversion of CBI enquiry and appoint a high level commission to  root out corruption in Army.

This is what is needed.

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Tuesday, March 20, 2012



Foreign Direct Investment is welcome into any country – in sectors in which it is needed. Each country has to identify the sectors in which it needs FDI and aggressively promote and canvass for such FDI in those sectors.

Developing Countries like India FDI in many critical sectors. We do make appropriate noises on FDI at times.

But when FDI comes in – there are huge problems in India for whoever brings in the FDI. This is inexplicable.

Take the case of Vodafone. The transaction took place off-shore. The taxation rules do not allow the taxing of such transactions. The Highest Court of the Land has ruled so – after examining the issues involved – in great detail.

Then, the Government goes to the Supreme Court again – with a Review Petition. Now, the Supreme Court has rejected the Government’s review Petition also – as having NO MERIT.

But, we do not stop there. Even while the Review Petition was pending before the Highest Court, the Budget proposes a review of all such cases of foreign based transactions -  during the last 16 years – and we RESTATE our Intention (of the Government) in its Decades Old Rules that we always wanted to TAX  such transactions – though there are no such words in the Tax laws as they exist. 

Is this needed at this time? Has not Vodafone proved extremely beneficial to Indian Telecom – rising to a close No.2 position and spreading telecom to all nooks and corners of India.

How much did India get by way of various taxes on telecom equipment, telecom services etc? The credit goes to AirTel and Vodafone – mainly – in relentlessly enhancing the Tele density in India to the levels of the very Advanced countries.
So – is it worthwhile – to find all possible ways to get over even Supreme Court Verdict -  and tax this transaction, and probably many such other transactions? Does it not scare away Potential Investors into India? Trust and friendliness are what attract people into any country.

Even if it was the REAL INTENT of whosoever made laws 16 years ago – to tax all such transactions but they failed to put in proper words to that effect – even if this be so – is it worthwhile taxing all of them NOW? No one can blame the Tax department from taking a view which enhances TAX REVENUES in a year in which they are falling short. But, the Government needs to take a more long term view of the REAL NEEDS  of India.

We need to build TRUST and FRIENDLINESS  in the minds of Foreign Investors and Domestic Investors – to invest aggressively in India. India will benefit hugely from such a mindset – rather than from extracting a onetime tax revenue and break that trust and friendliness. That type of decision can only come from the FM – not from Tax department, which has a vision cut out for itself.

It is not a question of one Vodafone. Many cases of FDI get stuck in India for different reasons. When someone comes with FDI, he doesn’t seem to get the treatment he deserves. He doesn’t seem to get the treatment our proclamations on FDI seem to suggest to them.

Whether FDI or Indian Investment, there must be RED CARPET invitation to the BIG INVESTORS and Entrepreneurs – for, it is they, who are creating wealth in India, Jobs in India, GDP in India, per-capita Income in India, Tax Revenues in India, social services in India, even philanthropy in India – just to mention a few benefits.

Also, most entrepreneurs are not embroiled in murders, rapes, thefts etc and are usually abiding by all laws. Most of the entrepreneurs are CLEAN. Many of them are like MODEL CITIZENS. They need to be encouraged.

India must allow both local and foreign entrepreneurs some freedom to invest, expand and bring benefits to India. The Indian laws must be much more enabling than at present.

These initial investments must not be seen purely from the stand point of some tax revenues. In fact, they must be specifically exempted from all taxes. Please get the FDI or IDI in first. The Tax Revenues will flow later automatically, for a long time to come. All initial investments and investments for expansion must be freed from all Taxation. These are the monies that ensure the long term health of India.

We need FDI. We must be really very, very clear that we need FDI which creates JOBS and INCOMES in India and enhances Tax revenues on a more permanent basis?

