The budget presented by Pranab Mukherjee today has been humourless and disappointingly bereft of Tagore quotes. Quotes from Kautilya are neither here nor there. Stock market also is not humoured. However, the negative reaction of Stock Indices has been overdone and we can expect a sharp pullback even in the course of the day today.
Changes in direct taxes are revenue-neutral whereas indirect taxes are amended to fetch Rs.2000 crore more. This from an economic viewpoint is regressive. Fiscal deficit of 6.8% will not permit reduction in interest rates. Treasury profits of banks will be hit.
In retrospect, this was an eminently expectable budget though few expected such a budget.
Monday, July 06, 2009
Tuesday, June 30, 2009
Political influence in judiciary
In a dramatic disclosure, Justice Reghupathi of Madras High Court told the open court that a Union Minister spoke to him and wanted bail relief for the accused in a CBI case. Political interference in judiciary has become so common that this incident is not taken seriously by many. Societal cynicism is so rampant that this will be forgotten within days.
One is tempted to ask is it the first time that the judge is sought to be influenced. If so, we can genuinely be proud of our system. I assume this is not the first time in which case why is he opening out now? Principles of good governance would require the judge to disclose the minister's name. Such disclosure is however very unlikely.
In the most unlikely event that the minister's name is disclosed, the honourable minister will certainly deny everything and if pressure mounts, he will claim that someone is deliberately misusing his name. Despite our cynicism, this is an issue that deserves to be probed by the Supreme Court suo moto.
One is tempted to ask is it the first time that the judge is sought to be influenced. If so, we can genuinely be proud of our system. I assume this is not the first time in which case why is he opening out now? Principles of good governance would require the judge to disclose the minister's name. Such disclosure is however very unlikely.
In the most unlikely event that the minister's name is disclosed, the honourable minister will certainly deny everything and if pressure mounts, he will claim that someone is deliberately misusing his name. Despite our cynicism, this is an issue that deserves to be probed by the Supreme Court suo moto.
Saturday, June 27, 2009
Saranagati and Thirukkural
Saranagati is an article of faith among worshippers of Vishnu. It refers to complete and unconditional surrender to the Almighty which alone will see us through ups and downs of life and will enable us to reach His abode and be there for ever. Saranagati signifies surrender of man's ego and worship of the Almighty's holy feet.
Sage Thiruvalluvar in seven couplets out of the first ten in his magnum opus 'Thirukkural' talks about the desideratum of total surrender to Him and in particular obeisance to His holy feet.
Couplets 2,3,4,7,8,9 and 10 are unequivocal in their stress on complete surrender at His holy feet.
2) What is the purpose of education if we do not pray at the feet of the all-knowing Almighty?
3) He who contemplates on the Holy feet of the Almighty will be immortal in the holiest place.
4) He who surrenders to the holy feet of the Almighty who is sans deire and hate will have no suffering ever.
7) He alone will be rid of agony who surrenders at the holy feet of the peerless Almighty.
8) Except those who have surrendered at the holy feet of the Almighty , others cannot triumph over the trials and tribulations of material world.
9) Faculties of those who have not surrendered to the holy feet of the Almighty who personifies goodness and purity are as good as non-existing.
10) Only those who have surrendered to the holy feet of the Almighty will cross the ocean of births and deaths ('samsara').
Sage Thiruvalluvar in seven couplets out of the first ten in his magnum opus 'Thirukkural' talks about the desideratum of total surrender to Him and in particular obeisance to His holy feet.
Couplets 2,3,4,7,8,9 and 10 are unequivocal in their stress on complete surrender at His holy feet.
2) What is the purpose of education if we do not pray at the feet of the all-knowing Almighty?
3) He who contemplates on the Holy feet of the Almighty will be immortal in the holiest place.
4) He who surrenders to the holy feet of the Almighty who is sans deire and hate will have no suffering ever.
7) He alone will be rid of agony who surrenders at the holy feet of the peerless Almighty.
8) Except those who have surrendered at the holy feet of the Almighty , others cannot triumph over the trials and tribulations of material world.
9) Faculties of those who have not surrendered to the holy feet of the Almighty who personifies goodness and purity are as good as non-existing.
10) Only those who have surrendered to the holy feet of the Almighty will cross the ocean of births and deaths ('samsara').
Thursday, June 25, 2009
Reforms in Education
Kapil Sibal's eagerness to reform the educational system deserves welcome. At the same time, he must be cautious not to undo time-tested tools. Students have got used to Board examinations after 10th standard and after plus two. It is true and unfortunate that some students allow the Board pressure to overwhelm them. Such students are few and far between. This certainly is no reason for scrapping the Board exam after 10th. The minister may concentrate on making education more interesting and creativity-provoking.
