TNEW DELHI - GAIL · 2019-08-01 · SUBIR VITHAL GOKARN (1959–2019) Gireesh Chandra Prasad...

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Transcript of TNEW DELHI - GAIL · 2019-08-01 · SUBIR VITHAL GOKARN (1959–2019) Gireesh Chandra Prasad...

Page 1: TNEW DELHI - GAIL · 2019-08-01 · SUBIR VITHAL GOKARN (1959–2019) Gireesh Chandra Prasad gireesh.c@livemint.com NEW DELHI The Reserve Bank of India’s latest move to ease foreign
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18 THURSDAY, 1 AUGUST 2019NEW DELHI POLICY

Subir and I crossed paths may times; not only in different,but vastly diverse roles. I first met him as an academic atthe Indira Gandhi Institute for Development Research

(IGIDR). Then we interacted as fellow columnists at the Busi-ness Standard. He “succeeded” me as the chief economist atCrisil. In 2002, I had accepted an offer as chief economist atCrisil, but never joined as I moved to Jammu and Kashmir aseconomic advisor. Ravi Mohan, who was the then CEO, askedme for a recommendation and I suggested Subir Gokarn. At thatpoint, he was working with the National Council of AppliedEconomic Research and was my tenant in New Delhi!

A few year later, the earlier tenuous landlord-tenant relation-ship was replaced by a more stressful relationship: Regulatorand market participant! In 2009, when he was appointed as thedeputy governor of the Reserve Bank of India (RBI), I was doingmy second term as the chairman of the J&K Bank! We met manytimes during that phase to discuss the all-important credit pol-icy issues, which he was in charge of.

As an accomplished professional economist, Subir combinedthe best of two divergent and often conflicting schools of eco-nomic thinking and approach: The Mumbai and the Delhischool. He was one of the rare breed of economists who under-stood market’s needs and appreciated the government’s com-pulsions.

The Bombay school had influenced him to believe that dem-ocratisation of entrepreneurship was the key to economicgrowth in a Schumpeterian sense. Closer home, his objectiveswere that of a C.N. Vakil or P.R. Bramananada, while his meth-ods were that of a Sukhamoy Chakravarty.

The Delhi school had sensitised him to the distributional vir-tues of public investment-led growth. He narrowed the policydifferences by reasoning that analytically, it was only about cap-ital goods versus consumer goods investment strategy. He wasinclined towards the latter as it addressed the issue of inflationin the short and medium term. His view of an ideal mix wouldbe high public expenditure with high private investment.

He was one person who knew that “borrowings” means dif-ferent things in Delhi and Mumbai! As a ‘Mumbaikarnomist’ heunderstood fiscal deficit and spoke about it without prefixinga pejorative! And, he was one of the few Delhi economists whounderstood debt leverage!

This syncretic view of economic policy and management, ofcourse, came from his academic education. He studied to be aneconomist at the St. Xaviers College in Mumbai and the DelhiSchool of Economics. It got well rounded and complete by hiscareer moves. Even though it may not have been planned, theway it panned out was not just very complementary, but also

panies for building faulty roads.Toward safety issues, the bill

provides for setting up aNational Road Safety Board bythe government through anotification. The proposed lawsuggested higher penalty foroffences such as driving with-out a licence, speeding, danger-ous driving, drunk driving andfor vehicles plying without apermit. Additionally, thosewho do not give way to an

ambulance or fire brigade mayhave to face a hefty fine of asmuch as ₹10,000 and/orimprisonment up to sixmonths.

Obtaining a driving licence(DL) could get tougher. Theprocess of obtaining a licencewill become technology-driven, reducing human inter-face to curb corruption. Cur-rently, licence testing is man-ual, which means untrained

to protect good samaritans orcitizens who come forward andrescue accident victims frombeing harassed by the law.

The bill increases the mini-mum compensation for hit-and-run accident cases from₹25,000 to ₹2 lakh in case ofdeath and from ₹12,500 to₹50,000 in case of grievousinjury.

Nitin Gadkari, Union roadtransport and highways minis-ter, said a total of ₹14,500 croreis being spent on safeguardingfatal spots which are vulnerableto road accidents. “Road engi-neering is responsible for roadaccidents and it is wrong toblame drivers. In this regard,786 spots have been chosenand ₹14,500 crore has beeninfused,” he said, adding that itwas imperative to identify andimprove “fatal spots.”

