Indian Economy News & Discussion - Nov 27 2017

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Suraj
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 13 Nov 2018 01:10

That's a fair question. RR's actions as RBI governor, or the lack of them, are acceptable topics for discussion here. His statements as a private individual today, are not really welcome here. In fact, that has been my consistent position on this topic . He's tainted by the manner of his unceremonious departure, and therefore his present utterances cannot be viewed as positive and productive interactions with the government, because no one in a position of power is listening to him, or interacting with him. He simply feeds entities who benefit from quoting him to suit their own arguments, none of whom are part of the government or the central bank. It is actually quoting him today, that constitutes discussion on politics. My position is - stop doing that.

Many of us have had former colleagues who were brilliant, but temperamental. Could have done much, but did not, and left behind work others had to fix. And in this case, even required changes to operating protocol to prevent one man doing too much unilaterally. Such people, as brilliant as they may be, leave behind mixed or questionable legacies because of their failure to do their basic job responsibility properly. Demonstrating inability to work with the government, and walking away to lecture from outside after having been sidelined ahead of time, doesn't looks good.

Rajan would be considered seriously in the Indian economic firmament had he persevered in his role and actually taken full ownership of his position, worked on banks' asset quality, addressed operational concerns fully, ensured he stuck through each of the major economic reforms that occured soon after his departure . Had he served the 5 year term his predecessors did, he's have been in charge through DeMo, GST and IBC. Instead, he was part of none of them; Urjit Patel is the one who will be remembered by history instead.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 13 Nov 2018 01:15

Suraj wrote:JayS and anyone else, can you find and post data to growth in AUM and any additional data indicating sectors into which these were invested, i.e gilt / blue chip / mid cap / small cap / corporate bonds ?

I have the data, the chart from 201503-201809. But how do i share a chart on BRF

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 13 Nov 2018 01:17

Thanks! You'd have to uploaded it someplace and link it. You could use google docs, but do be aware of the privacy issues of that.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 13 Nov 2018 01:47

Suraj wrote:Has Rajan ever sought any permission to office advice to GoI or RBI ? Have any of his comments since remitting office been considered by the government ? In fact, has he ever been sought out since, because he stated something helpful and his advice or guidance was considered useful to have ? The answer to all these is no. To what extent does anyone seriously believe the government listens carefully to policy advice offered from the dais of 'Institute of South Asian Studies' in UC Berkeley ?

AFAIK he doesn't requires GoI permission to state his opinion in public. And yes the govt similarly has zero obligation to pay any attention to him, let alone actively consider the unsolicited advice.

He's a private individual speaking against the institution of the state, an institution that he left on bad terms from. He's the archetypal high maintenance former employee. Since his freedoms are being asserted, it's equally important to assert that he was gently removed from his post, left on bad terms, and has had an axe to grind with the government ever since.

Not at all. He's criticizing some of the policies of the incumbent government, and his criticism as such is probably milder than that expressed by two fifths of the Parliament. Its just normal discourse in a raucous democracy, hardly a subversion of the institution of the state.

In India, we do not have any culture of former government servants being encouraged to offer critiques of government policy from foreign shores, in foreign media. If Rajan seeks to be a credible voice, at the very least he needs to demonstrate his desire to help the Government of India, rather than simply offer soundbites to foreign press on the other side of the planet.

Well, we have a history of public servants who, after a lifetime in the civil service, retire and enter the rough and tumble of politics, which of course involves participating in a lot of critique of govts, both past and present. Rajan breaking from the lecture circuit, to serve in the RBI for three years, and then returning to the lecture circuit, is, if anything, less consequential. There's no accepted norm against such a thing. We have Panagariya, former vice-chair of the NITI Aayog, defending the govt's record and favourably contrasting it with its predecessor. An equally welcome position.

Also, I don't think there's much of a distinction between the domestic and foreign press when it comes to expressing an opinion on economic policy. For example, if Zee News were to interview Janet Yellen about the US economy/policies, I don't think anyone would expect her to contour her position differently than if she were doing an interview for CNN. Whether her stated positions are credible is of course up to her audience to decide.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 13 Nov 2018 03:05

Sure, and let’s be clear - he’s a man who couldn’t stick around to get the job done, now offering gratuitous advice on how to do it .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 13 Nov 2018 04:36

Rajan takes what seems to be a fairly nuanced position on the current issue. Fortunately the clip's unedited. There's some interesting examples about the RBI board's decisions during his tenure.

(Only the first 15 min are the interview.)

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 13 Nov 2018 07:33

The guy sure has a lot to say, considering he demonstrated no ability to put his head down and work on actually doing it. The ultimate talker and not a doer, offering advice from his own margdarshak mandal.
Viv S wrote:Not at all. He's criticizing some of the policies of the incumbent government, and his criticism as such is probably milder than that expressed by two fifths of the Parliament. Its just normal discourse in a raucous democracy, hardly a subversion of the institution of the state.

He was for all practical purposes fired from his job. The criticisms of someone who couldn't cut it in the job he took up aren't worth much. He lacks credibility to speak about what he speaks of. Great resume, no demonstrated long term performance on the job, having left every major initiative during his tenure unfinished - the MPC, bank stress testing, operational reforms, nothing.

Had he completed a full five year tenure, stuck through major reforms, worked with the Government through good and bad times, and spoke from the position of "these are all that I accomplished as RBI governor", then he has the credibility to speak.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 13 Nov 2018 08:33

{Deleted}

D. Subbarao was at the helm of RBI when the global financial crisis hit. We never hear him making grand statements on the "lecture circuit" and he has more to say than others.
Last edited by Suraj on 14 Nov 2018 00:01, edited 1 time in total.
Reason: cleanup

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karan M » 13 Nov 2018 12:03

Suraj wrote:JayS and anyone else, can you find and post data to growth in AUM and any additional data indicating sectors into which these were invested, i.e gilt / blue chip / mid cap / small cap / corporate bonds ?


Image

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karan M » 13 Nov 2018 12:06

The data is also to some degree on AMFI website.
https://www.amfiindia.com/research-information
Dont think its broken up by which funds etc but more on a higher level.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karan M » 13 Nov 2018 12:17

Suraj wrote:Rajan is as capable as anyone before or after him in the position he was appointed to, that is all. At that level of responsibility, the primary requirement is the ability to get things done with the government, and not merely demonstrate a personal resume. He was a bad hire, seen from the fact that despite his credentials he was not offered another term, he aired differences with the government publicly both during the end of his tenure, and quite a bit more since. Four of his predecessors served out near full 5 year tenures, with Jalan serving an additional period beyond that. Rajan reflects a break from institutional continuity, at an institution where stability is a very significant requirement.

