Why blame it on Rajan?

With reference to ‘Rajan, the fall guy’ (September 5), the government, without setting its house in order, is keen on making former RBI Governor Raghuram Rajan a scape goat.

Instead of addressing issues that caused the NPAs in banks, pointing fingers at Rajan is in bad taste. The government must set right the banking system instead of taking pot shots at renowned economists.

Bengaluru

Raguram Rajan is credited with being one of the earliest to spot the growing real estate asset bubble in the US.

The subsequent 2008-09 collapse of the US economy is a matter of record. In his role as RBI Governor, he relentlessly flagged the looming NPA virus only to be traduced now by the likes of NITI Aayog,when corrective measures of the government have proved inadequate.

The US too suffered a economic downturn and job losses. But it promptly flooded its economy with excess liquidity to sustain stressed financial institutions to assist the overall recovery, that eventually turned around.

We in misplaced intent, drained liquidity massively with DeMo more in hope than design, leading to prolonged suffocation of business and credit squeeze, which hit the economy hard.

When US government could go ahead with foresight, for a $182-billion bail out of even a large private major as the AIG from going under in the 2008 crisis, surely our ailing public sector banks could have been propped up quickly enough with greater boldness and sagacity. Expediency and spin may well serve in politics but not in economics.

Navi Mumbai

With reference to ‘Spike in diesel price puts Govt in a spot’ (September 5, one tends to agree with this report’s key observations stating that auto fuel prices continue to give sleepless nights not only to consumers but the government as well, with elections round the corner and the Opposition stepping up its attack.

However, it goes without saying that diesel, the most popular transport fuel in the country, experiencing a spike of ₹3.72 a litre from July 29 till date (from ₹67.62 a litre to ₹71.34 a litre in Delhi on Tuesday) may further complicate the matters as the transportation costs are bound to go up substantially.

It may also be pertinent to point out that the bulk of government revenues (both Centre and States) comes from the auto fuel taxes and a sum of ₹15.33 a litre towards the Central excise duty and ₹10.46 a litre VAT on diesel is currently being charged from the hapless retail consumers.

But the government seems to have ruled out any cut in the excise duty in the wake of a limited ‘fiscal’ space to take any dent in its revenue collection. This could possibly be attributed to the petrol and diesel prices touching fresh highs as the rupee nosedived to its lowest level of ₹71,58 per US dollar, thereby making the imports of crude oil more dearer.

But the moot question remains: Why could the government not visualise/anticipate and effectively 'insulate' itself from the most likely upward trends in the global prices of the crude brent even when there were enough indications?

Further, the unabated ‘negative’ changes in retail prices of various fuels prices are bound to have an adverse impact on the overall retail inflation numbers. In this scenario, the RBI will find it difficult when its MPC meets early next month.

So, the ball currently lies in the Centre’s court and it should urgently rise to the occasion. And. who knows that its so called ‘ wait and watch’ policy, representing its sheer passivity even on such a vital matter may surprisingly 'turn the tables' upon itself during the 2019 Lok Sabha elections?

Panchkula (Haryana)

LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002.

COMMENT NOW