There is a huge clamour for FDI in Retail. We want to see Walmart in India. Many Political and media pundits and even some Corporateurs are dishing out arguments – saying that Walmart and other FDI Retailers – will do this, that etc to our Farmers, to our consumers etc and create a virtual heaven in India. No one TALKS ABOUT THE RETAILERS whose livelihoods are likely to go! We cannot be having a policy of robbing Peter to Pay Paul.

Did the Walmarts and other Foreign Retail Biggies bring any such great benefits to farmers and consumers where they are already operating? There is absolutely no proof for this. Then, why are we hell-bent on taking away the professions of Indian retailers in very large numbers in this sector. Whether Farmers and consumers benefit or not – there is not an iota of doubt that small retailers will suffer badly.

Also, there is no guarantee that only the likes of Walmart will come with FDI. FDI from not so friendly countries will probably be the FIRST to set foot in this sector. We already know that Indian retail market is already swamped by Chinese products – without any FDI limits.  There is real need to protect local manufacturers against these products. Many news reports have hinted and highlighted this need.

On the other hand, there is huge scope for FDI in Defence Production. India has two great neighbours – whose friendliness towards India is never clear. Each has its territorial claims also on India. In such a scenario – FDI in advanced Defence production through Foreign-Indian-Government partnerships is the NEED OF THE HOUR. In fact it was needed decades ago. India can and must allow equity participation even up to 49% also - by Advanced Defence equipment producers from friendly countries like US, UK, Russia etc. Control can however be retained in Indian Hands.

Sri Pranab Mukherjee’s Budget of March,2012 – is certainly very Good in many aspects – in the circumstances in which it is presented – with some of these exceptions. He has proved to be a master economist, who can steer clear of all bumps and holes in the economy –except of course, one or two aspects, like the ones highlighted above.

The request from all is – please let go of this RETROSPECTIVE CHANGES in taxation, which scare away all FDI. On the other hand, introduce a few changes, which clearly encourage FDI in Defence, Telecom, Aerospace, even Road Building and so on – and offer MORE TAX SOPS AND EXEMPTIONS for such investment.

It is certainly good Business sense that where we don’t have the money or  the skill – we get both of them from whosoever has them. But why will he come unless things here are at least as easy as in his home country?

Hope, we will see some welcome moves in this direction – from our Finance Minister, making this year’s Budget, the best in recent years.

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Sunday, March 18, 2012


100th 100

People do get sick…,do get old…,do become weak…,do become incapable of doing what they did effortlessly a few years ago…,and then …,they do fade out.
It happens to everybody. Many thought much the same thing – when  Sachin failed to get his hundredth hundred – for over a year.

Even Sachin must get older; lose concentration; fail (to play) consistently; and disappoint us consistently for over a year.. It was happening every time he batted during last one year or so. 

Yet, we (I) waited…,and waited…,and waited…some of his ardent supporters (many, including me) were not losing patience….but some were losing patience…

Many of the impatient men..the media men, the critics…all the off-field, arm-chair experts…, had started criticizing the Cricketing God…, stressing that older cricketers must fade out into cricketing oblivion – and probably, become enlightened bureaucrats, like K.Srikkanth…,or Sunil Gavaskar. Give chance to younger their advice…, their argument. 

K.Srikkanth was himself drawing flak (as selector) on why he was not demanding strictly for the 100th 100 from the little master. Tell him to – Get the hundred or get out. Something like that.

We must all be a little more understanding than that. After all, we can’t get another Sachin, to hit a century of centuries, in a century (of years).  It is now or never. This one Sachin or none else.

After 99 100s,  another small hundred will need to wait for its time. Sachin usually takes some time scoring that one run after scoring 99 quick runs to reach his ton. In same manner, he took quite some time, to take his 100th century - after his 99th ton. 

If we knew that - it had to be against Bangladesh, we would have invited Bangladesh or gone to Bangladesh long ago – instead of wasting time on England, Australia, Sri Lanka, Pakistan, South Africa etc. Bangladesh, any way is improving its cricket very well and is an increasingly unpredictable side. Congrats, B’desh for your win - especially after Sachin’s Century.