APJAK and Rajan are as different as examples could be. The former created and sustained institutions of the state, and the grateful nation in a bipartisan move elevated him to the highest ceremonial office in the land, which he represented with great distinction. The latter has no long term legacy, served one term and was unceremoniously booted out, with the first action post his departure being the Government curtailing the unilateral powers of the RBI governor, preferring instead a committee to make policy and rate decisions, with representation from both RBI and the government.

Rajan will always be remembered primarily for his most recent public utterance, and never for any sustained legacy of public service as RBI governor. Unlike his predecessor D Subbarao, he does not even have the benefit of having been remembered for being at the helm during a turbulent international economic crisis. Unlike his successor Urijit Patel, he wasn't around while the most significant economic policy acts of this administration - DeMo, GST, IBC - were implemented.

He'd have a far better legacy within Indian public policy had he put his personal ego aside and worked longer with the government to be part of major initiatives. Instead he'll be remembered as a brilliant temperamental person who left unfinished business and now speaks loudly about what the government should or should not do, from outside.


Superb post. What a joke to compare this dude to APJ AK. Rajan's only legacy is to be yet another egotistical prima donna who wanted to be a power without any of the responsibility or intense patriotism to actually make his birth nation prosper.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Yagnasri » 13 Nov 2018 12:48

He wanted to become "public intellectual" while holding the position of the RBI head. Media pitted him against the PM whom they do not like. He might have enjoyed it for sometime and started talking on and on that among others resulted in him getting kicked out once his term is over.

One of the major bullets we have dodged is his pressure to declare all the problematic bank lending as NPA immediately for which SBI Chairperson and other seriously opposed. Had we done it, entire banking system would have suffered irreparable loss. I

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby suryag » 13 Nov 2018 13:24

I run a large team across three continents and i ahve seen quite a lot of these PhDs fail miserably when asked to execute on a concept they themselves have created. These hangar pieces are best in universities, fit for consulting or for literature survey kind of assignments. Needless to say, i have found a minority of PhDs who can plan well and execute but as i said they are a minority.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 13 Nov 2018 16:57

JayS wrote:Old colonial era trick - divide and rule. And how dare you point finger to goras..? They are so rich. They can spend on anything they like. We are so so poor country, living on crumbs sent by goras as "Aid" and hence we should not waste money in such work. Instead we should use that money to buy uber expensive weapons from goras or on buying ultra expensive consumer goods from gora companies. That's halal.

You missed reminding me to say salam saa'b to goras. Reminds me of the Ghatak dialogues from Sunny deol to Katya. By that logic all zoos, science parks and space race should not have been executed.

Nevertheless, we at BRF should think about a concerted effort to counter this aid/priority nonsense drama that has been going on for quite some time.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahul M » 13 Nov 2018 17:13

To answer arjun's last point, it most definitely is. However folk insist on posting an economist's general comments not particularly germane to the economy thread. That is essentially the point suraj is making; a comment is not relevant just because an economist has made it.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 13 Nov 2018 19:28

ArjunPandit wrote:^^^thanks for making me feel sick in morning. Seems like bbc wapo NYT have even outsourced the job of dissing Indians to Indians only. Now I don't even feel offended at these articles, only thing that hurts is that it is an Indian putting India down. Did Americans think about how many natives can be accommodated in the land taken for White House or how many homeless can be given homes before making Ben Franklin George Washington statues


Off topic perhaps, but remember, the New York Times collectively - between all its writers and editors - does not understand the motivations of a Trump voter on Staten Island, one of the five boroughs of New York City. Yet it peddles its "understanding" of distant lands like India. What these publications provide is raw material, sometimes it is ore, sometimes it is dross. The reader has to exercise judgement in assembling their own worldview when using these, which is unfortunately, often lacking.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 13 Nov 2018 21:15

Rahul M wrote:To answer arjun's last point, it most definitely is. However folk insist on posting an economist's general comments not particularly germane to the economy thread. That is essentially the point suraj is making; a comment is not relevant just because an economist has made it.


Did you listen the speech?

He talks about all aspects of Indian Economy. It is a professional speech devoid of any political overtones by a world renowned economist, professor and ex RBI governor of Indian origin about Indian economy. It covers governance, monetary policy, regulations, taxations, digitization, banking, bureaucratic decision making, institutional cability building, investments and infrastructure. If all this is not relevant in this thread than what is?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Katare » 13 Nov 2018 21:41

Also please remember almost every RBI governor had the same issues with the govt as we have seen with RRR or seeing with the current governor (fully home grown SDRE). Nehru’s RBI governor resigned, MMS sent resignation to Indira Gandhi after massive battles with Pranab da. Subba Rao had major fights with govt during his times. Subbarao was one of the toughest, brightest and fiercly independent governor who was and is still popular on so called lecture circuits. He wrote extensively on demonitisation and GST. Vimal Jalan was very active after his retirement too. Actually this is the way things should be the day we don’t have these frictions between (and within) different arms of Govt we can be certain the system has collapsed. We should welcome these not try to shut them off.

I see all kind of retired generals, judges, scientists, diplomats and civil servents making a career out of TV debates, writing articles, giving unsolicited advices and writing provocative books.

Rajan had to go for the same reason Pranab da or APJ Kalam had to go after first term on presidential chair. All new govts like to appoint their own people at key positions when they comes to power to bring changes and cohesion.

All previous RBI governors go on lecture circuits, write memories and make pithy and critical comments. What most people hear or see are the ones media picks up. And Media picks up people who’s comments get at least a section of people riled up.

Official secrets act only applies on revealing classified information and govt approval for exercising one’s right to free speech is only needed by serving govt employee

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 13 Nov 2018 23:10

Katare wrote:
Rahul M wrote:To answer arjun's last point, it most definitely is. However folk insist on posting an economist's general comments not particularly germane to the economy thread. That is essentially the point suraj is making; a comment is not relevant just because an economist has made it.

Did you listen the speech?

