Some food for thought
"When a thing is said to be not worth refuting you may be
sure that either it is flagrantly stupid - in which case all comment is
superfluous - or it is something formidable, the very crux of the
problem."
—Percy Bysshe Shelley (English Poet, 1792-1822)
Word for the day
Spondulicks (n)
Money; Cash
First thought this morning
Very few people I know are aware about a place called Punaura
exists in Sitamarhi district of Bihar. Sita Kund situated at this place is most
popularly believed to be the birth place of Mother Sita. As per Valmiki
Ramayana and Kamban Tamil Ramavataram, Sita appeared from the womb of Mother
Earth when the King Janak of Janakpur (situated in present day Nepal, about
40miles from Punaura, Sitamarhi) was ploughing a field in Punaura on
instructions of sages.
Mother Sita is also known as Annapurna, provider of nourishment
and prosperity. The legend says that the kitchen of Mother Sita never lacked
adequate food for all. That is a metaphor for the crop that is born from the
womb of Mother Earth and nourishes the life on this planet. Reverence for
Mother Sita is therefore in fact reverence for Mother Nature, Sustainability,
and Ecology. There are numerous instances in Ramayana depicting how Mother Sita
cared for environment and sustainability during her exile years with Sri Ram
and Sri Laxman.
While the issue of birth place of Lord Sri Ram is ingrained in
the consciousness of most Indians, and enormous efforts are being made to
construct a grand temple at the place of his birth, little awareness exists
about the birth place of Mother Sita, who the Lord himself admitted as equal to
him in all respects.
It is high time that we also declare Punaura Dham (Sitamadhi,
Bihar), birth place of Mother Sita a monument of national importance and
develop it as equally grand pilgrimage as we plan for Ayodhya. This will not
only delight the millions of devotees but also convey a strong message to the
world about our full commitment to gender equality and sustainability.
Chart of the day
Another uninspiring act of MPC
The Monetary Policy Committee (MPC) of the Reserve Bank of India
decided to cut the policy repo rate by 35bps to 5.4%. It maintained
"accommodative" policy stance. MPC recognized the growth challenges
and cut the GDP growth forecast for FY20 6.9% from 7% earlier, while
maintaining CPI forecast at 3.5 - 3.7% range. RBI governor ruled out any CRR
cut as the system liquidity continue to remain in surplus.
Besides RBI also announced the following measures to support
higher credit growth:
(i) The risk weight
for all consumer credit categories has been cut to 100 percent from 125 percent
earlier. This excludes credit card receivables
(ii) The exposure
limit for single NBFCs has been raised to 20 percent from 15 percent earlier.
(iii) Bank lending to
NBFCs for specified agriculture and SME lending will now be eligible for
priority sector lending.
An overwhelming majority of market participants and experts were
anticipating a repo rate 25bps cut. To that extent the decision to cut 35bps
was a "small surprise" (borrowing the expression from the recent
Credit Suisse research report upgrading India to "small overweight").
It is evident from the policy statement released by MPC (read
here) that the Committee and RBI are fully conscious of the challenges
posed to the Indian economy. It is categorically acknowledged that both global
and domestic growth environment have worsened materially in past few months.
The need to stimulate growth is also admitted, as could be read from the
following excerpts from the policy:
"Even as past rate cuts are being gradually transmitted
to the real economy, the benign inflation outlook provides headroom for policy
action to close the negative output gap. Addressing growth concerns by boosting
aggregate demand, especially private investment, assumes the highest priority
at this juncture while remaining consistent with the inflation mandate."
(Paragraph 20)
In this light, I find the policy stance of MPC seriously
lacking. In my view, the situation today warranted a categorical "whatever
it takes" commitment from RBI. By making minimal apologetic rate cuts RBI
is just wasting bullets while not helping anyone's cause.
MPC appears to be ignoring the fact that the present crisis is
as much about confidence as financial stress. Minor rate cuts can ease a bit of
financial stress and other measures may improve access to credit, but these are
inadequate insofar as business and consumer confidence is concerned.
I would emphatically suggest that the government must consider
some changes in the present process of the management of Monetary Policy
itself. In my view-
(a) MPC should be
converted into an advisory body, which shall be obligated to consider the
representations of industry, trade and government before making its policy
recommendation to RBI. MPC must record its reasons in detail for disagreeing
with the views and suggestions of stakeholders.
(b) RBI Governor
should be at liberty to accept or reject, in full or part, the recommendation
of MPC. However, RBI governor must record his reasons in detail for any such
agreement and disagreement.
