Economic Highlights

New Delhi, 9 October 2023

RBI Subprime Alert

PERSONAL LOANS, DEFAULTS RISE!

By Shivaji Sarkar 

What would sway Indian politics --the Reserve Bank of India’s monetary policy or caste census? Normally it should be the RBI moves, but elections may be guided more by the caste factor as people forget that for decades castes have been denoting socio-economic status, aspirations rather than wry warnings of one who observes the economy from close quarters. 

The RBI has come out with certain facts that may not be palatable to the overall economic conditions, including a veiled subprime alert as personal loans and defaults rise. It held back repo rates at 6.5 percent amid continuous rises in prices. The bank indicates holding of rates till the general elections. In other words, it candidly says that there is little opportunity to cut the rates. This means the cost would continue to be more for the borrowers, whether individual or corporate.  

Do Bihar caste census figures matter in such a scenario? Inflation at 6.83 percent as per August 2023 figures less than the highest of 7.44 percent in July is beyond the RBI toleration limit of 6 percent. But hawkish RBI is targeting for 4 percent. It is good news if the target is achieved but if not, post elections rates could spiral. The 112 extreme backward castes and other economically weaker classes, who are covered by the Ujjwala gas schemes may feel happy that the government has reduced the LPG cylinder prices by Rs 300. 

Correspondingly, the price of commercial cylinders has been raised by Rs 300. It is a cross subsidy. The gas companies lose nothing but cost of production on a number of items to goes up. It will jack up the prices and overall cost of living. The subsidy on the gas would be substituted by higher realisations from the market. Technically it may keep oil companies’ coffers balanced but the market costs can upset the RBI’s calculations. It can make markets tizzy as RBI’s future inflation projection at 5.2 percent may be off the mark. 

The reaction of the weaker sections may not be easy to predict. Happiness and hardship quotients are not equally balanced. In such situations they may take decisions as per caste conglomerations, which is difficult to predict politically. It can stoke many speculations and make the work of psephologists difficult. 

Though the RBI moves still may not be exactly on the poll plank, but these may ultimately impact the course. However, the cushion RBI has provided edges out to almost eight months, far beyond the five State elections that are to close in December. Next monetary policy moves may be more critical.  

The situation is contrary to the United States. The Federal Reserve has been firming up rates. Another rise may be in the offing as the US jobs swelled, unemployment rate comes down to 3.8 percent and wages rose at a modest rate. It is not a good indicator for the Indian economy. Each US rate surge sees flight of capital from the rest of the world. This means investments elsewhere would plummet. India needs to feel concerned. 

The RBI finds that already its government bonds, G-Sec, security sales are in over supply and the 10-year-bonds get low returns. The central bank says it is limiting operations to manage liquidity and not yield. Practically, the yield differential between the US and G-Secs have fallen to low levels. This could have a negative impact on the strength of the rupee-dollar exchange rate. It is already at a low of Rs 83.25 to the dollar. The bank’s open market operation (OMO) bond prices are falling even as US 20-year bonds are firming. Managing the currency rates itself is becoming tough. 

The housing sector has seen hopes in rate hold and that more units could be sold. That is not a solace for RBI Governor Shaktikant Das. He is concerned over “certain components of personal loans recording very high growth. These are being closely monitored for signs of incipient stress”. 

On annual basis personal loans contributed 37.7 percent incremental bank credit in August 2023, according to the Monetary Policy Committee (MPC) report or over Rs 40 lakh crore against Rs 33 lakh crore in 2022 and Rs 29 lakh crore in 2021. Within these loans during August, credit card loans had shown a growth of 30 percent, vehicle loans 21percent and housing loans 14 percent. 

Retail loans in the Indian banking sector grew at a compounded annual growth rate (CAGR) of 24.8 percent between March 2021 and March 2023, the RBI said in its Financial Stability Report in June. It far outstripped the 13.8 percent CAGR of banks’ gross advances and the retail segment accounted for one-third of the gross loans in the banking system. 

