Under pressure

SS Tarapore in his article, ‘It’s lonely up there in Monetary Towers’ (June 12) has rightly analysed the plight of the RBI governor. As Manmohan Singh rightly observed, the job of the RBI governor is the loneliest job in the country. This was proved during the tenure of D Subba Rao who was subjected to heavy pressure from the finance minister and the government to dance to their tunes in making monetary policy decisions. Raghuram Rajan must be appreciated for managing the pressure from government and the corporate sector.

While setting out policy interest rates, the RBI has to maintain a fine balance between the cost of credit to borrowers and the return for depositors. The government needs to appreciate that any further reduction in deposit rates will result in a backlash by savers who would turn to risky non-bank assets as also physical assets. Monetary policy should be framed in such a way as to reduce inflation without affecting growth rate. Kudos to Rajan for maintaining the independence of the RBI in spite of several odds.

TSN Rao

Bhimavaram, Andhra Pradesh

Sugar-coated pill

With reference to the editorial, ‘No artificial sweeteners’ (June 12), the government practice of giving loans to sugar mills to pay off their debt to suppliers (cane-growing farmers) does not make business sense when there is little possibility of recovering the same. It is more in the nature of an unproductive subsidy, the cost of which is borne ultimately by the taxpayers. (Presently, production of sugar exceeding consumption might or might not have reduced the selling price, but the additional burden of sharing the cost of bad loans would really increase it. Thus the loan is a sugar-coated pill for the people.)

Three factors can help: reduce cost of production of sugar, reduce cost of cane-growing by use of technology (or better efficiency), or increase selling price of sugar to match farmers’ costs.

YG Chouksey

Pune

What growth story?

This refers to ‘The BJP’s borrowed feathers’ by Dr Manmohan Singh (June 11). He is an economist of repute and has expressed his doubt about the authenticity of the newly introduced GDP figures and the methodology of CSO. It’s good to hear that India is the fastest growing economy in Q1/2015, overtaking China. But economic fundamentals such as stagnant investment, poor credit offtake, IIP and WPI in the negative zones, declining exports and volatile external environment don’t support our growth story. CSO’s explanation that it has now captured MCA21 data is not sufficient. It should critically look into and give convincing a explanation.

KL Goyal

Jodhpur

Whole picture

This is with reference to the article, ‘Barometer of the economy. Really?’ by Aarati Krishnan (June 10). Though the listed corporate sector is huge, the unlisted firms contribute to the GDP, with agriculture being still kept out.

It is true corporates are versatile in terms of exports, production, hedging, and leveraging and their boom is overriding. But their performance judged in isolation can never provide the true picture. Obviously, Sensex and Nifty are not the barometer of the economy at this time.

RK Arya

Faridabad

India tops

The World Bank’s growth chart indicates India will top the major economies for the first time with an expected growth rate of 7.5 per cent this fiscal. Global Economic Prospects 2015 of the World Bank reports that India will outpace China, where growth is likely to moderate to a still robust level of 7.1 per cent. Growth forecast for the global economy for the year is 2.8 per cent, and for the US it is 2.7 per cent. In the euro area, growth for the period will be 1.5 per cent.

The expected hike in the US interest rates is a risk factor that could lead to greater financial market volatility and significantly reduce capital flows to India and other emerging countries.

A ray of hope that exists further is that the World Bank had asked the Fed to hold off rate hikes till 2016.

TV Jayaprakash

Palakkad, Kerala

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