Sunday, February 22, 2015

RBI And Financ Minister May Work Together

My Opinion on news of RBI Governor firing Government submitted below .
I strongly support the views of Mr. Raghuram Rajan Governor RBI,that only effectiveness in action can make the people happy. Strong government does not mean that it necessarily functions well.  Government is called successful only when people of India feel positive improvement  in their living standards and feel  comfort in leading their life with available volume of income  

In democratic set up it is opposing parties too who for their vested interest try to puncture all good efforts of the government rightly or wrongly . Media men also leave no stone unturned to incite anger in public by presenting even good policy in bad ways. Many times it so happens that Government is honest, sincere , active and effective in their plan to help poor and to increase growth rate but opposing parties and media men who are anti-government portray the good work of the government in bad way to incite public anger and to enrich vote bank.
WE can take the example of Land reform bill which was made pro-poor by outgoing UPA rule without taking care of business men who need land for starting a business and without taking care of the fact that  even government need land for developing highways , schools, colleges, hospitals, roads and all infrastructural projects.
If land acquisition is made a cumbersome process, and the cost is made so high that any  individual or corporate will avoid doing business, then striking the sentiments of poor by opposing parties to attract votes will prove more costly, suicidal  and more dangerous.

Now when Modi Sarkar is trying to make land acquisition easier by amending rules to some extent, there is much hue and cry in public domain and all created by anti-Modi forces. And now Even Anna Hazare supported by Aam Admi Party has started movement against Land reforms mooted out by BJP government. None of them , neither opposing parties nor media men suggest better ways which balances the interest of the poor as well as the interest of manufacturing sector. Only crying and abusing rulers will serve no purpose to the country.

Similar is the fate of mining of iron and coal. If row materials like land, coal   and iron is made rare element and too costly , I think all projects cost will be escalated to unbearable and unviable extent. Even if some business houses  dare start the project buying land, coal and iron products at higher cost , the price of products so manufactured will be much higher and again the government  will be targeted  on the ground of price rise and pain caused to poor. As such if land , coal and other minerals like iron is reasonably affordable to keep price reasonably within reach of common men, it will be appreciated by all. Though GOI may get huge amount by auction of such natural resources , thy may not imagine of keeping price low.

But unfortunately people protest if price rises, protest if there is scarcity of any goods or services and also protest when there is policy paralysis. We have to ponder over the way which is beneficial to all and practical too.

We have seen in the past that clever Rail Minister Like Mr Lalu did not hike rail fare or freight charges to win the hearts of voters. But position of rail services became so much pathetic that travelling by rail became impossible or uncomfortable if possible. GOI did not take adequate step to improve amenities in rail travel , did not take enough safety steps and did nothing to increase rail connectivity to all maximum towns and cities in want of adequate resources. When Rail Minister Mr. Trivedi wanted to increase rail fare and freight charges to improve quality and quantity of rail services , he was kicked out under pressure of opposing parties and anti-government propaganda made by media men.

We have to distinguish between populist and realistic measures. Common men are happy if all goods and services are made available to them free , service men may be happy if their salaries and allowances are increased every month, business men may be happy  if no taxes are imposed on them and so on. BUT all intelligent persons have to think whether such proposals are affordable and realistic.

 GOI want enough revenue collection to meet the cost of various social welfare schemes and to construct solid infrastructure to increase manufacturing and faming activities . For this purpose they need to impose various taxes on individuals and business men. If taxes are increased, again people of INDIA will exhibit anger and media will add fuel in fire. If taxes are not increased in tune with rise in establishment cost , rise in raw materials and rise in demand of free public utility services , Government of India can do nothing even if it likes to do. There must be some balancing act .

I agree that if corruption is wiped out from the system and if all types f pilferages and leakages are removed from all offices and all government departments, it may save a lot of expenses and give relief to common men to a great extent. Still GOI will need additional fund to cope with rising demands and escalating cost of all projects  for various pro-common men relief measures.

It is therefore the duty of RBI governor Mr. Rajan and Finance Minister Mr. Arun  Jaitley and it is the duty of ruling as well as opposing parties to sit together and frame a policy which will be pro-poor as well as pro producers and which will be so much balanced that it is considered as pro voters as well as pro government .Media men will have to stop negative campaigning and help government as well opponents to arrive at such a point which will benefit both ruled and rulers. Mr. Rajan is definitely a talented person and if he helps government of India to frame balanced policy and help administrative offices and PSUs to execute them honestly and sincerely , it will be a great help to people of India as well as GOI.