Had this happened an year ago - with the pressure off his mind, the little master would have again assumed the role of a master Blaster, and hit the Aussies and all others to the covers all through one year. The Maha’ Government would have pressured GOI for a Bharat Ratna for the Great son of M’Rashtra, who claims to be first an Indian and then, anything else. 

I like him much more - for this one statement, than for his 100 100s – because, not one in a hundred (or in a 100 100s) seem to feel so in India now a days. Youngsters (and not so youngsters) in India must all learn this one idea (or ideal) from Sachin and live by it. The country needs it - more than Cricket.

If that happens, Sachin will deserve B’Ratna too – but not for his 100 100s in Cricket. If a 100 patriots say  – be Indian ,Buy Indian (etc) – our Youngsters are in no great mood to listen. But, if Sachin of the 100 100s Fame, the cricketing God of our times, says that- our youngsters will surely listen.

Indian public mind – that is, our mind- is very peculiar. If MS Dhoni hits a 50 we are satisfied. We go into raptures (for a while). But, If Sachin hits 60  –we are dissatisfied. We condemn him. 100 is his Pass Mark. We are all unjust, cruel , biased, one-eyed monsters. We want a hundred from Sachin. Always. 

Otherwise – We may even throw stones at him – like some people sometimes do in Pakistan against Pros(Prostitutes) and we may cry for his blood. Give us a hundred or RETIRE!

This was the battle cry in some sections of media, on the streets, on the internet and all over the world – where the name of cricket is known, or at least, the name of Sachin is known.

Why is he not retiring, if he can’t even hit a hundred – many were asking impatiently. Don’t you have the guts to retire him – some openly asked the selectors. Yet others wonder openly – why are the older players like Sachin not retiring, making way, for younger players?

Some one else, other than Sachin, would have fretted, fumed, and retired in a huff, when such things happen. But, Sachin did have strong protagonists who fought the battles on his behalf, from his side. 

Show us some from amongst youngsters, who has done better than Sachin, even in 2011? Was he at the bottom of the scoreboard – or in the averages in 2011? If so, fine, retire him; fire him; but, if he is still among the top  5 even in 2011 – how can you retire him?

Locate the worst performers in the team – and FIRE THEM! Not one of the best performers, simply because, he is older than the worst performers. Admittedly, 2011 was virtually a washout for Indian cricket. Our cricketers FAILED INEXPLICABLY, but consistently. It was a Grand Team failure – with no one really shining. In Batting, bowling and fielding – we failed.  

Our bowling proved its weakness conclusively in 2011. It is proving to be so even in 2012 – as we saw against Bangladesh in which we lost - even after a marvelous century by Sachin.  We have just won a marvelous match today against Pakistan – by exceptional batting from Virat Kohli (183 –his 11th ODI ton) , Rohit Sharma(68) and of course, Sachin (52). So,2012 can prove to be a turn around.

After the disaster against Bangladesh – who can say that Sachin should now be fired and the rest of the team retained????

In India most people are emotional, some are philosophical, but very few are scientific – in temperament.

When a team wins 4 matches in a row – we retain the winning team for the next series, or for the next year and so on – including all the duds in the winning team. When we win, we get intoxicated – and then, even the desert looks green. It happens to many teams perhaps – and we are not an exception. But, when we lose – everyone looks a dud.

We  search for those youngsters who are talented –  we encourage them when they do well – we drop them all of a sudden even after they do well – and then, bring then back when they are emotionally down – and drop them if they don’t do well..and it goes on in quirky steps. The Yuvraj Singh Ad says it all. 

Will Sachin hit another hundred Centuries? Well. Mr.Yogendra Yadav can put this to vote and find the result – which we all, already know.

But, Sachin can convert many Indians to the much needed nationalistic philosophy of “I am an Indian first”. When Sachin Bats on field with this LOGO ON -  He can perhaps convert a 100 100 100 Indians into saying and feeling this intensely.

