DeMo blues

The latest RBI report on demonetisation belied all the hopes of the Finance Ministry which predicted an acceleration in financialisation of savings and channeling them into into other instruments and even into stock markets. But the households are keeping their savings in cash and the net savings going to banks are almost 50 per cent lower than the five-year average before demonetisation.

Hence the idea that the crackdown would leave banks flush with household savings which could be lent to productive parts of economy has been proved wrong. Bank deposits in FY 18 fell below pre-demonetisation levels.

Expectations of higher inflation and dismal interest rates on deposits may have prompted savers to sit on cash or faith in the banking system may have been shaken by scary news on bad loans, bail-ins and mega fraud. While banks were losers, market linked products reaped a bonanza. Shares an debentures saw a significant jump in FY18.

The RBI’s estimates reveal that the household money flowing into these instruments jumped from ₹0.36 lakh in FY 17 to ₹1.50 lakh in FY 18. So demonetisation was a policy failure even on the administration's own terms.

Bheemavaram (AP)

With reference to ‘Petrol, diesel prices hit new highs on rupee woes’ ( September 3), it’s highly frustrating to learn that the petrol and diesel prices in the country touched their highest levels on Monday due mainly to the dramatic fall of the rupee and a sharp rise in crude oil rates.

Is it not ironical that the prices of petrol have risen by over ₹2 per litre as against this the diesel prices have risen by ₹2.42 a litre since August 16 based on the price notifications issued by the state-owned fuel retailers which get further spiked up owing to the varying levels of the local taxes being levied by the state governments?

It may also be added that with the rupee closing at 71 against a dollar on last Friday, consumers are in for some tough times ahead. In August alone, the rupee lost over 3 per cent.

Unfortunately oil minister Dharmendra Pradhan is now taking convenient shelter behind the “isolated” policies of the US for the “abnormally” rising fuel prices in the international markets.

Incidentally, apart from the constant hike in the prices of auto fuels, the domestic cooking gas prices (LPG) have also undergone a hike of ₹1.49 per cylinder for subsidised LPG cylinders in Delhi and by ₹30.50 a cylinder for non-subsidised LPG cylinders in Delhi.

The upward swing in the dollar vis-a-vis the Rupee has also pushed up rates for compressed natural gas (CNG) as well as piped natural gas (PNG). So will the Centre ‘freeze’ fuel prices just before the 2019 election like it did just before the Karnataka Assembly elections?

New Delhi

It is heartening to note that country’s GDP growth for the first quarter of the current financial year had climbed to 8.2 per cent in the backdrop of robust growth in manufacturing and agriculture, but huge challenges remain. While the rise in GDP growth suggest the adverse impact of demonetisation and GST have subsided, but the falling rupee, rising commodity prices, and ballooning current account deficit and fiscal deficit will act as a big dampener on growth and raise questions about sustainability of the present growth momentum. Enhanced government spending and concerted efforts to spur job creation are key to sustain the growth momentum.

Sholavandan (TN)

Spurt in consumption and double-digit investment rate delivered 8.2 per cent GDP growth in the first quarter suggests economy seems to be well and on the upper trajectory.

The buoyancy in employment supporting sectors such as manufacturing and construction are the positive features. Giving credit to the government for its efforts seems justified.

Bengaluru

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