PM-speak on rupee tumble does not have enough currency

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One area where policymakers have failed in recent years is their inability in continuing to attract long-term capital.

September 1, 2013:  

As Prime Minister Manmohan Singh embarks on an overseas visit this week to attend the G-20 Saint Petersburg Summit, he may pray and hope that the likely US action on Syria will delay the tapering of US stimulus.

The hope being that developments on Syria may prompt the US Federal Reserve to think twice about tapering in September.

For this past month, when rupee hit a record low against the dollar, Indian policy makers have tended to lay the blame for the fall in rupee on “external factors” such as the May 22 announcement of likely US stimulus tapering.

Seldom had one seen Indian policymakers and political leaders take ownership for their policy goof ups or for that matter even their policy inactions.

In this backdrop, the Prime Minister’s recent statement in Parliament on the rupee slide was seen more in the nature of excuses given by a failed student.

It was quite perplexing to note that he went the extra mile to remind the developed countries – in pursuing their fiscal and monetary policies – that they should take into account the repercussions on emerging economies.

What about India’s own domestic policy failings that had led to the current situation? ask experts from the international policy community.

This is even as they took comfort from the Prime Minister’s reassurance to the international community on his commitment to reforms and restraint from capital controls.

One area where policymakers have failed in recent years, is their inability in continuing to attract long-term capital.

India has been relying on short-term capital flows to fund its deficits.

After sleeping on the wheel for nearly four years, the UPA Government is now, in the last year of its term, pushing for several reforms that may not be fiscally prudent.

The Food Security Bill has political engineering all over it, say economy watchers. The Food Security Bill is another way of distorting prices, mis-allocating resources and adding to the fiscal burden in the longer term, says Peter Drysdale, a Professor of Economics at Australian National University.

“India’s progress through reforms has been impressive in the last two decades. But this (Food Security Bill) sends a wrong signal to the reform process.

“This and recent hardening of approach to FDI signals that a caution is needed about India’s deep commitment to the reform process.”

Lack of confidence in policy commitment is the main reason for the short-term shock now experienced by India. Any wise Government should recognise this, says Drysdale.

Fiscal discipline, commitment to openness on capital and commitment to leaving the exchange rate do its proper job are the need of the hour.

It’s not clear that the latter commitment is being taken seriously. Defending the currency may not be a right approach or a long-term solution.

Top bankers hail work of outgoing RBI Governor D.Subbarao

RBI Governor D Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover.

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Mumbai, Sept 2:  

Top bankers have hailed the contributions of the outgoing Reserve Bank Governor Duvuuri Subbarao saying he did his best during a tenure that was marked by difficult times for the economy.

“I think the Governor’s (five year) term has been in one of the most difficult environments globally and domestically.

“If you look at the world and our country today, there is so much change that you have to be at your feet and I can’t imagine anybody else doing a better job (than Subbarao),” Axis Bank Managing Director and Chief Executive Shikha Sharma said.

Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover.

Within a fortnight of him assuming office, global investment bank Lehman Brothers filed for bankruptcy and the hit pulled the global banking system down to an unprecedented credit crisis which eventually led to the worst recession since the Great Depression.

This was followed by a difficult period which saw RBI working in close coordination with the government and other financial sector regulators, as also other central banks, to ring-fence the economy.

While the fiscal and monetary stimuli ensured that the economy did not fall off cliff, this soon gave way to a spike in inflation. This saw rise in policy rates from October 2010 for a year or so even as growth started coming down.

As Subbarao’s term moved close to ending, worries over slowing growth and stubborn inflation complicated the matter for the central bank. His problems got compounded with the fall of the rupee beginning May-end. It declined to a low of 68.85 intra-day to the dollar early last week.

“I’ve the highest respect for him. He has been through difficult times and let’s put it this way: in hindsight, it’s very easy to judge anybody...I do believe he did a great job,” Aditya Puri, who heads the second largest private lender HDFC Bank, said.

“One thing that has not been fully talked about during his tenure is that he has reduced CRR and SLR by 4 percentage points, which to my mind, in a tenure of five years is very significant,” said Pratip Chaudhuri, the chairman of the country’s largest bank State Bank of India.

Chaudhuri, who favoured doing away with CRR, added that its reduction was one of the reasons for the economic buoyancy during early part of Subbarao’s stint.

“To some extent, the buoyancy which we saw in the economy in the previous two years, could be attributed to that,” Chaudhuri said

ICCR spent ‘unauthorised’ Rs 8.5 cr on sending 34 delegations to 70 nations: CAG

Such cases of unauthorised expenditure were found in the case of tours led by well-known dance, music and theatre and folk artistes.

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New Delhi, Sep 3:  

If you thought taxpayer money was flowing only into dull and drab sectors such as coal, mining among others, think again. The Indian Council of Cultural Relations (ICCR) spent an “unauthorised” Rs 8.15 crore on sending 34 delegations to 70 countries during 2009-10 to 2011-12.