It doesn’t matter how many hundreds and half-hundreds or even half-of half hundreds he hits – but, he must play on for a long time to come to do this – and get his Bharat Ratna – just for this one service. Not for a 100 100s with Bat and Ball – which deserves a New, highest SPORTS HONOUR / AWARD.

But, if he does get B’Ratna, I will still congratulate him. It is just that – I want GOI to search for people  WHO ARE DOING EXCEPTIONAL SELF LESS SERVICE for India, and there are a few who are doing that – and honour them with B’Ratna. 

To draw  a comparison – Bill gates deserves no (B’Ratna like) awards for creating his Microsoft and becoming Number one billionaire in the world. But, he certainly deserves such an award for giving up more than 1/3rd (so far) of his wealth for saving the lives of millions of suffering people.

I love a few quotes on Sachin – and these are here :

·         A placard at the SCG: Commit all your crimes when Sachin is batting. They will go unnoticed because even the Lord is watching.

·         Peter Roebuck: On a train from Shimla to Delhi, there was a halt in one of the stations. The train stopped by for few minutes as usual. Sachin was nearing century, batting on 98. The passengers, railway officials, everyone on the train waited for Sachin to complete the century. This Genius can stop time in India!!

·         Barry Richards : Sachin is cricket’s God

·         Hashim Amla (South African batsman) : Nothing bad can happen to us if we’are on a plane in India with Sachin Tendulkar on it.

·         Mark Taylor : We did not lose to a team called India…we lost to a man called Sachin – (in Test match at Chennai 1997)

·         Harsha Bhogle : If sachin plays well…India sleeps well.

·         Kris Srikkanth : He is the only match winning batsman we have

·         Ranatunga : You get him out  and half the battle is won

·         Sachin Tendulkar : I want to give my six hours of serious cricket on the ground and then take whatever the result.

·         “To Sachin, the man we all want to be” - - What Andrew Symonds wrote on an aussie t-shirt he autographed specially for Sachin

·         “The joy he brings to the millions of his countrymen, the grace with which he handles all the adulation and the expectations and his innate humility -all make for a one-in-a-billion  - individual” - -Glenn McGrath

·         “Even my father’s name is Sachin Tendulkar.” -  -Tendulkar’s daughter, Sara, tells her class her father’s name after the teacher informs them of a restaurant of the same name in Mumbai.

·         Question: Who do you think as most important celebrity ?
Shahrukh: There was a big party where stars from bollywood and cricket were invited. Suddenly, there was a big noise, all wanted to see approaching Amitabh Bachhan.  Then Sachin entered the hall and Amitabh was leading the queue to get a grab of the GENIUS!! 
-A quote of Shahrukh Khan from one of his interviews

·         “I WILL SEE GOD WHEN I DIE BUT TILL THEN I WILL SEE SACHIN “ - -Displayed on a banner at a cricket ground

·         “Sachin cannot cheat. He is to cricket what (Mahatma) Gandhiji was to politics. It’s clear discrimination.” - -NKP Salve, former Union Minister. This was when he was accused of ball tempering.

·    “There are 2 kind of batsmen in the world. One Sachin Tendulkar. Two all the others.”-Andy Flower

·         I have delayed my shoots many times to watch Sachin bat" - Filmstar Amitabh Bachchan.

·         "I don't watch cricket much but I admire Sachin Tendulkar. I like the way he has conducted himself over the years. He has been such a huge star for so long but has not had a single controversy against his name." - Olympic bronze medallist boxer Vijender Singh.

·         "The best thing about Sachin Tendulkar is that he's completely rooted, down to earth, and a thorough gentleman. He's probably the best thing to have happened to Indian cricket and maybe Indian sport as a whole." - Indian tennis star Sania Mirza.