The share of unsecured retail loans grew to 25.2 percent from 22.9 percent in March 2021-2023, while secured loans eased from 77.1 percent to 74.8 percent, the data showed. Banks’ unsecured loan portfolio amounted to close to Rs 12 lakh crore as of end July. In an August 29 report, Nomura Global Market Research’s analysts say that while most lead indicators do not flag imminent risks for banks, the regulator’s “repeated warnings” on unabated growth in the segment as well as concerns on rising consumer leverage have sparked investor concerns. The RBI goes by the world experience of 2007-08 sub-prime meltdown. However, Das has not said a word about a possibility of repeat of a meltdown. 

A trend in higher default in this segment is noticed. The number of unsecured loans payment defaulters in India, on the other hand, has increased to 32.9 percent in the personal loans segment as of April 21, 2023, compared with 31.4 percent from a year ago.   

Banks report 16044 borrowers with total debt of Rs 346,479 crore. The amount stuck in the wilful default category has jumped by 41 per cent, or over Rs 1 lakh crore in the last two years from Rs 245,767 crore in December 2020, according to data compiled by Transunion Cibil. 

There is speculation that the caste census would lead to rise in demand for loan waivers. But the microfinance industry says that their borrowers know that debt waiver announcements would not add to default and escalation in credit cost. The only way to have done it is politically-- by state or other governments. Rates are to hold till May 2024, but the rising personal debts and defaults are ominous signs that nudge the RBI.---INFA 

(Copyright, India News & Feature Alliance)

REWIND

New Delhi, 5 October 2023

Cleansing Public Life

GANDHIAN APPROACH NEEDED

By Inder Jit

(Released on 4 October 1996) 

Mahatma Gandhi was remembered once again on October 2, his birth anniversary. Top leaders and many others in New Delhi visited the Rajghat and paid floral tribute to him. Almost all of them publicly swore by him. Few, however, cared to pause and ponder to do what is needed badly: some honest heart-searching. How would Bapu have reacted to the present state of unabashed corruption and criminalisation of politics in the country. Equally importantly, how would he have viewed the all round debasement of character and values? The Mahatma wanted free India to be united, secular and casteless. Yet after 50 years of freedom we are more disunited, more communal and more caste-ridden today than in 1947.

In retrospect, Acharya Kriplani seems ever so right. Some 25 years ago, he had drawn Parliament’s attention to a book by Ritwik Ghatak in which he had called Gandhi “the son of a pig”. He wanted the book banned. But nothing came of his effort. Instead, Ghatak was given a Republic Day Award. Greatly saddened, the Acharya bluntly stated, “Before independence, I used to think that the British were the most hypocritical people... They were in India for the good of the people... But, after independence, have come to realize that we Indians are the most sanctimonious humbug throughout the world. We call a person the father of the nation. But we do not mind his being insulted after his death.”

India would not be in the big mess in which it finds itself today if only we had gone by the Mahatma’s earthy advice, sadly, our ruling classes today prefer western ideas and ideologies more than ever before. They unwisely ignore our background, temperament and genius--- and the fact that over the past few decades some of the top thinkers of the West like Arnold Toynbee, J.B. Priestly, W.W. Rostow, Johnn Kenneth Galbraith, Gunnar Myrdal have appreciated Gandhi's ideas and even veered round to the Mahatma’s view: nations are not built with brick and mortar or Gross National Product (GNP), but the quality and character of its people. (Prof Rostow and others have accepted the view that the “quality of life” as emphasised by Bapu, is infinitely more important than continuous growth in GNP or high consumption.) Gandhi, therefore, gave top priority to building our national character debased by centuries of slavery. But we have lost all we gained in the rat race for material progress.

Our troubles have mainly arisen from the vulgar and ostentatious lifestyle of most Ministers and their close friends, many MPs and MLAs and their brood. It was not without reason that Gandhi sternly advocated a simple, austere life for the Ministers. He knew that given the chance our Ministers would turn into Maharajas. This, alas, has happened in most cases, creating no end of problems and political instability. Every party worker today wants to become an MLA or MP and next a Minister. No other vocation yields bigger and quicker returns. Consequently, there is a reckless struggle for office in which no holds are barred.Ends now justify the means. Honesty was once the best policy. It has ceased to be so today. Self is shamelessly placed before principles. Corruption and greed are rampant. Truth is at a heavy discount.

