Smoke it out

This refers to ‘GST regime should tax cigarettes more’ by Rijo M John (August 22). Considering the ill effects of smoking and burden on the economy, the tax should be higher so that smoking is discouraged. It is incidental that the government may realise more on account of higher taxation. As mentioned, under GST it should be at least at the present level of 55.4 per cent.

At the same time, we must ensure that all tobacco products are taxed at a single rate; there need not be any concession for bidis, gutka, etc. We must also ensure that higher taxation on cigarettes does not result in it being smuggled into the country. Let us also not forget that there are 96,865 registered (and more unregistered) tobacco farmers in the country and 0.25 per cent of India’s cultivated land is used for tobacco. India is the second largest producer and exporter of tobacco. Sufficient time should be provided to switch over to other crops.

S Kalyanasundaram

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Watching Urjit

It is heartening to note the appointment of Urjit Patel as the new RBI governor. He is in the same mould as his predecessor and it is expected that he will continue with the policy pursued so far. The immediate challenge is the redemption of foreign currency non-resident (FCNR) deposits to the tune of about $20 billion, which will erode the deposit base in the banking system leading to tight liquidity conditions and fluctuation in exchange rates. It will be interesting to watch if he would continue with the shift made from WPI to CPI as the key indicator for inflation monitoring.

The next general elections are scheduled for 2019 and the thrust is going to be on economic growth and job creation. With the Patel panel’s view that inflation targeting, and growth and employment are mutually exclusive, the approach of the new governor on balancing them will be keenly watched. However, the replacement issue could have been handled more deftly.

Srinivasan Velamur

Chennai

Patel is expected to play a crucial role during his tenure. His foremost task is to wage a relentless war on crony capitalism in order to recover bad loans (NPAs). Defaulters need to be punished. One hopes he will be a key player in the RBI committee on monetary policy reforms.

Attempts are to be made to control inflation and fiscal deficit enabling the poorer sections of society to enjoy two square meals comfortably. The Centre has also to play a major role in this respect. It is also hoped Patel will not compromise with North Block or the corporates on major issues and will try to maintain the autonomy of the RBI.

Jayant Mukherjee

Kolkata

The choice of the new RBI governor is sensible. It will soothe a lot of nerves in the investing community because of continuity. Let’s not forget that we as a country do not have a system which allows monetary policy to effectively dictate higher employment and growth.

Look at the developed nations achieve economic benefits with currency devaluation without importing inflation. If we go in for currency devaluation it will definitely be inflationary. So focus on inflation is a must and resolving the NPA crisis and recapitalising PSBs should continue to be the focus of the new governor and the MPC.

CR Arun

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With reference to the well articulated ‘From Rajan to Urjit: the change is seamless’ by Raghuvir Srinivasan (August 22), the choice of new governor is good from all angles as he has the theoretical background and practical experience. Whether it is Rajan from Tamil Nadu or Patel from Gujarat, what is required is independence to be maintained by the office of the governor. The governor’s views on economic matters should be respected without arm-twisting. The Centre should not pre-empt his move on financial and economic matters. The Prime Minister is duty bound to maintain anarm’s length approach with regard to the governor.

RS Raghavan

Bengaluru

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