·         Sachin is 99.5% Perfect.. I'll pay to watch him play. - Viv Richards

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Thursday, March 15, 2012

Mid-Quarter Monetary Policy Review : Dt.15th: March 2012 OF RBI - Seeking Fiscal Discipline Good - But, RATE CUT CANNOT WAIT - GROWTH MUST HAPPEN - FOR INFLATION TO COME DOWN

Mid-Quarter Monetary Policy Review

Dt.15th: March 2012

The times are unusual. Earlier on, we had the Railway Budget – which was hailed by the Ruling Party, the Unions in Railways and many others – but, it saw Mamata Banerjee the leader of TMC fuming at the raising of Passenger Fares and asking for replacing Mr. Trivedi the Railway Minister who belongs to TMC with Mr. Mukul Roy, another member from TMC. On 15th, we had the Economic Survey from the Finance Minister, which had lots of visionary statements. But what the FM will do in the Budget has become a puzzle, looking at the visionary Economic Review. We will see and digest the Budget, which is the REAL THING, when it actually comes.Sri Pranab Mukherjee is one of our best and Most Astute Ministers - and we do hope he will bring forth a reasonably Good Budget.

On 15th, we also had the Mid-quarter Monetary Policy Review from the RBI. The following are the salient points from the RBI’s  Review :

Monetary and Liquidity Measures
        Cash reserve ratio (CRR) of scheduled banks remains unchanged at 4.75 per cent of their net demand and time liabilities; and 

        the policy repo rate under the liquidity adjustment facility (LAF) remains unchanged at 8.5 per cent.

        Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.5 per cent.

        RBI reduced the CRR by 75 basis points from 5.5 per cent to 4.75 per cent effective March 10, 2012 – due to persistent structural liquidity deficit beyond the Reserve Bank’s comfort level, which would have further worsened during the week of March 12-16 due to advance tax outflows.

Global Economy

        After 3rd  Quarter Review of January 24, 2012, there has been modest improvement in global macroeconomic situation. US economy shows some positive signs. In particular, labour market conditions have improved. However, the US Fed expects that economic conditions warrant exceptionally low levels for the federal funds rate at least through late 2014. 

        The immediate financial market pressures in the euro area have been alleviated to some extent by the European Central Bank (ECB) injecting liquidity of more than one trillion euro through the two long-term refinancing operations. Growth in the euro area, however, turned negative in Q4. The emerging and developing economies (EDEs) are showing signs of growth slowdown. As a result, the global growth for 2012 and 2013 is expected to be lower than earlier anticipated.

        Inflation pressures in both advanced economies and EDEs moderated towards the end of 2011 on account of subdued domestic demand and correction in non-fuel commodity prices. Global crude prices, however, have spiked suddenly reflecting both geo-political concerns and abundant global liquidity, accentuating the risks to growth and inflation.

Domestic economy


GDP growth [year-on-year (y-o-y)] decelerated to 6.1 per cent in Q3 of 2011-12 from 6.9 per cent in Q2 mainly reflecting a slowdown in industrial activity. On the expenditure side, the growth moderation was mainly due to a deceleration in investment activity and weak external demand. The Central Statistics Office (CSO) has estimated the full year growth for 2011-12 at 6.9 per cent, which is in line with the Reserve Bank’s projection.  

        Growth in industrial production, as reflected in the index of industrial production (IIP), moderated to 4.0 per cent during 2011-12 (April-January) from 8.3 per cent in the corresponding period a year ago. While growth in the capital goods and intermediate goods sectors was negative, growth in the basic goods and consumer goods sectors decelerated marginally. Given the significant volatility in IIP numbers, the Reserve Bank also uses several other indicators to assess the overall industrial activity. The Manufacturing PMI for February suggested that industrial activity remained in an expansionary mode. While corporate sales growth in Q3 of 2011-12 was robust, margins moderated, reflecting increasing difficulty in passing on rising input prices. 


        After remaining above 9 per cent during April-November 2011, y-o-y headline wholesale price index (WPI) inflation rate moderated to 7.7 per cent in December and further to 6.6 per cent in January 2012, before rising to 7.0 per cent in February. While moderation in WPI inflation stemmed mainly from primary food articles, fuel and manufactured products groups also contributed.

