RBI’s reserves

This refers to the article, ‘What does the RBI’s MRI say?’ by SS Tarapore (September 4). Obviously, the practice of transferring the entire ‘surplus income’ to government when the reserves position of the central bank shows a continuous declining trend needs a review. Considering the size of the RBI’s balance sheet, and remembering that the bank’s share capital (5 crore) has not been augmented since inception, the reserves position needs to be raised to healthier levels.

The government should help the central bank augment its reserves at least to the level of 12 per cent of total assets. It must carry out appropriate amendments to the RBI Act. Till such time, the RBI should be allowed to retain surplus income by transfer to reserves.

MG Warrier

Mumbai

Protecting investors

For years, people have been lured by companies offering attractive interest rates on deposits and ponzi schemes. As the RBI has pointed out, one of the reasons is companies not operating from a registered address. Another reason is the non-filing of statutory returns with the ROC and stock exchanges. Ultimately when the company turns, the board, the address and the people behind it are missing, affecting the interests of poor and middle-class investors. No solid measure has been taken so far to curb this. Even if the miscreants are found, the assets in their name are not available to sell off.

To obviate this difficulty perhaps the RBI, while registering the company, should fix a limit for collection of deposits and also insist securities in the shape of fixed assets covering that limit be mortgaged in favour of the government so that in case of need the assets can be easily realised. The interest rates on deposits offered by banks and post office should be attractive so that people are not lured by fraudulent companies.

TSN Rao

Bhimavaram, Andhra Pradesh

Don’t listen to them

Our chief economic advisor Arvind Subramanian and and MoS finance Jayanth Sinha are worried about deflation. They are actually talking about core inflation, but it is wrong to look at core inflation in India. Look at the inflation in medical costs; we spend one lakh a year for a KG student. WPI inflation does not capture these nontraded goods and services inflation. So the RBI is right in targeting consumer price inflation and getting CPI to 4 per cent; maintaining it at below 5 per cent will bring in a lot of money for investments and create jobs and growth and in the process keeping inflation at low levels. The RBI is on the right track. It should not lose focus on by listening to Subramanian and Sinha. CR Arun

Email

Low growth in the exports and manufacturing segments are affecting the economy. The steel industry is suffering from the dumping of cheaply priced steel from China. Credit offtake is not picking up and growth is still below 10 per cent. The high price of credits and non-availability of incentives are hampering the growth of key sectors. The government and the RBI should take immediate corrective measures to address these issues.

TRN Sharma

Hyderabad

Arvind Subramanian says the real challenge for the economy is price deflation and not price inflation. Deflation means general fall in price level. In a country like India where the interest for buying goods and services is very high, there is no question of deflation. Let us be realistic in our approach to accelerate growth.

S Ramakrishnasayee

Ranipet, Tamil Nadu

Powerful uses

Governments should not view excess capacity in power production as a simple economic burden. Extra power could be used for beneficial purpose, such as pumping flood waters during rainy season to storage reservoirs, unconnected with the riverine system. Power could be used for making sea water potable water . When planners start thinking about economics in power production, especially when the per capita power consumption of our country is hardly 543 KWH as against the US’s 13,616 KWH, it is unfortunate.

Gadepalli Subrahmanyam

Vizianagaram, Andhra Pradesh

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