20th April

Get Real

The article emphasizes on the factor of improving the sentiments of the banks towards lending rather then completely relying on RBI’s monetary policy changes to improve the economic scenario in the country.

RBI has very limited options with respect to monetary policy changes. With WPI touching 0.18% on the week ended on April 4 and industrial production down by 1.2% in February 2009, RBI is under pressure to revive the economy big time. But the options with RBI are limited. Even if it decreases CRR to its long term goal of 3% and decrease the reverse repo rate to disincentivise banks to park their funds to RBI, it does not necessarily result into spur in lending or economic activity to the benchmark growth rate. Although growth in auto sales, cement prices and dispatches, and steel production indicate development in some areas. While there is no dearth of money in the economy, making it cheap would risk the currency itself. Unless and until the commercial banks do not lower their interest rates, there is nothing much RBI can do. Cost of funds tend to be low for banks owing to the host of administered interest rates and that reduction in rates could wash out the funds off the banks to alternate avenues. On the lending side as well, the mandated lending rates for certain loans shackles the banks to lower their prime lending rates. 

Thus, there is a very little in RBI’s hands to do to revive the economy and one should not expect any miracle tomorrow.

Mockery of governance

The article condemns the government’s decision to allocate 2% of PSU oil companies’ profits to social programmes. These are listed companies and so government has to take into account shareholders’ view before imposing any such decision that mocks the governance.

Already been a victim of forced unviable pricing by government, the new decision comes as a blow to the investments and returns of other stakeholders. The BIG Four – ONGC, BP, HP and IOC – are all listed and have public shareholding from 20% in IOC to 48.9% in HP. The new CSR decision would not only affect the valuation of these companies and make them less competitive against private sector companies but would also hamper their capital investment and dividend plans. This kind of social extravaganza is targeted more towards the oil minister’s constituency or the other top leaders of ruling party. It would only increase the already widespread misuse of PSU funds. Companies have to conduct their affairs in order to improve social and environment sustainability but not at the cost of corporate governance and opinion of stakeholders. The reason these companies are listed in stock markets is to make their governance more transparent and make them accountable to non-government stakeholders. But if government still treats these companies as their fiefs then it is better to delist them. 

Finally, a publicly listed state-owned company must respect the shareholders democracy as well. 

Promiscuous politics

The article talks about the habit of premier politicians of the country preferring to remain single pre-polls in order to enable them to make post-poll alliances without any bonding or dependency. 

These days, promiscuity hardly ever raises any eyebrows when it comes to post-poll alliances. Even if they swear undying fidelity to the so-called common agendas, many senior leaders believe in this philosophy of ‘short-term marriages’. Taking the example of Rahul Gandhi who has remained virtually non-attached along with many of the senior leaders who have remained single and ready to mingle with any party after the elections to form the government speaks a lot about the business opportunity seen by these leaders in the matrimonial market of politics just like common Indian sees in the actual matrimonial market. Other high profile single leaders include big names like Mamta Banerjee, Navin Patnaik, Mayawati and Jayalalita. But it is interesting to think whether this singleness amount to any peculiar inverse brand equity for politicians as they seek out best alliances to suit their interests say every five years, if not less then that. 

Rahul’s present singleness may pay his party rich dividends post-elections although he may not be personally happy about it given the fact that such post-poll marriages make strange bedfellows.