        Primary food articles inflation, which was modest at 0.8 per cent in December, turned negative (-0.5 per cent) in January 2012, before rising to 6.1 per cent in February. Despite the sharp increase in global crude oil prices, fuel group inflation moderated from 15.0 per cent in December to 12.8 per cent in February, reflecting the absence of commensurate pass-through to domestic consumers.

        Non-food manufactured products inflation moderated from 7.9 per cent in December to 5.8 per cent in February 2012, reflecting both a slowdown in domestic demand following the monetary tightening and moderation in global non-oil commodity prices. The momentum indicator of non-food manufactured products inflation (seasonally adjusted 3-month moving average inflation rate) also showed a moderating trend.

        Notably, Consumer Price Index (CPI) inflation (as measured by the new series, base year 2010) for the month of January 2012 was 7.7 per cent suggesting that price pressures persist at the retail level.

Fiscal Situation

        The Centre’s fiscal conditions deteriorated during 2011-12 (April-January) with key deficit indicators already crossing the budget estimates for the full year. Apart from sluggishness in tax revenues, Government’s non-plan expenditure, particularly subsidies, increased sharply.  As indicated in the TQR, the slippage in the fiscal deficit has been adding to inflationary pressures. Credible fiscal consolidation, therefore, will be an important factor in shaping the inflation outlook.

Money, Credit and Liquidity Conditions

        The y-o-y money supply (M3) growth and non-food credit growth moderated, reflecting the slowdown in the economy. Liquidity conditions have remained significantly in deficit mode.  In order to mitigate the liquidity tightness, the Reserve Bank undertook steps to inject primary liquidity of a more durable nature through open market operations (OMOs) aggregating `1,247 billion during November 2011- March 9, 2012 and reduced the CRR by 125 basis points (50 basis points effective January 28 and 75 basis points effective March 10), injecting primary liquidity of about `800 billion. The liquidity situation has since improved and it is expected to ease further in the weeks ahead.

External sector 

        While merchandise exports growth decelerated, moderation in imports growth was less pronounced leading to a widening of the trade deficit. After the TQR, the rupee has moved in a range of `48.69 to `50.58 per USD. With sluggish demand conditions in the advanced economies impeding exports growth and  crude oil prices rising sharply, the current account deficit (CAD) is likely to remain high. The financing of the CAD will continue to pose a challenge so long as the global situation remains uncertain.


        While the recovery in the US has been progressing, economic activity in the euro area has contracted. Although abundant liquidity injection by the ECB has mitigated the immediate pressures in financial markets, a credible solution to the sovereign debt problem is yet to emerge. Sluggish global economic activity, uncertainty in the euro area and rising crude oil prices will hamper growth prospects of EDEs.

        On the domestic front, while most indicators suggest that the economy is slowing down, the performance in Q4 of 2011-12 is expected to be better than that in Q3. Inflation has broadly evolved along the projected trajectory so far. However, upside risks to inflation have increased from the recent surge in crude oil prices, fiscal slippage and rupee depreciation. Besides, there continues to be significant suppressed inflation in fuel, fertilizer and power as administered prices do not fully reflect the costs of production.


        Recent growth-inflation dynamics have prompted the Reserve Bank to indicate that no further tightening is required and that future actions will be towards lowering the rates. However, notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions.


The above is the summary of the Monetary Policy Review dated 15th, March, 2012.It is largely on expected lines. 

RBI’s release of CRR to ease the tight liquidity conditions is a very welcome Measure.

It is now widely accepted that by and large there was no fiscal or administrative action to control Inflation in the economy. To simplify our perception – it looks as if Inflation is RBI’s Baby, while Growth is No one’s  Baby. 

