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I have been observing, for over a fortnight , the tactics adopted by our corrupt politicians and dishonest industrialists to pressurize an upright Governor of Reserve Bank of India (RBI) - Mr Subbarao. It is a classical case, where politicians, industrialists and media gang up together and pressurize an honest official to not take a decision which is the best for the economy or country. We see this almost on a regular basis not only at State levels but also at central level. Good people are discredited by regular bashing by politicians and media. The recent examples are the movements of Team Anna and Baba Ramdev. These movements with best intentions are time and again hammered by politicians and media, and in between are joined by rich businessmen. Coming back to our topic of the day, let us have a glance at some of the headlines which appeared in media before the announcement of the Monetary Policy statement on 18th June 2012:-
Headlines Appearing before the Announcement of the Monetary Policy :
RBI must adjust monetary policy : Pranab
Pranab Mukherjee expects RBI to adjust interest rates
Industry calls for cut in interest rates
Industry Asks RBI to cut interest rates, boost investments
RBI Governor expected to announc rate cuts, India Inc
RBI expected to cut key lending rates to spur growth
The above clearly indicates that Finance Minister (Likely to become President of India soon) was coercing Mr Subbarao, Governor of RBI, to cut the interest rates. By issuing such statements openly, FM has clearly indicated that he was in favour of rate cuts but Governor thought it otherwise. Similarly, industrialists were issuing statements that there is a need for rate cut to boost investments. There appears to be a clear collusion between politicians and industrialists to maximize their profit. Both of them wanted their respective share of profits to increase in the name of growth and investments. The reduction in interest rates will benefit industrialists and politicians only. In this age of almost double digit inflation, poor and senior citizens are earning less than the inflation rate if they invest in banks. Thus their returns are negative. Had they been serious about growth and investments, they would have curtailed the growth of black money. In his career of over 25 years in government, Pranab Mukherjee has hardly done anything to contain black money. Inspite of huge pressure from Team Anna, Ramdev and general public, he has blocked all efforts to name the people who were hoarding black money abroad and is now cursing Team Anna for raising issues of corruption against him personally. He is now looking to be absolved of all sins once elected to be President of India.
In the above background, I am left with no option but to say "Hats Off" to Mr Subbarao for his stand against all odds (I use Hats off phrase only when I sincerely wish to show my honour to somebody, because of baldness !!). In the policy statement, RBI has clearly stated the circumstances under which, they have adopted the "NO CUT" stance. One of the reasons given in the Policy is ' the current slowdown in economic growth and investment activity is not primarily because of high interest rates. '. Why FM and Government has failed to contain fiscal deficit and losing money in scams. Why Government, which expects rates to be cut, has failed to contain inflation. Was our FM and industrailists are unaware that at present the effective bank lending rates are lower than the rates during the boom years. Why FM and Government has failed to contain fiscal deficit and losing money in scams. Why Government, which expects rates to be cut, has failed to contain inflation. The depreciation in rupee has already benefited the exporters by over 10% earnings. Now they are mum on this issue. Had rupee appreciated, they would have cried for additional subsidies. Now when country is suffering, they will be making fatter profits and digest the same without uttering a single word. Why FM does not decide to concessions to exporters - lower rate of interest on export financing and other incentives.
Inspite of the fact that the logic for not going for cut in policy rates have been wonderfully explained by RBI, our media and industrialists are crying foul and following headlines have appeared in the media, a day after the policy announcement.
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Headlines Appearing After the Announcement of the Monetary Policy :
Anand Sharma wants RBI to rethink on rate issue
RBI stuns, keeps rates steady as growth crumbles
RBI's Status Quo Leaves India Inc Disappointed
RBI pause jolts India Inc Government
Bank Stocks tank as hopes of RBI rate cut fade away
RBI Governor Subbarao still has 15 months to go
RBI's communication flip-flop baffles market
Mr Anand Sharma wants RBI to rethink on rate issue ! Others are worried that RBI Governor Subbarao has still 15 months to go. This is a great country and every rich wants to become richer by snatching the "roti" from the mouth of a poor.
All along these days, I was supporter for "No Cut" in policy rates. People like me were dubbed as retrograde and against the investment and growth climate. I am lucky that at the end that I could get feeble support from some the top people in private banks like Ms Chanda Kochhar of ICICI Bank, Abheek Barua of HDFC Bankhave, as they have supported RBI move.
I will like that RBI Governor should not be made the whipping boy. In the present scenario only few can take a stand against the Government. Thus, there is a need that all bankers must support this upright Governor so that our economy can be brought back on track provided politicians stop creating mess of it. I wonder, whether even one DG from the present lot would have been able to resist such pressure, as most of them owe their survival to the government only - one had issued the statement contrary to the stance of RBI and the other is waiting for his permanent extension ? What can one expect from such people in future ? The knowledge and capabilities of the names going around for replacement of one of DG's are also pathetic - bankers who have worked with them are well aware of these facts.