He talks about all aspects of Indian Economy. It is a professional speech devoid of any political overtones by a world renowned economist, professor and ex RBI governor of Indian origin about Indian economy. It covers governance, monetary policy, regulations, taxations, digitization, banking, bureaucratic decision making, institutional cability building, investments and infrastructure. If all this is not relevant in this thread than what is?

No, his speech isn't worth anyone's time. Don't parrot it here. If you post more of them, they will just be deleted.

If he wants to offer bhashans and advice, he should do so on the back of service to the country first. He had his chance and he blew it. Having lots of great things to talk about is insufficient for the person involved. He asserts himself as former RBI governor, and therefore the primary measure of his credibility is what he did as RBI governor. News articles from that time uniformly express surprise and lament that he didn't bother to finish any substantial act he took upon. He's a professional who was hired to perform, and he did not perform. If Urjit Patel could stick through DeMo, GST and IBC, so could Rajan. But he did not.
Katare wrote:Subba Rao had major fights with govt during his times. Subbarao was one of the toughest, brightest and fiercly independent governor who was and is still popular on so called lecture circuits. He wrote extensively on demonitisation and GST. Vimal Jalan was very active after his retirement too. Actually this is the way things should be the day we don’t have these frictions between (and within) different arms of Govt we can be certain the system has collapsed. We should welcome these not try to shut them off.

I'd very happily listen to Subbarao and Jalan , but not to Rajan. The reason is that the first two demonstrated the ability to stick through difficult periods and work with demanding governments , while the latter did not. A person without accomplishments on the job to back his statements afterwards, is not due any consideration. Rajan is a celebrity, and this thread is not about celebrity worship. "What did he get done for him to be worth listening to ?" is a test he does not pass.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 14 Nov 2018 00:42

2. The stress tests conducted by RBI are very primitive. Anyways They are no silver bullet either. Banks passing stress tests have failed in eu. The rigor is no where close to what we see in us or uk/eu. That stems primarily from lack of data and controls. No stress test can capture control failure in cases like mallaya or nimo, and effect capture would be inadequate coz of poor data and crude models. You're spot on for contagion. That's why RBIs push back on dividend and PCA.


The RBI has autonomy to implement proper stress testing norms - the inability to do so is entirely theirs. There's no political interference preventing them from stress testing banks, is there ? RBI has come up short on several measures here, including their management of banks auditing processes, the SWIFT process management that was central to the Nirav Modi case, and stress testing norms. It's odd of them to claim lack of autonomy without demonstrating ability.

The RBI has autonomy to implement proper stress testing norms - the inability to do so is entirely theirs. There's no political interference preventing them from stress testing banks, is there ?

Basic Hygiene:
1. Given the level of derailing of thread and its asymptotic approach towards political threads on GDF, I am intentionally ignoring the political dimension
2. Please let me know if this discussion on ST needs to be continued in banking thread. Given that Suraj sir is mod and is engaging here, I think this is fine for now.
3. There is some confusion in Suraj and my previous posts between central bank's role as a supervisor and its role as a monetary policy setter/executor. I will focus on first and not the second.
4. Unless clarified, please assume it for PSB only

Coming to RBI's competence. Based on my discussion with guys who had indirect roles in designing stress test in FinMin & RBI and in FRB NY (all three different persons at different times). They spoke the same point in diff words, "Dont shoot the survivors". In terms of ST(Stress Tests) they meant that the banks are not mature to have a mature guidance. They do not have sufficient/adequate data, infrastructure and resources to undertake this exercise. So the seemingly incapability of RBIs is intentional.
Yes they should ask banks to get the areas I mentioned. But it would also mean significant costs along with attrition of tenured resources due to increasingly tech heavy demands from role. All this would mean investments by capital starved banks, increase in execution costs and also increase in short term frauds/credit/market losses. The approach chosen, like most things in India, is evolutionary. You may not like it but thats the "paradigm" or doctrine in our indian banking sector.
With regards to the ST, I was fine with the way RBI started, but the evolution is at a glacial pace, if at all. As for RBI guidance, it has not been updated since 2013 end. I would have expected them to at least publish a roadmap towards a horizontal stress testing and increasing sophistication. However, as of today, they cann't go advanced, because a failure of most banks in ST can unnecessarily create panic in capital markets, in addition to challenges I mentioned above. For this IMHO, we should follow the the non disclosure way similar to CAMEL ratings days. Nevertheless things should move forward and should now. What I hear is that everyone is so busy cutting trees that they dont have time to sharpen the axe.

Bringing specific details on gaps for stress testing.
1. The data systems for Indian banks is still in a primitive stage. They can't drill down from aggregate exposures to a granular level. Systems don't support efficient analytical slicing and dicing of data, what to speak of modeling or early warning. This is inexplicable since CBS was almost done by 2005 and Basel II started in 2007. Historical data is so effed up. Linkages across products for same customer are inaccurate. People are so busy in adhaar enrolling but they dont realize its power in this aspect. People haven't even woken up to Big data
2. Even with poor data, robust reporting and monitoring through open eyes can detect issues earlier than any quant model or ML technique. I do not see even that happening at a granular level
3. Indian banks have bureaucratic rules for hiring consultants and employees (no surprise) and are fiefdom for Big 4 audit (alternating between audit and consulting) +Big 2-3 consulting. The same PO type exam formats coupled with low pay and hassles result in "chalta hai". Things did start to change but they are still not able to higher reasonable talent laterally. This is sad, because there is no dearth of talent in India in the field of Risk. All major global FIs have at least some analytics being done out of India, some almost fully. Even Pvt banks are at par with global ones. ICICI, HDFC and Axis lead the pack.
Long story short, Public sector bankers did not see value in any of it. Did US return RRR/VA did anything material on it well not that I am aware of. Could they have done more yes, but there are always bigger fires to douse, within a single bank, what to speak of a central bank, in such a political charged environment.

RBI has come up short on several measures here, including their management of banks auditing processes, the SWIFT process management that was central to the Nirav Modi case, and stress testing norms. It's odd of them to claim lack of autonomy without demonstrating ability.

[/quote]

For failures on ST i have already answered.

