Letters to the editor dated October 3, 2019

| Updated on October 03, 2019

Mounting debt

Apropos the editorial ‘Sliding back’ (October 3).The spin on the 2016 demonetisation was effective enough for leading economists and big business to see no downsides even up to the end of 2017. It was a rare observer who promptly foresaw a massive collapse of an informal credit system that was sustaining the ecosystem for MSMEs and NBFCs.

The pundits are since ruing their naivete, but in our complex supply chain, the spiral of the accruing debt burden is proving to be more vicious. The cascade of debt had since engulfed big banking, which has the government for support. But it is the small entities and their employees, who are bearing the brunt. The government found no black money and is now finding it hard to repair the damage it wrought on an economy. This government has a reputation of dismantling planning bodies and believing economists are disposables.

R Narayanan


Missed opportunity

It refers to ‘Farmers should be central to policy on onions’ (October 3). It is not every day when government gets the opportunity to benefit farmers directly; a sudden surge in onion prices had presented one, but it was completely wasted. That too, at a time when farmers in general are under distress and don’t find the agricultural profession viable for their livelihood. The government should have let farmers earn the extra money when onion prices touched a decent high, and should rather should have addressed structural issues and improve warehouse and cold storage besides providing technological support . And as far as the APMC is concerned, it is only for the advantage of traders and not farmers,and hence needs to be re-visited.

Bal Govind


Onion policy

Apropos ‘Farmers should be central to policy on onions’ (October 3). The author brings to daylight the hasty approach of the government in solving the huge hike in onion prices by banning the export and controlling the stock level to prove itself as immediate problem-solver. But they ignored the distress of the farmers aftermath of the price crisis. What is needed is a policy on keeping the supply balanced to withstand drought and flood by monitoring the supply and managing the risks in storing the stock.

Nevertheless, inclusive concentration on the onion market with the removal of policy-induced market imperfection is vital.

NR Nagarajan


Policy rate cut

This refers to ‘Room for a rate cut’ (October 3). In order to combat the deceleration in economic activities, the government has executed several economic reforms like cutting corporate taxes and initiative sector-specific reforms for automobiles and banking. Notwithstanding the likelihood of a contraction in the estimated tax revenues, the government is fast moving with economic reforms to accelerate economic activities, and therefore a cut in policy rate in the ensuing Monetary Policy meeting is imperative to push sentiments and investments.

A cut in the policy rate followed by its transmission is crucial to bring down the cost of capital to fund economic activities. Albeit the unusual rate cut of 35 basis points during the last meeting, growth of private investments are sluggish. Financial intermediaries have already linked their lending rates with the repo rates and those remaining must be urged to do so to make the transmission effective. Owing to the excess monsoon across the country, a robust increase in agriculture output is possible. It will lead to a drop in the price level and hence a modest rate cut will not push inflation.

The lenders must cut the lending rates to reduce the cost of capital, and as a consequence, bank credit and private investment will expand. As such a cut in the repo rate at this juncture will propel the effect of other reform measures and accelerate the revival of the economy from the slowdown.

VSK Pillai


Published on October 03, 2019

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