6th March

RBI as King Canute

The article contemplates on whether the present rate cuts announced by RBI would actually translate into more lending or rate cuts to the end consumer or not.

As the repo rate and reverse repo rate stands at 5% and 3.5%, more important is reverse repo rate, the rate at which banks park their funds to RBI. Since this is low, it expected to encourage banks to lend more. However, the timing of the cuts is surprising since already the rupee is depreciating and the rate cuts would lead to further fall in the rupee value. The falling inflation and the third quarter GDP growth rate add to the worry. It is very less likely that we would be able to achieve the CSO estimate of 7.1% GDP growth rate this fiscal owing to dismal 5.3% in the third quarter which is expected to fall further in the last quarter. Although RBI has advised banks to recheck their lending portfolio but no banks would lend the money at the rate lesser then their fixed deposit rates. 

Thus, it’s doubtful if the present rate cuts would translate into increased lending or lower interest rates. But given the situation, there is very less RBI can do about it.

Idle USO Funds

The article advocates increased use of USO funds to increase the rural telecom density which stands currently only 1/6th of the urban density. Effective utilization of funds would also yield side benefits that would help to empower rural population of India.

TRAI has suggested restructuring of Universal Service Organization (USO) funds to better utilize its Rs.20K crore of funds. Current rural telecom density stands at 12.8 phones per 100 persons while the same for urban telecom density is 80. The urban market is getting saturated while the rural market it still underserved. Some of the reasons may be the high cost of infrastructure and low ARPU due to low income levels in rural areas. However, the biggest constraint is the lack of backhaul capacity, the fibre optic cable used for communication between the mobile tower and the nearest hub. USO funds can be utilized to develop the fibre optic network not only for the rural areas but also for the entire country. Such network would also boost the broadband penetration. Side benefits would be better inclusion of rural population, socially and financially, information dissemination and distance education, increased productivity etc. 

What is needed for TRAI is to make an action-ready policy document which ensures technology neutrality, fair play to all participants and a transparent subsidy regime that ensures most optimum utilization of USO funds.

Momentary thrill of dates

The author censures the recent trend of remembering the event by “dating” them. The author is of opinion that by doing so, we just remember the date and forget the importance or gravity of event in changing the things for the world.

Today when we say 9/11 we see the twin towers burst down with half of Manhattan covered by dust cloud and that’s all. Nobody remembers the date of Spain and London train bombings, or Parliament Attack or Mumbai train bombings. The most recent date we remember is 26/11 when Mumbai was held hostage for three days by 10 terrorists. The latest comes as 03/03 when the Sri Lankan cricket team was attacked by terrorists in Lahore. Another attack or bombing and we’d forget 26/11 or 03/03 as well. Dates do give momentary thrill but not a lasting history. We remember events like Quit India movement or Emergency for the significance of the events but we hardly remember the dates. These events changed the course of life of general public. It cannot be dumped down to dates.

Dating is good for human being as it can lead to something but “dating” history can only lead to a hollow memory of transformational past.