For bank Audit, Yes that is what I found shocking too, Failed lending could have been at political behest or can be blamed at branch employees' collusion or sheer negligence. But not Auditing is inexplicable, IIRC all bank branches have to be audited annually. Even if the audit involves taking auditors to good hotels good restaurants to avoid getting an adverse comment. But the auditors have to at least turn up. The reason I hold them less guilty than others is because, RBI forms the zeroth line (while setting the policies) and the 4th line of defense (while reviewing the execution/review by remaining three: Business, Risk and Audit). They can set the policies and procedures but to validate their actual implementation. Majority of reliance is through Internal/external auditors or validators rather than the central bank. Even the US banks and regulators were found woefully short in 2007-09 period. In the end, the first responsibility is of bank management, then internal risk unit, Internal/external auditors. Ratings agencies, while not directly responsible. If these can't find the gap in execution very unlikely a central regulator can find a gap. What were the shareholders, board of directors (GoI and their nominees) doing , when they know LoUs or foreign branches were resulting in high losses. There are segment level reportings also required as per IFRS. Why was the audit report with adverse findings not paid attention to by shareholders. These are more pertinent questions.
That said, there is no excuse on earth for not auditing a top 5 bank for 9-10 years and that does not absolve RBI. Those responsible should at least face consequences. but in order of priority probably the last, after the banker & the statutory Auditors. Even then RBI asking for more authority is not unjustified. Taking global example, after 07-09 recession, all bankers were found lacking. That didn't mean their autonomy/responsibilities were cut. In fact it was opposite, despite of OTS being shunted, FRB assumed much more powers through Dodd Frank. Same was true everywhere.

We also have to keep in mind that this govt has kept RBI very busy in bringing inflation down, Demo and NPA assessment. With the level and number of resources, I am not displeased with what RBI and Finmin have accomplished.

PS: My friend in FinMin & RBI were in know of happenings. You can treat them as the anonymous sources of DDM.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 14 Nov 2018 02:36

Govt wants RBI to adopt less stringent Basel-III norms for capital adequacy
The government is of the view that the Reserve Bank should resort to Basel III norms for capital adequacy in banks rather than the present stricter guidelines which restrict the lending capacity of lenders, sources said.

Currently, the RBI applies stricter norms and not those specified under Basel III for capital adequacy, leading banks to set aside higher capital for loans.

The government has been in favour of alignment of the capital adequacy norms with Basel III norms, sources said, adding this issue may come up for discussion in the upcoming board meeting on November 19.

According to the Basel Committee on Banking Supervision (BCBS) report, core capital requirement for banks as prescribed by the RBI is 1 per cent higher than what Basel III norms recommend.

Indian banks as per RBI direction are required to maintain 5.5 per cent Common Equity Tier 1 (CET 1) as against 4.5 per cent required under the Basel III framework.

These higher capital norms translate into additional capital requirement, restricting lending potential and income generation, the BCBS report released in 2015 said.

"Several aspects of the Indian framework are more conservative than the Basel framework. This includes higher minimum capital requirements and risk weightings for certain types of exposures as well as higher minimum capital ratios. The RBI also applies certain restrictions to banking activities through its prudential framework," it said.

The RBI has fixed March 2019 as the deadline to meet capital requirements under the Basel III norms for banks.

Price hikes, monsoons push propel agri input firms' Sept quarter profits
Agri input companies have posted decent growth in revenue and net profit for the quarter ended September 2018, due to an increase in sales volume on normal monsoon rainfall and price hikes.

While companies have been able to pass on raw material cost hikes to consumers successfully, there was a lag time of 4-6 weeks in the passage, which had a small impact on profit margins. Agri input companies aim to make most of the price hikes of their products in the December quarter.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 14 Nov 2018 08:52

Regarding the Basel 2, Suraj sir do you have any opinion on the credibility of article? If true, this is perhaps not the best way forward.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vips » 15 Nov 2018 03:45

Direct tax collections to exceed target this fiscal: CBDT chief Sushil Chandra

Direct tax collection has already crossed Rs 5 lakh crore and will exceed the budgeted target of Rs 11.5 crore set for the current fiscal, CBDT Chairman Sushil Chandra said Wednesday.

He further said that so far the I-T department has issued refunds to 2.15 crore assessees amounting to Rs 1.15 lakh crore and from now onwards the net collections will increase.

"We have already crossed the Rs 5 lakh crore figure that is 44 per cent of the net direct tax collection target. This is despite the fact there is a surge in refund," Chandra said.

Speaking to reporters after inaugurating the pavillion of the Central Board of Direct Taxes (CBDT) at the India International Trade Fair (IITF), Chandra said the number of people voluntarily filing tax returns has gone up substantially, and 6.85 crore income tax returns were filed last year.

This year so far 6.02 crore ITRs have been filed with the Income Tax Department. The number of direct taxpayers was 3.8 crore when the Modi-led government took office in May 2014.

The CBDT chief said that so far the net growth rate in direct tax collection is 14.5 per cent, while the gross collection grew 16.5 per cent."Our asking rate is 14.55 per cent and definitely we will exceed our target Rs 11.5 lakh crore. There is buoyancy. In the second quarter, there has been good profit to India Inc and we saw very good advance tax collection," Chandra said.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 15 Nov 2018 04:02

ArjunPandit wrote:Regarding the Basel 2, Suraj sir do you have any opinion on the credibility of article? If true, this is perhaps not the best way forward.

It's a PTI article, not someone's opinion. It seems to suggest RBI makes up for lack of fine grained oversight by simply being more conservative in the norms they specify.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 15 Nov 2018 08:10

Suraj wrote:
ArjunPandit wrote:Regarding the Basel 2, Suraj sir do you have any opinion on the credibility of article? If true, this is perhaps not the best way forward.

It's a PTI article, not someone's opinion. It seems to suggest RBI makes up for lack of fine grained oversight by simply being more conservative in the norms they specify.

That's not unusual, regulators and banks across the world do that too. Capital optimization is a dirty word in the world of regulation

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 15 Nov 2018 13:08

ArjunPandit wrote:
Suraj wrote:It's a PTI article, not someone's opinion. It seems to suggest RBI makes up for lack of fine grained oversight by simply being more conservative in the norms they specify.

That's not unusual, regulators and banks across the world do that too. Capital optimization is a dirty word in the world of regulation

True, and I think the government is not doing anything particularly strange by asking RBI to define Basel-III norms instead of something more conservative of their own.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 15 Nov 2018 13:11

Some interesting insights into the remittance industry:
Half of India’s overseas remittances come from these 4 southern states; Kerala tops the list
India continues to be the top nation with $69 billion of remittances that it received last year from the large pool of skilled, semi-skilled and unskilled Indian migrants across the world, with four southern states in the country accounting for almost half of its total remittances, according to a study by the Reserve Bank of India (RBI). The states of Kerala, Karnataka, Tamil Nadu and Andhra Pradesh had a share of about 46% or $31.74 billion (Rs 2,30,900 crore), of total remittances of $69 billion that India received last year from its citizen working overseas.