Even a cursory glance at what the Mahatma wrote over the years yields rich fare. Of particular interest and relevance today are his views on the approach to the formation of ministers and the manner in which minister should conduct themselves. In the Harijan of August 7, 1937, Gandhi wrote: “It would to decidedly wrong to create ministership for the sake of conciliating interests. If I were a Prime Minister and I were pestered with such claims. I should tell my electors to choose another leader. Those offices have to be held lightly not tightly. They are or should be crowns of thorns, not renown… It would be tragic if self-seeking and misguided zealots were allowed to impede the progress by imposing themselves on Prime Ministers. If it was necessary to have assurance from those who have ultimately to clothe ministers with authority, it is doubly necessary to have assurances of understanding of loyalty beyond suspicion and of willing obedience to discipline.”

Gandhi was clear about the “acid test” for the appointment of minister, oneissue over which there has considerable controversy over the years. “The choice”, said he, mustcommend itself to the members of the party to whom the Prime Ministers owe their nomination. No Prime Minister can for one moment impose a man or a woman of his choice on the party. He is chief because he enjoys the full confidence of his party as to ability, knowledge of persons and other qualities that mark out one for leadership.” He wanted the ministers and the legislators, for their part, to be “fearless” in the performance of their duty. “They must always be ready to risk the loss of their seats or offices”, he wrote in the Harijan on April 4, 1936. Offices and seats in the legislatures have no merit outside their ability to raise the prestige and power of the Congress. And, since both depend upon the possession of morals, both public and private, any moral lapse means a blow to the Congress. This is the necessary implication of non-violence.”

The Mahatma virtually outlined a code of conduct for the ministers in his writings in the Harijan from 1938 to 1948. He wanted the ministers to be watchful both of their personal and public conduct and said that “they have to be, like Caesar’swife above suspicion in everything.” Offices must be held in the Government“in the spirit of service without the slightest expectation of private gain ---for themselves or for their relatives or friends.” There is a beauty and an art in simplicity, he said. “It does not require money to be neat, clean and dignified. Pomp and pageantry are often synonymous with vulgarity.”As a practical man, Gandhi did not rule out appointments in the Government of those who were close to the ministers or were related to them. Said he: “If the relatives or friends get any appointment, it must be only because they are the best among the candidates, and their market value is always greater than what they get under the Government.”

Briefly, Gandhi also made the following suggestions: 1) Ministers should not live as“sahib log” nor use for private work facilities provided by the Government for duties. 2) Ministers should not be sensitive (to public criticism). They should takein good part even carping criticism. “The critics expect much more from these chosen servants of the people than from others in the way of simplicity, courage, honesty and industry.” 3) Ministers are of the people, from the people. Let them not arrogate to themselves greater knowledge than those experienced man who do not happen to occupy ministerial chairs. 4) People often think nothing of not keeping a promise made, it must be kept at all costs. 5) The ministers are the people’s servants. They can do nothing against the express wishes of the people. “They will not stay in office a day longer than the people wish.”

Tragically, the Mahatma was snatched away before he could get free India’s new rulers to accept and practise his ideas. Sardar Patel, according to JP, kept a watchful eye on the Congress organisation, Congress ministers and also on ministers’conduct during his tenure and “cleaned up with an iron hand whatever corruption he found.” Nehru held to the tradition for years. But because he did not have the same hold over the Congress organisation as did Sardar he “turned a blind eye to the proliferating opportunism, immorality and corruption.”Not that he liked them, JP clarified. But he often condoned “unethical conduct on the plea that if one was a capable worker or an able administrator his other faults should be overlooked.” Lal Bahadur, during his spell of prime ministership, strove to remove those who were known to be corrupt. But India lost him within a short period --- before he could curb rampant defections, power of money and rabid casteism, which have become the bane of our national life.

Little has been done thereafter to cleanse public life, establish healthy democratic norms, rebuild character and uphold basic values. On the other hand, matters have greatly worsened, touching a new, disgraceful low in recent years. Our leaders today decline to go by Gandhi’s ideas and advice on the plea that times have changed. But, in doing so, they forget that they cannot fool all the people all the time. Our people are now alert and watchful and judge the leaders not by what they say but by what they do. The answer, therefore, lies not merely in remembering the Mahatma superficially. A new style and outlook needs to be initiated at the top. As the Gita says: “Whatsoever a great man doeth, that other men also do. The standard he setup, by that the people go.”All in all, it is time, indeed, to think afresh --- and make a new beginning. ---INFA

(Copyright, India News & Feature Alliance)