A report by the Comptroller and Auditor General (CAG) on autonomous bodies, tabled in Parliament on Tuesday, found that that in several cases, the ICCR had split the estimated expenditure to avoid obtaining requisite approvals. As per the delegation of financial powers of the council, expenditure beyond Rs 15 lakh requires approval of its president.

However, the ICCR followed a practice of “splitting expenditure to avoid obtaining approval of the president, ICCR, during approval of budget estimates”, the audit report found.

For instance, two separate estimates of Rs 14.73 lakh and Rs 23.21 lakh were submitted for a tour to China in April 2012 by the 38-member theatre group led by Ratan Thiyam. Similar cases of splitting expenditure were found in the case of tours led by well-known dance, music and theatre and folk artistes, such as L Subramaniam, Ila Arun, Penaz Masani, Tanushree Shankar, Uma Sharma among others.

The CAG report also found that the council was not following Government instructions that officials should only travel by Air India.

During 2009-12, ICCR incurred 98.32 per cent expenditure on air travel by airlines other than Air India, the report said.

It also noted that the ICCR, which is under the administrative control of the Ministry of External Affairs (MEA), had opened three Indian Cultural Centres and was in the process of opening another eight without the Ministry’s approval. Also, it was operating the posts of Director, ICC, in various countries without requisite sanction by the Finance Ministry.

The CAG report noted that in the absence of guidelines for appointment of external directors, the ICCR had taken ‘arbitrary’ decisions. It quoted the instance of appointment as directors of three journalists and an academic, “who were working for different private agencies and their pay was fixed as per their earning in the private sector.”

Also, the council incurred significant expenditure on procurement of services by private firms, such as SEHER, Modern Stage Service Pvt Ltd, etc., without following general financial rules.

The ICCR was set up in 1950 to establish, revive and strengthen cultural relations with other countries.

With Rs 7 lakh cr investment in limbo, Gujarat has lowest implementation growth

Ahmedabad, Sept 3:  

Gujarat has recorded the lowest investment implementation rate as only 46 per cent of the total investment projects in the western state are under implementation while the rest remained non-starter as of March 2013, apex industry body Associated Chambers of Commerce and Industry of India (Assocham) said on Tuesday.

"Of the total investment proposals worth over Rs 13.7 lakh crore attracted by Gujarat as of March 2013 from various public and private sources, about 54 per cent worth over Rs 7.4 lakh crore remained non-starter," according to an analysis of investments carried out by Assocham.

In Gujarat, over 40 per cent of investment projects are in the announcement stage alone while implementation of six per cent has been stalled due to various reasons and there is no information of about eight per cent of projects.

With 82 per cent of investment projects under implementation, Haryana has recorded the highest rate of implementation of investments amid industrialised states in India.

Jammu and Kashmir (81.4 per cent), Punjab (79 per cent), Assam (72 per cent) and Chhattisgarh (69 per cent) are amid top five states that are currently witnessing a high rate of implementation of investments.

“A staggering 43 per cent of total investment projects worth a humongous Rs 52 lakh crore attracted by states across India remained non-starter as of March 2013, while over 34 per cent of these investments are stuck at the stage of announcement. Implementation of about six per cent of projects has been stalled and there is no information of the remaining (three per cent) projects,” said Mr D.S. Rawat, Secretary-General, Assocham.

Across India, investments worth over Rs 69.5 lakh crore, or 57 per cent of the total investment proposals of over Rs 122 lakh crore were under implementation as of March 2013, suggesting that investments across states have been kept on hold owing to prevalence of global recessionary trends and slowdown of Indian economy which desperately needs investments.

The prevailing unstable external and internal economic conditions, high inflation, credit availability and its cost along with a host of local problems like delays owing to land acquisition have been affecting the investment scenario in India. The only states that try to address genuine concerns of investors to possible extent see higher implementation rates.

Bhutan rolls out red carpet for Indian IT industry

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Hyderabad, Sept 3:  

Bhutan has rolled out the red carpet for the Indian IT industry to participate in its ambitious information technology development programme.

The Bhutanese Prime Minister, Lyonchhen Tshering Tobgay, who visited Hyderabad as part of his maiden visit to India after he took over, said Bhutan was endowed with natural beauty.

Now Bhutan would pursue a programme to build on its natural foundation and tread the path of modernisation, led by IT.

“Show us the path. We will first take baby steps in this direction, followed by giant strides. It will be a profitable proposition for you,” he told a meeting of CII here today.

He welcomed Indian IT companies to set up operations in Bhutan. “I assure you we will give you the very best option and incentives to do business in Bhutan. You can feel the sense of my enthusiasm…I am open for business,” he said, adding that Bhutan would welcome a IT-led business delegation to the country.

Tobgay also identified renewable energy as another area for cooperation between the two countries.

The Prime Minister, who visited the CII Green Building here, was impressed with the work India was doing in the area of green building campaign.

The CII said India, which was engaged in capacity building in energy efficiency sector in Sri Lanka, could undertake a similar exercise in Bhutan, besides assisting it in the green building movement, certification and materials manufacture. The trade body identified waste management as another area that India could work jointly with Bhutan.