Kerala topped the list of states, accounting for about 19% share or $13.11 billion (approximately Rs 95,000 crore) of the total remittances, it showed.

Of the total $69 billion in 2017, about 58.7% was received by four states — Kerala, Karnataka, Maharashtra and Tamil Nadu. After Kerala, Maharashtra had the largest chunk of remittances at 16.7% (11.52 billion), followed by Karnataka 15% (about $10.35 billion), Tamil Nadu 8% and New Delhi 5.9%.

In terms of countries, 82% of the total remittances came from seven countries – UAE, the US, Saudi Arabia, Qatar, Kuwait, the UK and Oman. Indians working in The Gulf Cooperation Council (GCC) countries – mostly semi-skilled and unskilled workers – sent more than 50% of the total remittances in the financial year 2016-17, it added. It may be noted that over 90% of Indians overseas work in the Gulf region and South East Asia.

On the other hand, Indian residents working in the US, considered highly skilled, were the second largest contributors.

According to the study by the RBI, over half of this amount was used for family maintenance (consumption), while 20% deposits in banks, followed by investments in land and property and shares (8.3%), it added. The Rupee Drawing Arrangement (RDA) is the most preferred mode, accounting for about 75% of remittances, especially from the GCC countries.

In April this year, the World Bank said in a report that India grabbed the top position with about $69 billion of remittances in 2017, followed by China ($64 billion), Philippines ($33 billion) and Maxico ($31 billion).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jpremnath » 15 Nov 2018 14:51

Expect a boost in figures this year...with the fall in Rupee, people have been taking loans and sending home money...The interest rates are much lower here and no mortgage is needed for one to get a loan. The last such deluge in remittances was in 2013-2014 when the rupee went through a similar collapse...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 15 Nov 2018 15:24

OT hence deleted.

- jayS

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 15 Nov 2018 15:28

Suraj wrote:
ArjunPandit wrote:That's not unusual, regulators and banks across the world do that too. Capital optimization is a dirty word in the world of regulation

True, and I think the government is not doing anything particularly strange by asking RBI to define Basel-III norms instead of something more conservative of their own.
actually across globe regulators have gone more conservative. While that needs to brought down but only after risks have been brought down to a reasonable level. That I don't think it's the case Npa detection has just been started and resolution is still WIP, there should be a delay of few years
In any case Bose Bank keep higher than the required ratios

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 15 Nov 2018 23:36

Suraj wrote:He was for all practical purposes fired from his job. The criticisms of someone who couldn't cut it in the job he took up aren't worth much. He lacks credibility to speak about what he speaks of. Great resume, no demonstrated long term performance on the job, having left every major initiative during his tenure unfinished - the MPC, bank stress testing, operational reforms, nothing.

Had he completed a full five year tenure, stuck through major reforms, worked with the Government through good and bad times, and spoke from the position of "these are all that I accomplished as RBI governor", then he has the credibility to speak.

The Rajan's professional actions in his role as RBI governor aren't particularly questionable. His push for the recognition of NPAs, introduction of the AQR and inflation targeting has been criticized for stifling growth, but I'm guessing there are at least as many people who'd argue it was right call over the long term. Sure many of initiatives would/will take time to bear fruit but he wouldn't have seen all that much more change had he demitted office after a two year extension i.e. Sept 2018 (maybe enough to see the NPA cycle turn, albeit unresolved). Still.. he did manage to see out the introduction of other smaller things, the MPC, UPI, payments banks etc.

I suppose the only big difference a two year extension would have made was that demonetization wouldn't have happened. Then again, given its botched execution but more importantly the govt & RBI's unwillingness to follow through afterwards, that would probably have been for the best.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 16 Nov 2018 02:22

The success of demonetisation has already been extensively covered in a separate thread. There's no need to mischaracterize it here in an effort to derail this thread.

Further, Rajan did not see out any of MPC, UPI or the payments banks. The MPC was essentially a case of the government taking away the RBI governor's unilateral control over rate decisions, something Rajan was the last RBI Gov to have the ability to do. It was not even Rajan's idea but proposed by the Urjit Patel Committee in 2014, at a time when Patel was the Dy Gov. For his role in devising MPC, he was subsequently elevated to RBI Gov role.

This website has a simple and humorous take on the whole thing in a UPSC friendly format: RBI Urjit Patel Committee: 4% CPI, Nominal Anchor, Multiple Indicator, Monetary Policy Framework Reforms (Part 1 of 2).

UPI/BHIM is not Rajan's effort - it is an effort an effort pushed by PMO and the Executive branch of government, through the National Payments Corporation of India, which has been around since 2008. UPI was released in April 2016 and Rajan was gone 4 months afterwards. All subsequent results are primarily the result of wider adoption of the platform by Whatsapp, Google Tez and other payment systems.

Payments banks arose during Rajan's tenure, but the idea wasn't his proposal. It was the principal proposal of the Nachiket Mor Committee on financial inclusion. The effort on them has been largely superceded by PMJDY instead. Sept 2018: Payments banks' total deposits under Rs.540 crore. Meanwhile PMJDY statistics currently read 332 million beneficiaries, Rs.85000 crore in deposits and 261 million RuPay cards. The result is a testament to the simple fact that financial inclusion can only be effectively pushed by the executive, and not by a central bank regulation. Payments banks are a creative but demonstrably not a very significant or impactful solution - a far better approach has already been put into execution very effectively.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 16 Nov 2018 04:51

Suraj wrote:The success of demonetisation has already been extensively covered in a separate thread. There's no need to mischaracterize it here in an effort to derail this thread.

