Letters

Letters to the editor dated November 8, 2021

| Updated on November 08, 2021

Focus on job generation

This refers to “Global easy money policy likely to continue” ( November 8). Post-pandemic, central banks across the globe seem to be grappling with the dual challenges posed by inflation and growth with the latter attracting more attention all along. This had led to inflation gradually going out of bounds caused primarily by increase in asset prices.

Advanced economies like US have focussed on quantitative easing to ensure growth and the fact that the balance sheet size of US treasury reaching $4.5 trillion by the end of 2017 proves it. Also the fact that supply side disruptions contribute to surge in inflation shows its gradual dominance.

To mitigate the component of ‘cost push’ factor influencing the rise in inflation, it is time for central banks across the globe to concentrate on augmenting the income of the public through employment generation. The fact that post opening up of the economy, the skyrocketing of fuel prices proves that creation of demand is not proportionate to the rise in income levels of the consumers leading to their inability to absorb the price hike. Hence it is time that fiscal and monetary policies concentrate on employment generation.

Srinivasan Velamur

Chennai

Oil blues

Apropos ‘Total tax on petrol down to 50 per cent, diesel to 40 per cent after duty cuts’ (November 8), the total incidence of taxes on petrol has come down to 50 per cent and that on diesel to 40 per cent following the Centre’s reduction in excise duty, and by a slightly higher proportion in States that have also cut VAT on the fuel.

But it was intriguing that several non-BJP ruled States like Delhi, Rajasthan, Chhattisgarh, Maharashtra, Jharkhand, Tamil Nadu, West Bengal, Kerala, Telangana and Andhra Pradesh, have not yet lowered the VAT, the sole exception being the Congress ruled Punjab.

Ironically, the AAP-led Delhi govt which levies 30 per cent VAT has sought a further cut of ₹15/litre in fuel prices instead of announcing any rate cut at its own level. Mind you, the current price of Petrol ₹104.01/litre and Diesel being sold at ₹86.71/litre, happens to be much higher than its neighboring states of Haryana, Punjab, HP, J&K and UT of Chandigarh. One really wonders if its CM Arvind Kejriwal can so proudly offer ‘free’ electricity and water to Delhites, what prevents him from announcing the much needed matching reduction in the local sales taxes (VAT)?

Vinayak G

New Delhi

Corona’s origin mystery

Apropos the article 'Did the novel corona virus come from a lab after all?’ (November 8), the origin, spread and cure of the virus is one of the biggest unsolved puzzles. The writer puts forward the plausible lab leak theory. But it remains a theory and the true facts are yet unknown. There have been conspiracy theories floating around for quite sometime. The reluctance of China to come clean is adding to the confusion.

How it spreads is also unknown even though its a strong possibility that close contact with an infected person may cause it. However this theory of spread through surface contact has only helped sanitiser making companies rich. The immunity factor in infections is impossible to determine.

The virus is a warning to humans to mend their ways.

Anthony Henriques

Mumbai

Overleveraged or illiquid?

With reference to ‘Navigating the tricky world of business loans and interest rates’ (November 8), saying that an overleveraged balance sheet causes a company’s financial distress is really mistaking cause and effect. Overleveraging usually refers to the level of a company’s debt vis-a-vis its earning strength. When a company completes its debt financing, both the lender and borrower usually expect the company’s leverage to remain within healthy limits until the maturity of the debt.

However, when unexpected issues arise with the company’s operations, declining profitability and cash flows result in the balance sheet appearing overleveraged. If the amount due to these creditors overwhelms a company’s resources, it can become insolvent, illiquid or both. Therefore, rather than focusing on whether a company is overleveraged, it is more constructive to determine if it is insolvent or illiquid.

PD Sankaranarayanan

Sowparnika Puthuvaya Mana (Kerala)

Published on November 08, 2021

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