The other day, Prime Minister Dr Manmohan Singh did meet the Editors of various Channels. Starting from alphabet (a) Aaj Tak to (s) Sun TV, the venerable Editors who are the present King Arther and his Knights in their shining armour sat on a rectangle table for an inter-action. Each one of the Editors, was given one question to ask, but many made up their skill by posing compounded questions and putting supplementary. This crowd made of the top electronic media, represented the cream of the Fourth Estate.
As usual, contemporary topic prevailed. One or the other question related to this. All of you know that 2 G was the mother of all scams until ISRO-Devos scam surfaced. It was pegged at 2 lakh Crore. 2 G scam CWG was regaled to the back burner. But different agencies used different barometers to weigh the scams. Raja and Kapil said no revenue loss! Did they mean, we got no revenue hence no loss? CAG estimated the loss at Rs 1.76 lakh Crore. They worked their figures based on the sale of Spectrum in 3 G, and its equivalent frequency cost to 2 G. CBI estimated it at Rs 50,000 Cr.
While one varied with the other figure, and each differed widely on the basis of methodology, a question was put to the Prime Minister of India, during the Press meeting by an elite journalist. Prime Minister did not equate losses in the 2 G scam with the subsidies to the Poor. He asked the audience, if auctions don’t take place, how do you estimate or calculate a loss? We have a budget which gives subsidy for food, Rs 80,000 Cr/annum some people may say that these food grains should be sold at market place. Because it is not sold at market place, but given as subsidy, do you say it is a revenue loss? Queried the PM. That he used the comparison of Food subsidies made political parties, newspapers, and raise brouhaha. The Prime Minister compares the loot of a scandal to the Poor man’s bread. The PM used the comparison of food subsidies to drive home the point of allusion to facts and nothing more.
Suppose, you say that Revenue from Liquor is a major Central Excise levy. Government advertises people not to drink, and highlights the problems caused by drinking. Cigarette is revenue. Government is taking all actions to curb its use. Would you say that the Government is justified in popularizing that “Cigarette smoking is injurious to health”. There are people who barb that Corruption is in-separable in India, yet they are the first people who pay something to get something done. I am not for a moment suggesting that people like Raja or x should be left scot free. Law should take its own course. But while saying that he did not condone Corruption, which he said will be dealt with most seriously, comparison between an activity at one point of time and another activity at another point of time will not yield a realistic picture. Circumstance makes it so. When Arun Shourie dealt with the Policy of FCFS on Spectrum allocation, our country’s use of mobile phones was negligible. There was no demand. No mobile phones. When Reliance institutionalized its availability, telephony became very popular, and today, Spectrum price has gone up abnormally. Price rules the supply, and incessant demand chases supply. Every body knows that fancied Chinese goods won’t last. Yet, people buy it for fancy prices. Commerce Ministry which should have slapped dumping is sitting quiet. Our Prime Minister is a clean man, sitting between the ‘devil and the deep sea’. Let us not harass him.
Monday, February 21, 2011
Monday, February 14, 2011
Obituary: Small Coins
Obituary: Small Coins!
Is Coins that were exchanged at times of continuous inflation, lost their purchasing Power? We present a Coin, and in exchange we get something in return. In major stores, franchise stores thanks to the glare of Globalization sweeping Indian economy, like never before, the bill amount in paisa is rounded off. If the bill comes to less than 50 paisa, it is omitted, and if it is more than 50 paise, it is rounded off to the next Rupee. Nobody complains.
The other day, an Old man came to my door seeking some charity. Today, nobody will accept anything less than Rs 10/- for any kind of philanthropy. The so-called Civic Society, if they are collecting money for a good cause or no cause, they would like atleast Rs 50/-. Rs 100/- would be better.
The aluminum coins of 5 paise, ten paise and twenty paise will disappear and will become a non legal tender from June 30, 2011. Metal coins of 10 paise and 25 paise also will cease to hold value. They will go to some Numismatist who may keep it as a Vestige.
There was Re 1/- issued by the Secretary, Finance, Govt of India. Today, it has disappeared. Rs 2/- was also in circulation. It is rarely seen. The difference between Rs 1/- and Rs 2/- was the first variety was issued by GoI, while Rs 2/- was issued by the Reserve Bank of India against security back-up.