No polemics/politics/derailment intended here. Just economics. The objective of demonetization was two-fold, both logically acceptable. First, to go after those possessing unaccounted wealth (preceded by an amnesty scheme). Second, to reduce the amount of cash in the system pushing the financial flows more towards formal modes of transfer. The first one was rendered moot when most of the money got deposited in/washed through the banks, but nobody got prosecuted. As for the second, the cash-to-GDP ratio before demonetization was 12% which fell to 9% but is now back up to 11%. Of which 80% by value (and almost 20% by volume) are high denomination notes which is only a slight reduction from the 85% earlier.

https://rbi.org.in/scripts/AnnualReport ... Id=1235#T1

Further, Rajan did not see out any of MPC, UPI or the payments banks. The MPC was essentially a case of the government taking away the RBI governor's unilateral control over rate decisions, something Rajan was the last RBI Gov to have the ability to do. It was not even Rajan's idea but proposed by the Urjit Patel Committee in 2014, at a time when Patel was the Dy Gov. For his role in devising MPC, he was subsequently elevated to RBI Gov role.

This website has a simple and humorous take on the whole thing in a UPSC friendly format: RBI Urjit Patel Committee: 4% CPI, Nominal Anchor, Multiple Indicator, Monetary Policy Framework Reforms (Part 1 of 2).

UPI/BHIM is not Rajan's effort - it is an effort an effort pushed by PMO and the Executive branch of government, through the National Payments Corporation of India, which has been around since 2008. UPI was released in April 2016 and Rajan was gone 4 months afterwards. All subsequent results are primarily the result of wider adoption of the platform by Whatsapp, Google Tez and other payment systems.

Payments banks arose during Rajan's tenure, but the idea wasn't his proposal. It was the principal proposal of the Nachiket Mor Committee on financial inclusion. The effort on them has been largely superceded by PMJDY instead. Sept 2018: Payments banks' total deposits under Rs.540 crore. Meanwhile PMJDY statistics currently read 332 million beneficiaries, Rs.85000 crore in deposits and 261 million RuPay cards. The result is a testament to the simple fact that financial inclusion can only be effectively pushed by the executive, and not by a central bank regulation. Payments banks are a creative but demonstrably not a very significant or impactful solution - a far better approach has already been put into execution very effectively.

The Urjit Patel Committee was instituted by Rajan and published its report in 2014, before the new govt took office. Its remit was on more or less the same lines as that proposed by the 2009 Raghuram Rajan Committee on Financial Sector Reforms (which also suggested an active role for the RBI MPC). The objective of the MPC wasn't so much to sort out a recalcitrant RBI governor but to find some agreeable space between the governor's unilateral power to set the rates and the govt's unilateral power to dismiss an uncooperative governor. The actual MPC constitution was an outcome of a policy framework agreement between the RBI & MoF in 2015, coming into effect just a couple of months before his Rajan's departure.

BHIM (like every other wallet) is a mobile app build upon the UPI. The UPI itself is a much older development was created by NPCI which operates under the supervision of the RBI rather than the GoI. And this effort (among others in FinTech) was championed by Rajan and overseen by Nilekani.

Nandan Nilekani on the origins of Unified Payments Interface, NPCI and RBI’s role in its development

Payments banks were proposed by the Nachiket Mor Committee. The Nachiket Mor committee, in turn, was set up Raghuram Rajan. Like most committees of its kind, it had no executive powers and formed purely to render advice. Again, the legal & policy framework for it was created under Rajan. And sure the PMJDY has brought much of the existing unbanked population into the net but the initiative will still live on through the Post Payments Bank with its massive reach around the country.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ramana » 16 Nov 2018 05:27

All the 2019 elections are soon coming near.
Have we discussed what the next set of economic reforms are to be undertaken?

Also any discussion on how to reduce and eliminate subsidies?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 16 Nov 2018 06:22

Viv S wrote:No polemics/politics/derailment intended here. Just economics. The objective of demonetization was two-fold, both logically acceptable. First, to go after those possessing unaccounted wealth (preceded by an amnesty scheme). Second, to reduce the amount of cash in the system pushing the financial flows more towards formal modes of transfer.

Both your assertions are at best, questionable, because they are what you think demonetisation was about. I would argue that neither of them were the primary purpose, on the basis of what the government has done otherwise - formalization of banking and economic activity, and the destruction of the value of the informal economy through a series of actions (GST being another) that make it more worthwhile for economic activity to be conducted formally, rather than informally.
https://rbi.org.in/scripts/AnnualReportPublications.aspx?Id=1235#T1

This reference as has much value as the articles asserting that the fact that the vast majority of the cash was redeposted, was a sign of failure of demonetisation.
The Urjit Patel Committee was instituted by Rajan and published its report in 2014, before the new govt took office.

That's exactly what I said - it doesn't really look so good for Rajan when the head of the committee *he* formed is selected to replace him ahead of time.

To summarize:
1. The 2008 Rajan Committee proposals are not adopted.
2. Rajan gets picked as RBI gov
3. Constitutes 2013 Urjit Patel committee
4. New committee recommendations - including CPI targeting approach and and MPC mechanism - accepted.
5. Rajan prematurely replaced by Patel.

1. Payment banks system proposed by Nachiket Mor committee . Rajan not a member.
2. Payment banks approximately 0.6% of PMJDY in aggregate deposits.

1. NPCI existed half a decade before Rajan's tenure.
2. Most of the exponential growth in UPI transactions begins in fall 2017 with Whatsapp/Google mobile support
Image

How are Rajan's contributions evident in the above ? He wasn't a member of either the Patel or Mor committees. The Patel committee recommendations superseded anything from the previous committee report, and Patel himself replaced Rajan. Mor heads the Gates Foundation in India now, and might return to RBI someday in a bigger role. What original contribution exists, other than having demonstrated ability to delegate tasks to others who came up with solutions for which they received career boosts ?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 16 Nov 2018 09:10

Suraj wrote:Both your assertions are at best, questionable, because they are what you think demonetisation was about. I would argue that neither of them were the primary purpose, on the basis of what the government has done otherwise - formalization of banking and economic activity, and the destruction of the value of the informal economy through a series of actions (GST being another) that make it more worthwhile for economic activity to be conducted formally, rather than informally.

Other actions taken like GST, PAN-Aadhar linkage, PMJDY, digital payments etc. while indicators of the govt's general motivations, are not germane to the question of what the specific objectives of the demonetization exercise were. And I'm not inventing objectives, I'm going by what the govt said the objectives were. Initially, it was about wiping out black money and acting against those who ignored the amnesty and continued to deal with it. Later it was about encouraging digitization and a move towards a cashless society, which is why the RBI's decision to entirely reflate the system with cash (in even higher denominations) makes no sense at all. And going by the Economic Survey 2016-17, the expansion of the individual taxpayer base directly attributable to the exercise was quite modest at ~1% (https://www.indiabudget.gov.in/es2016-1 ... 1_vol2.pdf - Pg 22).