REWIND

New Delhi, 5 October 2023

Cleansing Public Life

GANDHIAN APPROACH NEEDED

By Inder Jit

(Released on 4 October 1996) 

Mahatma Gandhi was remembered once again on October 2, his birth anniversary. Top leaders and many others in New Delhi visited the Rajghat and paid floral tribute to him. Almost all of them publicly swore by him. Few, however, cared to pause and ponder to do what is needed badly: some honest heart-searching. How would Bapu have reacted to the present state of unabashed corruption and criminalisation of politics in the country. Equally importantly, how would he have viewed the all round debasement of character and values? The Mahatma wanted free India to be united, secular and casteless. Yet after 50 years of freedom we are more disunited, more communal and more caste-ridden today than in 1947.

In retrospect, Acharya Kriplani seems ever so right. Some 25 years ago, he had drawn Parliament’s attention to a book by Ritwik Ghatak in which he had called Gandhi “the son of a pig”. He wanted the book banned. But nothing came of his effort. Instead, Ghatak was given a Republic Day Award. Greatly saddened, the Acharya bluntly stated, “Before independence, I used to think that the British were the most hypocritical people... They were in India for the good of the people... But, after independence, have come to realize that we Indians are the most sanctimonious humbug throughout the world. We call a person the father of the nation. But we do not mind his being insulted after his death.”

India would not be in the big mess in which it finds itself today if only we had gone by the Mahatma’s earthy advice, sadly, our ruling classes today prefer western ideas and ideologies more than ever before. They unwisely ignore our background, temperament and genius--- and the fact that over the past few decades some of the top thinkers of the West like Arnold Toynbee, J.B. Priestly, W.W. Rostow, Johnn Kenneth Galbraith, Gunnar Myrdal have appreciated Gandhi's ideas and even veered round to the Mahatma’s view: nations are not built with brick and mortar or Gross National Product (GNP), but the quality and character of its people. (Prof Rostow and others have accepted the view that the “quality of life” as emphasised by Bapu, is infinitely more important than continuous growth in GNP or high consumption.) Gandhi, therefore, gave top priority to building our national character debased by centuries of slavery. But we have lost all we gained in the rat race for material progress.

Our troubles have mainly arisen from the vulgar and ostentatious lifestyle of most Ministers and their close friends, many MPs and MLAs and their brood. It was not without reason that Gandhi sternly advocated a simple, austere life for the Ministers. He knew that given the chance our Ministers would turn into Maharajas. This, alas, has happened in most cases, creating no end of problems and political instability. Every party worker today wants to become an MLA or MP and next a Minister. No other vocation yields bigger and quicker returns. Consequently, there is a reckless struggle for office in which no holds are barred.Ends now justify the means. Honesty was once the best policy. It has ceased to be so today. Self is shamelessly placed before principles. Corruption and greed are rampant. Truth is at a heavy discount.

Even a cursory glance at what the Mahatma wrote over the years yields rich fare. Of particular interest and relevance today are his views on the approach to the formation of ministers and the manner in which minister should conduct themselves. In the Harijan of August 7, 1937, Gandhi wrote: “It would to decidedly wrong to create ministership for the sake of conciliating interests. If I were a Prime Minister and I were pestered with such claims. I should tell my electors to choose another leader. Those offices have to be held lightly not tightly. They are or should be crowns of thorns, not renown… It would be tragic if self-seeking and misguided zealots were allowed to impede the progress by imposing themselves on Prime Ministers. If it was necessary to have assurance from those who have ultimately to clothe ministers with authority, it is doubly necessary to have assurances of understanding of loyalty beyond suspicion and of willing obedience to discipline.”

Gandhi was clear about the “acid test” for the appointment of minister, oneissue over which there has considerable controversy over the years. “The choice”, said he, mustcommend itself to the members of the party to whom the Prime Ministers owe their nomination. No Prime Minister can for one moment impose a man or a woman of his choice on the party. He is chief because he enjoys the full confidence of his party as to ability, knowledge of persons and other qualities that mark out one for leadership.” He wanted the ministers and the legislators, for their part, to be “fearless” in the performance of their duty. “They must always be ready to risk the loss of their seats or offices”, he wrote in the Harijan on April 4, 1936. Offices and seats in the legislatures have no merit outside their ability to raise the prestige and power of the Congress. And, since both depend upon the possession of morals, both public and private, any moral lapse means a blow to the Congress. This is the necessary implication of non-violence.”