With the obituary to these small Coins, 50 paise coin will be the smallest coin that will have validity. All the other smaller denomination coins will lose its parity in terms of purchasing power.
Whenever we take about the value of Rupee, we say that the Rupee is equivalent to 20 paise or 30 paise etc. Now, with these small coins going to antiquity, the value of the Rupee against its purchasing power will be compared to what. Today Rs 45/- is equal to a Dollar. They say that Rupee has become stronger to the Dollar. When the Rupee: Dollar parity goes down in Rupees, we say Dollar has improved in its value. Exporters will cry hoarse, if more Rupees will be equal to a $. Some time ago, there was strong rumours that Rs 1,000/- will be demonetized. This would facilitate money coming into the Open.
Bank Chiefs always say there is enough liquidity in the system. Only sometimes, there is movement of money. If you go to semi urban banks, they will say that they have no currency to pay. Some ATMs will not give you money, but will say, Transaction closed. And the money you pressed will be debited to your account. You will have harrowing time to get a reversal of the wrong debit. No body would say for want of a 10 paise coin, one’s battle was lost.
Good bye small paises!!!
Friday, February 4, 2011
Practice what is preached?
In UPA’s second avatar, our well learned Economic Professor, who is presently India’s Prime Minister, seldom speaks. When he speaks on rare occasion, like the one he did before the Chief Secretaries of States recently, it was pearls of economic wisdom, erudite scholar’s thoughts, which flew like the Ganges which carries all the filth, mud, dead humans, unconcerned.
His cure to the dreaded scarcity of essential commodities was, waiving mandi taxes, octoroi and local taxes which impede the smooth movement of essential commodities.
His Second doctrine which “demeans us against our own people” is the Corruption strike at the roots of good governance and denting country’s international image.
His third prescription was that the economy was on a high growth trajectory for the past few years, but it was ‘inflation’ that posed threat to the growth.
He felt that there was a need for paradigm shift in institutional arrangements for improving the availability of various commodities to meet the higher levels of consumption.
There were times in independent India, when he adhered to “Mixed economy” philosophy. But down the line, we were comfortable transforming ourselves to the “Business economy”, when economic institutions preached liberalization and globalization, reverse foreign investment by Indian mega companies. In order to grow, sub prime lending rate allowed mega companies to become mammoth companies, car lending, funds for housing, higher purchasing power amongst the middle class put India to growthtrajectory, etc. Then, the coalition Politics unwound the “economic economy” , where priorities were accorded to Social causes like 100 days Compulsory work, writing off agricultural loans worth Rs 70,000 Cr, BPL subsidy under PDS, and many such freebies.
Taxation by the Central Government through budgetary exercise, direct, indirect, scaled new heights. Service tax, which was Rs 500 Cr in 1991 budget skyrocketed to Rs 50,000 Cr in 2010 budget, Petrol prices were de-linked from Government control and vested in the oil companies which raised the same periodically. Let us thank RBI which has said that 25 paise and less than 25 paise will cease to exist , so from now on, the increase will be minimum 50 paise, but concurrent increase over the last six months’ was Rs 10/- over the previous price. The diesel prices were vested with the Government, and its alterations not under the purview of Oil companies, because Diesel constituted a major use of big businesses and government! Oil Seed cultivation is in chaos, do to excessive import of edible oils. While the proportion of domestic supply:: Foreign import was 50::50, some livid mind thought it should be changed to 50:50, but the imported oil exceeded the demand by 30%. Added to that, in the name of inflation, the customs duty was made “zero”. Countries, in order to up the import c.i.f price resorted to taxation, “export tax” so the price looked higher than that was the domestic price; hence WTO penal clause was avoided. Import has been going on indiscriminately, thereby, the indigenous edible oil industry has produced lower and lower growth figures, which may ultimately result in 100% import of edible Oils. Again using the ‘inflation’ doctrine, Government is contemplating banning exports.