That's exactly what I said - it doesn't really look so good for Rajan when the head of the committee *he* formed is selected to replace him ahead of time.

To summarize:
1. The 2008 Rajan Committee proposals are not adopted.
2. Rajan gets picked as RBI gov
3. Constitutes 2013 Urjit Patel committee
4. New committee recommendations - including CPI targeting approach and and MPC mechanism - accepted.
5. Rajan prematurely replaced by Patel.

1. Payment banks system proposed by Nachiket Mor committee . Rajan not a member.
2. Payment banks approximately 0.6% of PMJDY in aggregate deposits.

1. NPCI existed half a decade before Rajan's tenure.
2. Most of the exponential growth in UPI transactions begins in fall 2017 with Whatsapp/Google mobile support

How are Rajan's contributions evident in the above ? He wasn't a member of either the Patel or Mor committees. The Patel committee recommendations superseded anything from the previous committee report, and Patel himself replaced Rajan. Mor heads the Gates Foundation in India now, and might return to RBI someday in a bigger role. What original contribution exists, other than having demonstrated ability to delegate tasks to others who came up with solutions for which they received career boosts ?

The purpose of a committee is to examine all sides of an issue and make recommendations. Committees are created all the time, and their recommendations are viewed, noted and filed away almost all time. In and of themselves, they have no administrative value. The rubber meets the road only when it comes to implementation. Saying his initiatives aren't Rajan's work, despite the fact that he set up the panels pursue it almost immediately on taking office and then implemented the recommendations, is a bit like saying that XYZ wasn't the GoI's work because it came from a NITI Aayog proposal. Same goes for argument about delegation - it would be like saying that the PM doesn't have any achievements because the ministers did everything, or that the minister doesn't have any achievements because it was actually the ministry secretary who did the work and so forth down the line.

Also, the Patel or Mor committees didn't override the Rajan committee's recommendations. The latter had a very broad ambit and Rajan constituted them, along with the Bimal Jalan committee, to go into depth in those specific areas where he was pursuing reform. Aside from that, at least on NPAs, the CEA credits Rajan for identifying the cause and pushing for its resolution.

Murli Manohar Joshi headed committee wants Raghuram Rajan's insights on the NPA crisis
The 30-member Lok Sabha Committee on Estimates, headed by BJP veteran Murli Manohar Joshi, has asked Rajan to appear before it for a briefing on the banking sector's mounting non-performing assets (NPAs). The committee examines the estimates included in the budget. It reports on the efficiency of the policy underlying the estimates and entities which are audited by the CAG.

A member of the committee told India Today that Joshi wrote a letter to Rajan on August 7, where he said that the "committee admires his experience and knowledge and if he is unable to testify to the summons in person, the committee would like a written testimony of his expert view on the NPA crisis, how it has been created and how India should tackle it".

Murli dashed off the letter to Rajan after former Chief Economic Advisor (CEA) Arvind Subramaniam made a presentation on the bad loan problem before the parliamentary committee. During his deposition last month, Subramaniam is said to have told the members that the credit for pinpointing the causes for the mounting NPAs and launching serious efforts to resolve them ought to go to Rajan.

As far as his departure is concerned, if the govt was determined to implement demonetization and Rajan had indicated that he was not in favour of such a step, then given that the move required a consensus with the RBI, it was pretty much inevitable that his tenure would not be extended. That's not an indictment of his performance while in office.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 16 Nov 2018 23:59

Viv S wrote:Other actions taken like GST, PAN-Aadhar linkage, PMJDY, digital payments etc. while indicators of the govt's general motivations, are not germane to the question of what the specific objectives of the demonetization exercise were. And I'm not inventing objectives, I'm going by what the govt said the objectives were. Initially, it was about wiping out black money and acting against those who ignored the amnesty and continued to deal with it. Later it was about encouraging digitization and a move towards a cashless society, which is why the RBI's decision to entirely reflate the system with cash (in even higher denominations) makes no sense at all. And going by the Economic Survey 2016-17, the expansion of the individual taxpayer base directly attributable to the exercise was quite modest at ~1% (https://www.indiabudget.gov.in/es2016-1 ... 1_vol2.pdf - Pg 22).

Your statements are a collection of 'government said's that are collectively your own claims :) You realize you're trolling here, right ? If you don't, well yes you are. There's a thread for the topic. You're ignoring pages of discussion there, and simply expecting to be taken seriously then you post a gross generalization about a major reform action, and expecting to be a) taken seriously and b) not be censured for thread derailment. Why do you think that's reasonable ? You've already been given one hint that this line of thread derailment isn't welcome here.
Viv S wrote:The purpose of a committee is to examine all sides of an issue and make recommendations. Committees are created all the time, and their recommendations are viewed, noted and filed away almost all time.

Except that Rajan himself chaired a committee whose recommendations were 'noted and filed away' . Why did Rajan not use the results of his own committee report when he became RBI head ? Why create a new committee chaired by Urjit Patel, if allegedly the conclusions are the same ?

Your argument reduces Rajan to a short-lived bureaucrat who was effective at delegating work. Is THAT what he's famous for ? He's not a noted economist with a stratospheric educational and professional resume, interesting economic theories that might one day win him a Nobel in Economics ? No, he's just good at forming committees ? How's he any better than any good UPSC product then ? And why exactly is he so famous ? What are Rajan's original contributions to Indian economic policy, beyond answers that start with "created a committee to look into..." ?

Your comparison to the PM not getting credit for the work of his ministers ignores the fact that the PM *is* the delegator in chief, by designation. It's his job to delegate things out and see that his ministries get things done. Rajan is sought because he's an academic and economic expert. His fame lies in his technical competence and academic background at least as far as his resume is concerned, and not his bureaucratic skills.

It's quite possible he found himself doing bureaucratic work he just didn't like doing - which simply reinforces the fact that he's a bad hire. His job as RBI Gov is to work with the government, and execute the policies implemented by the government as effectively as possible. The institution he headed, demands stability and continuity from its leadership.

He accomplished none of these. The actual policy recommendations were the work of others. He has a history of not working well with the government. He left too soon for any impact upon actions recommended by committees of his time. In other words, no demonstrated leadership or continuity.
Viv S wrote:As far as his departure is concerned, if the govt was determined to implement demonetization and Rajan had indicated that he was not in favour of such a step, then given that the move required a consensus with the RBI, it was pretty much inevitable that his tenure would not be extended. That's not an indictment of his performance while in office.