At the same time it is duty of concerned Ministers in Government to take opinion of persons like Mr. Rajan before finalising any policy and be always ready to give a respected hearing to all who proved constructive suggestions . No doubt , that GOI will have to deal strongly and if needed also punish harshly if media men or opponents put hurdles without any valid reason in its way of performing well. If a borrower of banks fails to repay the loan or if a taxpayer evade taxes fraudulently , they must be punished quickly and effectively to give a good message to all concerned. Judiciary and police have to play their role honestly and effectively.

There must be honesty behind all policies and execution of all plans. I have full faith in Mr. Modi as well as in talented Mr. Rajan RBI Governor , and if they sit together , they can give right direction to economy of the country .Performers must be awarded but non performers should also be taken to task occasionally.

It is important to point out here that great economist Mr. Manmohan Singh failed because his UPA government thought it wise to keep mum on all charges of corruption and policy paralysis. There was uproar in entire country against GOI but PM Mr. Manmohan Singh under the pressure of High Command Sonia Gandhi  turned blind eye to all. As a result the UPA government lost last election.

Now when Modi government appears to be serious on all plans and on all projects to help common men , it is duty of RBI Governor, media men, all concerned  and opposing parties to cooperate Mr. Modi in the larger interest of the country and people of India .

Opposing parties as well as media men will have to  extend cooperative hand to ruling parties in ruling the country peacefully . And if  after all cooperation ,BJP government fails to perform, it is votes who will punish it as they punished to Congress Party. Similarly let Mr. Arvind Kejriwal Aam Admi Party perform in Delhi for a few years , votes keep watch on them and punish them at opportune time. After all Mr. Modi and Mr. Kejriwal both have come people's mandate.

Last but not the least , I would like to add here that ,It is the need of the hour that talented persons from all opposing parties and media sections are also made integral part of the government , policy framing processes and in governance for successful execution of plans. Somehow or the other it is the need of the hour that land, coal, minerals, capital from banks is made available at lowest cost to needy without aspiring for profit. GOI and PSUs should work on "no profit no loss" basis. Only in such position prices may remain within reach of common men.

GOI will have to learn punishing corrupt, profit makers, hoarders, and all those who are playing destructive role only. Entire freedom to business houses and allowing them to earn exorbitant profits on all products or services is the root cause of  price rise for many public utility services and goods of common men in many fields.

If farmers, businessmen, manufacturers, service providers, railways, road makers all get land, capital, minerals, row materials etc at low cost and comfortable legal and administrative support , then only we may create quality products at affordable price and create adequate job opportunities for unemployed youth. If we keep the prices of land and houses in control  and in affordable level, then common men can dream of a dwelling house to survive respectfully .Only reducing interest rate on home loan may  not help common men in buying a housing unit. Similarly lowering interest rate on bank loan may not enthuse business men  to manufacture if other inputs are costly and not affordable easily.


Rajan cautions against ‘strong govt without accountability’-Times of India-22.02.2015

( See my comments below)

MUMBAI: Reserve Bank of India (RBI) governor Raghuram Rajan went beyond monetary policy to caution against strong governments without democratic accountability.

"Strong governments may not move in the right direction. Hitler provided Germany with extremely effective administration — the trains ran on time, as did the trains during our own Emergency in 1975-77. But Hitler took Germany efficiently and determinedly on a path to ruin. It is not sufficient that the trains run on time, they have to go in the right direction at the desired time."

He asserted that a strong government does not mean one that is militarily powerful or uses its intelligence apparatus to sniff out enemies of the state. Instead, a strong government is also one that provides an effective and fair administration through clean, motivated and competent administrators who can deliver good governance.

The RBI governor also cautioned against a system of multiple appellate processes against government and regulators. He said such systems tended to work in favour of deep-pocketed entities rather than rectifying miscarriages of justice.

Speaking at the Ideas Festival in Goa, Rajan pointed out that India was not like other countries where a strong government emerged first and was later restrained by rule of law and democratic
accountability. "In India, we have the opposite situation — there are strong institutions like the judiciary, opposition parties, a free press, and NGOs, whose aim is to check government excess." Warning against too many checks, Rajan said, "We cannot have escaped from the licence-permit raj only to end up in the appellate raj!"

"We will have to strengthen government (and regulatory) capability, resisting the temptation to implant layers of checks and balances even before capacity has taken root. We must choose a happy median between giving administration unchecked powers and creating paralysis, recognizing that our task is different from the one that confronted the West," he said.

Rajan said that rule of law means that government's actions are constrained by what Indians would term dharma — the code of moral and righteous behaviour, enforced by religious, cultural, or judicial authority. "And democratic accountability means that government has to be popularly accepted, with the people having the right to throw unpopular, corrupt, or incompetent rulers out," he said.

He added, "Strong governments need to be peopled by those who can provide needed public goods — it requires expertise, motivation, and integrity."

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