Manage right

SS Tarapore is right (“Enough of this exchange rate machismo”, October 31). We not only need strong forex reserves, we also need to implement proactive macroeconomic policies like effectively managing our exchange rates.

For that, after analysing our situation, we should do away with overvalued exchange rate policy which surely have ill effects on our export sector. This would be detrimental for our MSME sector which is bone marrow of manufacturing.

Deepak Kumar

Bhiwani, Haryana

Let us move up

Singapore ranks 1 and India 142 in the Doing Business Index, reports the World Bank Group (October 30). Doing fair business is difficult in a country that has no proper regulations to help the start-up and running of business. It is also difficult if such regulations are in place but the Government does not enforce them — like road traffic rules in our country. For moving up on that index India must work on both ends.

Since that does not involve any cutting-edge technology we don’t possess, the question is not whether we can do it. It is: Do we will it?

R Veera Raghavan

Chennai

Lost in default

This is with reference to the editorial, “Beginning of the end” (October 31). Monetary measures such as QE by the US Fed seek to increase the supply of credit and not increase of money supply to the economy. When central banks “stimulate”, it is not about physical currency but a focus on debt. “Money” in banking denotes financial collateral/equity capital.

Central banks are not equipped to increase the level of reserves, the prime means to circulate “liquidity”, but create only ledger money to prod the banking system into increased lending.

Sadly though, the liquidity through stimulus was largely subverted by the finance industry getting preferential treatment from government, be it massive bailouts or the right to borrow huge amounts of free money from the central banks for risk-free use.

What was worse, banks then sat on idle cash, not lending to the ground economy because they were overly concerned about their balance sheets.

While the very purpose of banking was thus lost in default, an equal damage was caused by massive global transfers of dollar funds causing huge monetary and fiscal imbalances on lesser economies. We managed the post-2008 crisis well, but many nations could not and are still struggling.

R Narayanan

Ghaziabad, Uttar Pradesh

Austerity drive

The BJP-led NDA government has announced some austerity measures such as cutting non-plan expenditure, banning creation of new posts, and so on to reduce the increasing levels of fiscal deficit in the country.

This may do some good for sure, but the fact remains that the creation of useful posts in many government departments alone can enhance employment, output and income in the economy. Hence, it must be continued.

Also, the Government must take steps to curb direct tax evasion which is one of the reasons for increasing fiscal deficit.

S Ramakrishnasayee

Ranipet, Tamil Nadu

The Centre’s newly announced austerity measures are welcome. But the more important thing is to practice what is proposed. Officials travelling on lowest available air fares, effective use of video conferencing facilities and doing away with 5-star hotel meetings for babus will certainly lead to tightening of the belt.

It is a common practice among ministers to adroitly convert private journeys and engagements and also party programmes into official ones at the cost of the exchequer. If this practice is stopped forthwith, it will substantially help reduce the drain on non-Plan expenditure. It is pertinent to know which minister will come forward to bell the cat in this regard.

It may be recalled that the former American secretary of state James Baker was once asked to refund the cost of an unscheduled landing of his aircraft in Houston on his return journey from Israel. Will such a thing ever happen in India?

CG Kuriakose

Kothamangalam, Kerala

High hopes

As the full list of tax evaders who stashed away black money in tax heavens is with the apex court and the special investigation team (SIT) is expected to undertake inquiry as per the laws, the moot point is whether the team will be able to get to the bottom of it and bring the unaccounted money back given the complex nature of transnational accounts. One’s hopeful of getting rid of the blot of black money from Indian soil forever.

R Prabhu Raj

Chennai

In black and white

The high-decibel discussion on bringing back ‘black money’ is all fine, but it is time to realise that this so-called ‘black money’ has been earned through a lot of hard work. It is only different from ‘other money’ because tax has not been paid for the collection of this wealth. In a way, we can say that this tax evasion is a direct consequence of unfriendly government policies biased against honest business enterprises.

Is it a crime to save money? All Indians have the mentality to save money, while many others do not. Instead of chasing this saved money, termed as black, wouldn’t it be better for the Government to offer an investment system which will encourage voluntary deposits of this unaccounted ‘national’ wealth?

My suggestion is that the Government should float Water Bonds, which can be utilised for water conservation, purification and restoration. The supply of pure water will solve the problem of agriculture, inflation and employment. Increased milk and dairy production and the subsequent creation of green petrol (bio-energy) will also stop the migration of people from the village to the city.

To do all these things, infrastructure — just like dams, ponds, tube wells and wells, canals and connecting pipelines — is necessary, which requires a lot of investment. Thus, the water bonds will give twin benefits; one, they will infuse much needed funds into the water-dependent economy and, two, will finish the ‘black money’ problem.

Manmohan Gupta

Mumbai

Act now, don’t be Fed up

This refers to your editorial ‘Beginning of the end’ (October 31). The US Fed will not be hastily selling it’s holding of the $3 trillion as feared but the money machine has stopped and the world will have to live with the new situation of less liquidity in the system. This is a completely new phenomenon and no one knows what is in store for the global asset markets. We need to get our act together and break from our historical growth rates of about 6 per cent. For this to happen we need reforms both in our economy as well as the administration. We are a $2 trillion economy growing at 5.5 per cent. Today, the US is growing at 3.5 per cent. They have a $17-trillion economy. Unless we grow at much higher rates we face the risk of capital flight and exchange rate volatility as we did last August. Significant correction in our markets cannot be ruled out. We are not fully prepared for the coming correction with heavy short-term loans in our external debt which are not hedged properly. The Government has its work cut out.

CR Arun

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