The Mahatma virtually outlined a code of conduct for the ministers in his writings in the Harijan from 1938 to 1948. He wanted the ministers to be watchful both of their personal and public conduct and said that “they have to be, like Caesar’swife above suspicion in everything.” Offices must be held in the Government“in the spirit of service without the slightest expectation of private gain ---for themselves or for their relatives or friends.” There is a beauty and an art in simplicity, he said. “It does not require money to be neat, clean and dignified. Pomp and pageantry are often synonymous with vulgarity.”As a practical man, Gandhi did not rule out appointments in the Government of those who were close to the ministers or were related to them. Said he: “If the relatives or friends get any appointment, it must be only because they are the best among the candidates, and their market value is always greater than what they get under the Government.”

Briefly, Gandhi also made the following suggestions: 1) Ministers should not live as“sahib log” nor use for private work facilities provided by the Government for duties. 2) Ministers should not be sensitive (to public criticism). They should takein good part even carping criticism. “The critics expect much more from these chosen servants of the people than from others in the way of simplicity, courage, honesty and industry.” 3) Ministers are of the people, from the people. Let them not arrogate to themselves greater knowledge than those experienced man who do not happen to occupy ministerial chairs. 4) People often think nothing of not keeping a promise made, it must be kept at all costs. 5) The ministers are the people’s servants. They can do nothing against the express wishes of the people. “They will not stay in office a day longer than the people wish.”

Tragically, the Mahatma was snatched away before he could get free India’s new rulers to accept and practise his ideas. Sardar Patel, according to JP, kept a watchful eye on the Congress organisation, Congress ministers and also on ministers’conduct during his tenure and “cleaned up with an iron hand whatever corruption he found.” Nehru held to the tradition for years. But because he did not have the same hold over the Congress organisation as did Sardar he “turned a blind eye to the proliferating opportunism, immorality and corruption.”Not that he liked them, JP clarified. But he often condoned “unethical conduct on the plea that if one was a capable worker or an able administrator his other faults should be overlooked.” Lal Bahadur, during his spell of prime ministership, strove to remove those who were known to be corrupt. But India lost him within a short period --- before he could curb rampant defections, power of money and rabid casteism, which have become the bane of our national life.

Little has been done thereafter to cleanse public life, establish healthy democratic norms, rebuild character and uphold basic values. On the other hand, matters have greatly worsened, touching a new, disgraceful low in recent years. Our leaders today decline to go by Gandhi’s ideas and advice on the plea that times have changed. But, in doing so, they forget that they cannot fool all the people all the time. Our people are now alert and watchful and judge the leaders not by what they say but by what they do. The answer, therefore, lies not merely in remembering the Mahatma superficially. A new style and outlook needs to be initiated at the top. As the Gita says: “Whatsoever a great man doeth, that other men also do. The standard he setup, by that the people go.”All in all, it is time, indeed, to think afresh --- and make a new beginning. ---INFA

(Copyright, India News & Feature Alliance)

Events & Issues

New Delhi, 6 October 2023

         Caste Survey

FAIR DEAL FOR EBC IMPERATIVE

By Dr Oishee Mukherjee 

The caste survey undoubtedly has been a unique achievement of Bihar Chief Minister Nitish Kumar, who has ignited with a concerted attempt to reclaim the turf from the BJP. If the Opposition alliance is to challenge the BJP next year, eroding its control over caste groups, specially in the heartland States, and reclaiming the narrative of emancipation hold the key. The fact that extremely backward classes dominate the OBCs in Bihar and other States a well which, in turn, form the dominant section of the population raises troubling questions about the BJP’s claims of inclusive welfare and grass-root development.  

Politicians and trade unionists have righty come forward to praise the Bihar caste survey as it exposes how the forward classes dominate. Rights groups like the All-India OBC Employees Federation (AIOBCEF), Most Backward Classes Forum (MBCF) and the Janjid Brahmin Mahasabha (JBM) have rightly questioned why successive governments had not acted on a three-decade old order to identify the artisan castes and put them outside the creamy layer, considering their extreme backwardness. 

