Nepal’s drift towards China

China’s growing influence in the Himalayan country Nepal is a matter of deep concern for India. On one hand, Nepal recently rebuffed India by not sending its soldiers for the first Bimstec (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) anti-terror military exercise being held in Pune (September 10 to 16), while on the other hand, Nepal agreed to send its troops to China for an anti-terror exercise, which clearly shows closeness of Nepal with China.

The government’s decision to help Nepal build new hangars and upgrade the existing at the Kathmandu airport must be appreciated as it will help reduce China’s influence on Nepal. The government must, however, take more steps to stregthen relationship with neighbouring countries.

Secunderabad

In order to contain fuel prices, a well-known measure is to reduce our dependency on external sources as it leads to double-procurement: for the import of crude oil, India needs to procure the US dollars. Whenever there is a hike in crude oil prices, it drives the rupee value further down as payment can be made only in dollars and India’s CAD (current account deficit) widens.

There are ways to meet India’s energy requirements and, at the same time, reduce our import of crude oil substantially. First, the government should reaffirm and recheck its commitment to achieve the target of blending 10 per cent ethanol with petrol by 2022. As molasses is the major source for producing ethanol, which in turn is in high demand from distilleries and the chemical industry, the availability is restricted. As a result, the procurement of ethanol has become difficult. In this context, the Centre must incentivise the sugar industry to make molasses available in plenty and direct them for the production of bio-fuels and also establish more bio-fuels refineries.

Second, the government should encourage people to use public transport by offering fare-concessions.

Third, transition to e-mobility should be speeded up. In railways, converting meter-gauge to broad-gauge and electrification of broad-gauge must cover all lines. And, fourth, deals must be struck with oil-exporting countries (like Iran) who allow payments to be made in their own currencies.

Cuddalore, TN

The recent statement by Raghuram Rajan on NPAs and potential risks in the coming years is worth taking note by the government. As pointed out by Rajan, the MUDRA loan scheme and Kisan credit card need to be examined more closely for credit risk. Any crisis on this front will affect beneficiaries in the micro-enterprise and agriculture sectors.

The government should, therefore, do a quick re-evaluation of the schemes to mitigate the possibility of another crisis.

Bangalore

While infusion of additional capital and consolidation of similar operations across banking can allow public sector banks to become self-reliant and thus overcome inherent risk and liquidity issues, the institutions run a risk of being over-capitalised.

It is important that banks, driven by a stable/efficient top management, adhere to performance-oriented supervision standards and inculcate a culture of zero-tolerance to malfeasance in order to generate profits in-line with market standards. Further, instead of relying on reactive measures, PSBs need to strike a balance between employing defensive workarounds such as PCA or over-aggressive lending strategies targeted at boosting interest income at the cost of borrower-creditworthiness.

Clean-up of balance sheets and improvement of loan portfolios are a pre-requisite for optimal utilisation of additional funds and to prevent issues of watered capital or operational inefficiencies. Increasing liquidity and equity market-cap via strategic control/corporate actions or implementation of a rehabilitation plan can turnaround the financial position of PSBs and benefit all stakeholders.

New Delhi

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