"Sixty years ago I knew
everything; now I know nothing; education is a progressive discovery of our own
ignorance."
—Will Durant (American,
1885-1981)
Word for the day
Anoesis (n)
A state of mind consisting
of pure sensation or emotion without cognitive content.
Malice towards none
If elected representatives
are public servants, why the rules relating to attendance and conduct in office
should not apply to them mutatis mutandis, as these apply to every other person
employed in public service!
First random thought this morning
When an elected representative
takes oath of the office he has been elected to, he swears by the name of God
that he will perform his duties and obligations as defined by the constitution,
without fear or favor and without ill-will or affection towards any one.
I want to ask, when an MP or
MLA recommends someone for admission to a school or college, or railway
reservation, or out of turn treatment at a government hospital, or job - does
he not violate the constitutional oath and hence become liable to be
disqualified?
Would the Hon'ble Supreme Court
like to examine this question as PIL?
Yet another opportunity missed
The decision of Monetary Policy Committee (MPC) of RBI to cut
policy rates by 25bps is on the expected lines. In fact MPC was left with
little choice after the largest Indian bank, State Bank of India, decided to
cut savings rates that impact close to 330 million savings account, a couple
days ago.
Given that SBI touches maximum number of poor households, and
account for the largest number of marginal savings account, the decision to cut
savings rate must not have been without strong reasons.
In my view, through this move the government has decided to lead
the monetary policy. It would therefore be reasonable to expect that lending
rate cut, may be little aggressively, will follow. Given the stature of SBI,
most other banks may have to follow the move.
Though I will not go full length and question the legitimacy of
MPC itself, under the given circumstances, it is certain that the government is
more committed to growth rather than inflation at this point in time.
The difference of opinion between the government and MPC on the
monetary policy stance is welcome. MPC not listening to the government is also
a healthy sign.
But the problem is that this tussle between MPC and the government
will likely erode the predictability and data dependability of the policy. This
is something that may not be desirable for anyone.
Coming back to the MPC policy statement, I find the following
worth taking a note, in India's context:
·
A normal and well-distributed south-west monsoon
for the second consecutive year has brightened the prospects of agricultural
and allied activities and rural demand.
·
Industrial performance has weakened in April-May
2017. This mainly reflected a broad-based loss of speed in manufacturing.
Excess inventories of coal and near stagnant output of crude oil and refinery
products combined to slow down mining activity. For electricity generation,
deficiency of demand seems to remain a binding constraint.
·
The weakness in the capex cycle was also evident
in the number of new investment announcements falling to a 12-year low in Q1,
the lack of traction in the implementation of stalled projects, deceleration in
the output of infrastructure goods, and the ongoing deleveraging in the
corporate sector.
·
The 78th round of the Reserve Bank’s industrial
outlook survey (IOS) revealed a waning of optimism in Q2 about demand
conditions across parameters, and especially on capacity utilisation, profit
margins and employment. The manufacturing purchasing managers’ index (PMI)
moderated sequentially to a four-month low in June and the future output index
also eased marginally.
·
Surplus liquidity conditions persisted in the
system, exacerbated by front-loading of budgetary spending by the Government.
·
Merchandise export growth weakened in May and
June from the April peak as the value of shipments across commodity groups
either slowed or declined. By contrast, import growth remained in double
digits.
·
Business sentiment polled in the manufacturing
sector reflects expectations of moderation of activity in Q2 of 2017-18 from
the preceding quarter. Moreover, high levels of stress in twin balance sheets –
banks and corporations – are likely to deter new investment.
·
With the real estate sector coming under the
regulatory umbrella, new project launches may involve extended gestations and,
along with the anticipated consolidation in the sector, may restrain growth,
with spillovers to construction and ancillary activities. Also, given the
limits on raising market borrowings and taxes by States, farm loan waivers are
likely to compel a cutback on capital expenditure, with adverse implications
for the already damped capex cycle.
·
External demand conditions are gradually
improving and should support the domestic economy, although global political
risks remain significant.
·
While inflation has fallen to a historic low, a
conclusive segregation of transitory and structural factors driving the
disinflation is still elusive.
·
There is an urgent need to reinvigorate private
investment, remove infrastructure bottlenecks and provide a major thrust to
the Pradhan Mantri Awas Yojana for housing needs of all.
·
Keeping in view these factors, the projection of
real GVA growth for 2017-18 has been retained at the June 2017 projection of
7.3 per cent, with risks evenly balanced.
Broadly, MPC did see material slowdown in growth momentum. It did
recognize the need for reinvigorating private investment, especially in view of
the rising fiscal constraints on state government due to loan waiver and pay
commission payouts.
MPC did also note that some of the upside risks to inflation have
either reduced or not materialised.
MPC also recognized that the global rates may move higher as
central banks reverse some of their ultra loose policies. This implies that MPC
must have discussed that there may not be much scope to cut rates later.
But still in its wisdom, MPC decided by a majority decision to cut the
rates by 25bps.
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