It is a well-known fact that the whole administrative apparatus is dominated by the forward castes, which obvious take all decisions. Thus, their neglect towards the backward castes is quite understandable. It may be mentioned here that the Supreme Court had in December 2021 directed Madhya Pradesh and Maharashtra, whose policies of introducing OBC reservation in local body elections had been challenged, to set up a dedicated commission each for an ‘empirical inquiry’ into the applications of reservation in local bodies. They were to specify volumes of the reservation required while limiting the total to a highest of 50 percent. Later Odisha and Haryana decided to follow the example. 

Even Prime Minister Narendra Modi has, within a day, changed his observation and stated that economic rights should decide rights and benefits, trying to counter the Opposition’s demand for a nation-wide caste census. He reportedly said: “The poor of Bharat have the first right over the country’s resources, whether the poor person is a Dalit, a backward or a tribal or from the general category. For me, the poor are the biggest caste”. 

But his policies sadly have not showed what he said a few days back. Obviously, Modi had no other alternative but to react in this manner to counter the overwhelming support for the caste survey and to point out that the neglected section – the Extremely Backward Classes (EBCs) – have been suffering as successive governments had not cared to look at their rehabilitation. 

Though a section of the media has criticised this survey by giving various justifications, it is undoubtedly an eye-opener to the fact that development has been on misplaced priorities and that there is an imperative need to plan schemes that benefit the lower castes and the EBCs who constitute 36 percent of the Bihar population. The figure would not be much different if say such a census was carried out in the Hindi heartland States of Uttar Pradesh, Madhya Pradesh, Chhattisgarh or Rajasthan at this point of time. Is this the reason why the BJP has time and again refused for an all-India caste census? If such census would have been carried out, it would clearly reveal that allocations for the lowest segments have been inordinately poor as all money has been earmarked to make life cosier for the upper and middle income sections of society.   

In this connection, questions have been raised the EWS (economically weaker sections) who were found to constitute 15 percent of the population in Bihar get 10 percent quota. In fact, 15 percent people are getting an exclusive 10 percent quota while 85 percent people from the SCs, STs and OBCs are getting 50 percent quota. This has been found to be irrational. Demands have been made for sub-categorisation of OBCs so that the EBCs get a fair deal, and this can happen by implementing the Rohini Commission report. 

The very fact that the present dispensation has reportedly followed a pro-rich policy cannot be doubted but the question remains how long will this continue? Will the poor continue to suffer in silence when all facilities – whether of education, health, roads and highways etc. -- are all made available in urban areas to facilitate good life for a particular section of society. This is obviously a repressive state of development where deprivation and exploitation prevail and that too in a country where Mahatma Gandhi is adored as the ‘Father of the Nation’.      

If the poor are the biggest caste, what is the agenda of Modi and his government to rectify matters? How much additional money will be allocated for the MGNREGA programme in the current budget to make sure that those enrolled get work for 100 days or at least 80 days a month? Obviously, this year’s allocation needs to be doubled for which a 0.5 percent surcharge will have to be levied on the billionaires of the country. Will the centre do this and change its pro-rich image to reach out to the poor? 

One may recall that Oxfam had suggested for imposing additional taxation on the rich to meet the government’s priorities of looking at the welfare and needs of the poorest. But the Indian government did not give credence to such suggestion. The planners and bureaucrats, who are better off, don’t show the genuine concern for those citizens languishing in the backwards areas of the country. In fact, when the undersigned was taking classes of officers in Bhubaneswar, they were surprised when the pathetic conditions in the interior villages of their States as also that of Chhattisgarh, Jharkhand and Bengal were pointed out to them. 

Rural transformation is a favourite subject alright but doingactual concrete work is something different. A lot heavily revolves around monetary allocation for rural development, which unfortunately is very less than the actual requirement. Moreover, how can the government find money for welfare schemes after giving huge subsidies to the business houses to start their enterprises that are run purely on commercial basis. Even subsidised land is given for setting up hospitals and educational institutions, which only the rich and the upper middle class can afford to go.     

The entire question revolves around what strategy would now be adopted to reverse the pro-rich, pro-urban bias and target the extremely backward castes who languish in poverty. If the poor is the biggest caste, can we expect that policies would be revised to target this section and upgrade their livelihoods. The questions beg answers. ---INFA 

(Copyright, India News & Feature Alliance)