Various Ministries, both at centre and in states, did almost nothing to curb either food inflation or non-food inflation – and left them largely to natural and market forces. This is not a healthy sign. There must be a strong Administrative mechanism to watch agricultural activity and take prompt action to raise output by increase acreage, curbing hoarding, resorting to timely imports and so on.  In India, agri exports happen easily – but not agri imports, even when agri products prices are soaring sky high.

It is a surprise – that India is waiting for the likes of Walmart to come to India and create storage conditions for Food Products, for Farmers. It is difficult to understand this stand-off of  Government, from basic agricultural needs. Proper Public-Private partnerships must be forged in India to create such storage and transportation facilities and other infrastructure needed for Agri Products. Policy actions are required on this from the central and state Agri/Food Ministries. FDI in Retail is not the panacea for all that India needs in this sector.

It was left to the Hon’ble Supreme Court to suggest river waters linkage. This must have been done from 1947 – and can even now be done in phases. In the absence of this, there is a negative thinking in many states – constructing Big dams and obstructing already flowing water from going to lower riparian states. While the Dams have huge amounts of stored water, which is constantly evaporating, lower riparian agriculture is in doldrums. Many agricultural areas are getting reduced to virtual Deserts. We urgently need a national Water Policy – to prevent these disasters from spreading further. If this is done – India will never face Food shortages or Inflation.
Food Planning must be FOR SURPLUSES – NOT FOR SHORTAGES. This must be the core of any Policy.

Surpluses can be shared with poverty stricken friendly countries – or even with others. But, right now – India still has vast population below poverty levels – which means – at near starvation levels. Our Food Inflation statistics do not take into account huge need for additional food articles – to make Indian Population strong and healthy.

Industrial Growth is coming down. But, non-food inflation – in manufactured articles – persists. High Interest Rates and High taxes make Indian Products costlier than imported products.  Do we need Industrial growth or Industrial deceleration? This is the crucial question that must stare in the face of every policy / decision maker.

Now – RBI’s  stand is if inflation comes down, we will reduce Interest Rates. 

But, only if Interest Rates come down from present sky high levels,  Industrial Growth will pick up, our products will become competitive vis a vis Chinese, Vietnamese and Taiwanese products etc and only when Industrial Growth picks up to meet demand – Inflation will come down.

Now it is like an age-old proverb which says: marriage will happen if madness goes; but madness will go only when marriage happens. 

Madness is due to non-performance of marriage. So marriage is easier to perform, before curing madness.

No one can find fault with RBI seeking more fiscal discipline from Government and reduction in Deficit financing. We do hope, Finance Ministry and other Ministries got the Message of the RBI. The Message is in very clear terms and very timely too. 

But, in real action terms, increasing prices of Oil, diesel and Gas is not a solution at all. This, as in the past, will send a huge, uncontrollable Inflation spiral right across all sectors of economy.  This is not the time for this measure. Expenditure on Unproductive schemes  must be cut down. This is the only way. RBI must send similar message to states. Their unproductive expenditure also needs to be pruned drastically. Else, RBI must impose limits on their borrowings. There cannot be room for fiscal profligacy by States in current Indian situation. Money must be well spent on productive schemes.

This is one side of the Picture. And, this is however no reason – for keeping the INTEREST RATES SO HIGH – and stifling Growth of Indian Industrial activity. Right now – in Indian Markets, we find more Chinese, Taiwanese and Vietnamese products than Indian Products – thanks to Government taxation apathy and RBI’s Rate apathy. We are driving out Indian Products from Indian markets, which means huge unemployment conditions, decelerating Industrial Growth, and long term social chaos. If they are not yet visible, it is because, we do not want to see them.

CSO needs to collect more statistics and better statistics -  and also give us its Expert Interpretation on Ground realities. (That of course, another story)

Even large Industries are currently crying for quick reversal of the current High RATES. Hope the voices of industries like TATA steel and many, many others, who are reeling under the impact of High interest rates is understood by RBI and Finance Ministry both – and a quick reversal of Rates follows soon.

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