Tuesday, June 23, 2009
Growth of Banks
It is unfortunate but true that growth sometimes becomes the only strategic focus of an organisation. Is there something like the optimal size for a commercial bank? Intuitively one may say that the optimal size will be a function of internal constraints / facilitators and external factors. Reducing this to a regression analysis will be a theoretician's delight.In our country, debate about optimal size has been waxing and waning. For example. in early 1970s, private banks tended to avoid the deposit threshold of Rs.50 crore fearing that crossing that limit would attract nationalisation. (e.g.the then Vysya Bank Ltd.)Banking reforms post-Narasimham committee reports emboldened bank managers to feel "the bigger,the merrier". The Basel norms which are implemented more rigidly in India have changed the mindset of risk managers in banks. They are now confident that tier-1 and tier-2 capitals are both steroid and antibiotic promoting growth and preventing contagion.Unfortunately, they are also a diuretic creating unforeseen liquidity problems. A few years back, Mr.P.Chidambaram tried to encourage the "merge and grow" culture hoping that growth per se will take care of many banking ills.
Monday, June 22, 2009
Credit rating agencies
This posting is triggered by the article on "Lessons from the financial crises" by Arun Duggal in ET today. In order to regulate credit rating agencies, he argues that they must be made to hold 10% of the paper they rate till their maturity.
The problem with this suggestion is that this will require huge infusion of capital by credit raters. An essentially non-fund based business will become a fund-based activity.
Instead, in order to make them more accountable, in case more than say 5% of issues rated as investment-grade end up in default within a year, the agencies must be disgorged of fees received from such issuers.
The problem with this suggestion is that this will require huge infusion of capital by credit raters. An essentially non-fund based business will become a fund-based activity.
Instead, in order to make them more accountable, in case more than say 5% of issues rated as investment-grade end up in default within a year, the agencies must be disgorged of fees received from such issuers.
Wednesday, June 17, 2009
China's investment bids
It is well known that China has huge investible funds (foreign currency) on account of its humongous trade surplus. Traditionally these funds have been invested in US treasury bonds. In a bid to diversify investments and thereby reduce risk, China has been seeking to invest in foreign companies. China has also been trying to use this opportunity to get a stranglehold on commodities. Timing is perfect. Economic crisis has accentuated the capital needs of the corporate world. Stock market crisis has ensured that equity is going abegging. Why shouldn't China make hay while the sun shines?
However, China is only getting rebuffed in a few places. Sometime back its attempt to buy the American oil company Unocal through the Chinese state-owned oil company CNOOC was frustrated by political interests in the Mecca of Capitalism. China's largest aluminium company, Chinalco (state-owned, needless to say) proposed to buy $19.5 bn stake in Rio Tinto, Australia-based world's second largest mining company valued for its copper and iron-ore mines. Sinophobic Australia has negatived this Chinese bid.
In a way, world has turned a full circle. Xenophobic China has become friendlier but other parts of the world are fearful of China's investments. Prosperity brings its own problems. Prosperous China cannot afford to alienate the world however much rest of the world may try to shun China's overseas investments.
In the late 20th century, capitalism is said to have saved China. Now China is trying to rescue capitalism. Can it succeed?
Many companies in the metal sector all over the world are in the process of hedging their raw material requirements through acquisition of mines or stakes in mining companies. For example, Hindalco is purchasing a coal mine in Queensland, Australia at a cost of $80 mn. Such moves make strategic sense in view of cheap prices of mines now. China by virtue of its large forex resources is aiming at big bets. Resistance to big players is a part of international game. Repeated rebuffs will irritate China. China's response now or later will be unpredictable.
However, China is only getting rebuffed in a few places. Sometime back its attempt to buy the American oil company Unocal through the Chinese state-owned oil company CNOOC was frustrated by political interests in the Mecca of Capitalism. China's largest aluminium company, Chinalco (state-owned, needless to say) proposed to buy $19.5 bn stake in Rio Tinto, Australia-based world's second largest mining company valued for its copper and iron-ore mines. Sinophobic Australia has negatived this Chinese bid.
In a way, world has turned a full circle. Xenophobic China has become friendlier but other parts of the world are fearful of China's investments. Prosperity brings its own problems. Prosperous China cannot afford to alienate the world however much rest of the world may try to shun China's overseas investments.
In the late 20th century, capitalism is said to have saved China. Now China is trying to rescue capitalism. Can it succeed?
Many companies in the metal sector all over the world are in the process of hedging their raw material requirements through acquisition of mines or stakes in mining companies. For example, Hindalco is purchasing a coal mine in Queensland, Australia at a cost of $80 mn. Such moves make strategic sense in view of cheap prices of mines now. China by virtue of its large forex resources is aiming at big bets. Resistance to big players is a part of international game. Repeated rebuffs will irritate China. China's response now or later will be unpredictable.
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