RBI has no grip over the economy. They reduce interest rates and say that the monetary ends are stable. There is a multiplier effect in the interest Policy. If credit interest rate becomes lower, the savings rate will also become lower. According to RBI, saving money and lodging it in Banks instead of recklessly spending it, will fuel ‘inflation’. When the Opposite happens, the RBI tightens the policy, allows increase in interest rate not through raising interest rates, a power now transferred to Banks as “base rate”, but by fiddling with REP rate, reverse REPO rate, CRR, etc. In India, demand is over-estimated, supply under-estimated. When inflation creeps in, Government reverses its Policy, demand under-estimated and supply over-estimated.
When the economy is between the devil and the deep Sea, major scams worth lakh Crores of Rupees have been detected proving to the world, that Deviant Globalization (Nils Gilman) is a part and parcel of Indian economy. Instead of Indian money stalked in the Indian Banks, the money finds its way to tax heavens, with Government doing nothing about it to bring back the money.
Prime Minister should act, instead of theorizing the well-known economic theories which mean nothing to the Common Country man or tax payer.
His cure to the dreaded scarcity of essential commodities was, waiving mandi taxes, octoroi and local taxes which impede the smooth movement of essential commodities.
His Second doctrine which “demeans us against our own people” is the Corruption strike at the roots of good governance and denting country’s international image.
His third prescription was that the economy was on a high growth trajectory for the past few years, but it was ‘inflation’ that posed threat to the growth.
He felt that there was a need for paradigm shift in institutional arrangements for improving the availability of various commodities to meet the higher levels of consumption.
There were times in independent India, when he adhered to “Mixed economy” philosophy. But down the line, we were comfortable transforming ourselves to the “Business economy”, when economic institutions preached liberalization and globalization, reverse foreign investment by Indian mega companies. In order to grow, sub prime lending rate allowed mega companies to become mammoth companies, car lending, funds for housing, higher purchasing power amongst the middle class put India to growthtrajectory, etc. Then, the coalition Politics unwound the “economic economy” , where priorities were accorded to Social causes like 100 days Compulsory work, writing off agricultural loans worth Rs 70,000 Cr, BPL subsidy under PDS, and many such freebies.
Taxation by the Central Government through budgetary exercise, direct, indirect, scaled new heights. Service tax, which was Rs 500 Cr in 1991 budget skyrocketed to Rs 50,000 Cr in 2010 budget, Petrol prices were de-linked from Government control and vested in the oil companies which raised the same periodically. Let us thank RBI which has said that 25 paise and less than 25 paise will cease to exist , so from now on, the increase will be minimum 50 paise, but concurrent increase over the last six months’ was Rs 10/- over the previous price. The diesel prices were vested with the Government, and its alterations not under the purview of Oil companies, because Diesel constituted a major use of big businesses and government! Oil Seed cultivation is in chaos, do to excessive import of edible oils. While the proportion of domestic supply:: Foreign import was 50::50, some livid mind thought it should be changed to 50:50, but the imported oil exceeded the demand by 30%. Added to that, in the name of inflation, the customs duty was made “zero”. Countries, in order to up the import c.i.f price resorted to taxation, “export tax” so the price looked higher than that was the domestic price; hence WTO penal clause was avoided. Import has been going on indiscriminately, thereby, the indigenous edible oil industry has produced lower and lower growth figures, which may ultimately result in 100% import of edible Oils. Again using the ‘inflation’ doctrine, Government is contemplating banning exports.
RBI has no grip over the economy. They reduce interest rates and say that the monetary ends are stable. There is a multiplier effect in the interest Policy. If credit interest rate becomes lower, the savings rate will also become lower. According to RBI, saving money and lodging it in Banks instead of recklessly spending it, will fuel ‘inflation’. When the Opposite happens, the RBI tightens the policy, allows increase in interest rate not through raising interest rates, a power now transferred to Banks as “base rate”, but by fiddling with REP rate, reverse REPO rate, CRR, etc. In India, demand is over-estimated, supply under-estimated. When inflation creeps in, Government reverses its Policy, demand under-estimated and supply over-estimated.
When the economy is between the devil and the deep Sea, major scams worth lakh Crores of Rupees have been detected proving to the world, that Deviant Globalization (Nils Gilman) is a part and parcel of Indian economy. Instead of Indian money stalked in the Indian Banks, the money finds its way to tax heavens, with Government doing nothing about it to bring back the money.
Prime Minister should act, instead of theorizing the well-known economic theories which mean nothing to the Common Country man or tax payer.
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