Resign because you don't agree with a policy ? Rather than stick around and help implement it as best as can be done ? We aren't discussing gross human rights violations or something here - it amounted to a switch of currency notes for the average person, nothing more. It's a policy that pursues an objective many developing economies with large informal economic sectors do - how do push formalization of economic activity and banking. There's no heroism in resigning over something like this. It simply demonstrates that the person lacks the ability to stick though difficult reform measures. The power to define and execute reform is the government's prerogative, and a government bureaucrat's job is to get it done.

Rajan clearly is not a good bureaucrat and should never have taken a bureaucratic role like RBI gov - it's clear he was a bad fit. I've no malice against him personally. He didn't do the most high profile job on his resume well, because he wasn't a good fit for it. He's an academic and intellectual, and loves talking. RBI governors are supposed to be taciturn bureaucrats who speak little, in measured words.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 17 Nov 2018 03:34

Katare wrote:What is your beef with Rajan?


He talks too much and on nuanced topics like GST and DeMo he comes out as a person who missed the bus due to his own making and blames the current GoI for that.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby krisna » 17 Nov 2018 03:40


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Viv S » 17 Nov 2018 03:55

{Deleted - poster cannot be bothered to listen to advice to stop posting in the wrong thread}

Except that Rajan himself chaired a committee whose recommendations were 'noted and filed away' . Why did Rajan not use the results of his own committee report when he became RBI head ? Why create a new committee chaired by Urjit Patel, if allegedly the conclusions are the same ?

Your argument reduces Rajan to a short-lived bureaucrat who was effective at delegating work. Is THAT what he's famous for ? He's not a noted economist with a stratospheric educational and professional resume, interesting economic theories that might one day win him a Nobel in Economics ? No, he's just good at forming committees ? How's he any better than any good UPSC product then ? And why exactly is he so famous ? What are Rajan's original contributions to Indian economic policy, beyond answers that start with "created a committee to look into..." ? [

Like I said before, the Rajan committee had a very broad mandate i.e financial sector reforms, and a very broad set of recommendations i.e. "a hundred small steps" . On taking office, he set up the Urjit Patel committee to do a follow-up granular analysis of one of the specific areas of where reforms were planned i.e monetary policy framework.

On the issue of bureaucrats, economists and central bankers, I'll quote Mr. Rajan's predecessor on the matter -

You need somebody even a person without an economics background if he is got sufficient intelligence and leadership qualities I think he can lead the Reserve Bank I think so. So this belief that the governor must be an economist I don’t think you should carry it too far it helps certainly. Christine Lagarde who is the MD of IMF she is not an economist, but she is doing a great job as the MD of the IMF. So to believe that an IAS officer would make a better governor or an academic would make a better governor it is wrong it depends on the individual.

Just having an IAS pedigree has never been enough. You have got to be an IAS pedigree with some qualifications to be the governor. However you must also remember that it is misleading to look at all that the RBI does through the prism of the governor. The RBI itself is a great institution with enormous depth and breadth of professionalism and competence. So, all that feeds into the governor. What the governor needs to do is to absorb all this analysis that is given to him and make a judgement call.

I can say that I was surprised by Raghuram Rajan's decision to not accept or not be considered for a reappointment. I thought that he had done a great job and that our macroeconomic management would have benefitted immensely if he had continued but that is not to be.
- D. Subbarao


Your comparison to the PM not getting credit for the work of his ministers ignores the fact that the PM *is* the delegator in chief, by designation. It's his job to delegate things out and see that his ministries get things done. Rajan is sought because he's an academic and economic expert. His fame lies in his technical competence and academic background at least as far as his resume is concerned, and not his bureaucratic skills.

Its not that simple. Being a good PM requires political experience, political savvy, rhetorical skill and administrative competence. He's got to manage the expectations of his base, of the electorate and of a myriad of pressure groups & interest groups. He has to balance a focus on winning elections with governing the country well (and the two don't always overlap). He's not merely a delegator, nor are the ministers and civil servants who report to him just delegators of the second & third rungs. Being a good administrator isn't enough to be good PM.

Its the same with the RBI governor's role. There is a purely economistic aspect to it, wherein the broad policy of inflation-targeting was spelled out by Rajan while dedicating a panel of experts to look into the nitty-gritty of implementation, but the bulk of the work is still the formulation of administrative policy given that RBI is the primary regulator of the country's financial system. In both matters, the governor needs to exercise his judgement - he's not a rubber stamp.

It's quite possible he found himself doing bureaucratic work he just didn't like doing - which simply reinforces the fact that he's a bad hire. His job as RBI Gov is to work with the government, and execute the policies implemented by the government as effectively as possible. The institution he headed, demands stability and continuity from its leadership.

He accomplished none of these. The actual policy recommendations were the work of others. He has a history of not working well with the government. He left too soon for any impact upon actions recommended by committees of his time. In other words, no demonstrated leadership or continuity.

The RBI's role is not and never has been to execute the govt's policies. Like all central banks and financial regulators, it is an independent body that is expected to discharge its role without political considerations. There are of course overlapping areas where it needs to work with the govt and during his tenure it did so quite effectively - the creation of the MPC being the most notable example.

Resign because you don't agree with a policy ? Rather than stick around and help implement it as best as can be done ? We aren't discussing gross human rights violations or something here - it amounted to a switch of currency notes for the average person, nothing more. It's a policy that pursues an objective many developing economies with large informal economic sectors do - how do push formalization of economic activity and banking. There's no heroism in resigning over something like this. It simply demonstrates that the person lacks the ability to stick though difficult reform measures. The power to define and execute reform is the government's prerogative, and a government bureaucrat's job is to get it done.

Rajan didn't block the demonetization proposal because the govt never asked him to implement it or even told him that such a thing was planned. He was verbally asked his opinion about such an exercise and he gave it as honestly as he could have. Given the sensitivity of the move, if the govt felt that they ideally needed a governor who was personally supportive of the move, well then that's that.

Also, Rajan did not resign from his position, on principle or otherwise. He served out the entirety of his three year tenure. And when the govt indicated that it had different plans, he merely declined to seek an extension, making the transition fairly amicable for both sides.


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