The bill also has a provisionto penalize construction com-

FROM PAGE 1 people are also able to procurea licence. A national register ofdriving licence will be createdcomprising nationwide licencedata to make transfer of vehi-cles across states easier andweed out fake licences.

The government will alsohave the power to regulate taxiaggregators such as Ola andUber as the current MotorVehicles Act does not recog-nize cab aggregators as a sepa-rate entity. Adding the word“aggregators” in the Act willgive power to the Centre toframe guidelines for thesecompanies and make themmore compliant.

Likewise, the bill allows theUnion government to ordermotor vehicles recalled if itthinks a defect in the vehiclemay cause damage to the envi-ronment, the driver or otherroad users.

[email protected] Nandi contributed to

this story.

Government seeks to put India on a safer road

Union road minister Nitin Gadkari said a total of ₹14,500 crore is

being spent on safeguarding fatal spots. MINT

Core sector growth at 4-year low in June

Slowdown may spur the MPC to go for another round of rate cut

Dhoni joins Army troops in militancy-hit south Kashmir on two-week stint

bit.ly/2MCJFS3

Asit Ranjan Mishra

[email protected]

NEW DELHI

The Indian economy threwup more bad news onWednesday, as datashowed eight infrastruc-ture sectors, which consti-

tute 40.27% of the index of industrialproduction (IIP), decelerated to a50-month low of 0.2% in June. Theweak performance may pave the wayfor another round of rate cuts by themonetary policy committee of theReserve Bank of India (RBI) at itsmeeting on 7 August.

Four out of the eight sectors con-tracted in June, with output of refin-ery products with the highest weightof 28% within the core sector con-tracting by 9.3%. This is apart fromdeclines in production of crude oil(-6.8%), natural gas (-2.1%), andcement (-1.5%). The only sector thatcontinues to grow at a robust pace iselectricity generation (7.3%).

The Indian economy is goingthrough a period of consumption andinvestment slowdown, with grossdomestic product (GDP) growth inthe March quarter slowing to a five-year low of 5.8%. Annual GDP growthslowed to 6.8% in theyear ended 31 Marchfrom 7.2% in the previ-ous year.

The InternationalMonetary Fund hasreduced its growthprojection for India in2018-19 by 30 basispoints to 7%, expecting weakerdomestic demand.

“The growth in June is sympto-matic of a certain degree of stagnationthat has set in Indian industry. Giventhe fall in production in the auto seg-ment and virtual flat core sector

growth, IIP numbers will be impactednegatively in June,” said Madan Sab-navis, chief economist at Care RatingsLtd.

India’s merchandise exports con-tracted 9.71% in June and, whilereleasing the data earlier this month,commerce secretary Anup Wad-hawan had attributed it to a tempo-rary shutdown of ONGC’s Mangalore

Petrochemical Ltd’s Jamnagar refin-ery for maintenance that hit exports ofpetroleum products. This could havebeen reflected in the core sector dataas well. “The effects of the shutdownof the Jamnagar refinery are likely toabate by mid-July,” Wadhawan had

said on 15 July.In the absence of a fiscal stimulus,

most analysts believe monetary policyneeds to do the heavy lifting to pumpup economic growth. RBI cut policyrates for the third consecutive time inJune adding up to a cumulative 75basis points and is expected to cutrates yet again next month, given thebenign inflation trajectory.

Retail inflation grew3.18% in June com-pared to 3.05% amonth ago, while fac-tory output, measuredby IIP deceleratedfrom an upwardlyrevised 4.3% in April to3.1% in May.

“There is limited visibility of abroad-based improvement in theIndian industrial outlook. The coresector data further strengthens thelikelihood of a repo rate cut in theAugust 2019 policy review,” said AditiNayar, principal economist, Icra Ltd.

CORE’S UNDER STRESS

FOUR of the eight sectors contracted in June, with output of refinery products contracting by 9.3%

GOVT exhausted 61.4% of its full-year fiscal deficit target, according to data released by the CGA

EXPERTS see limited visibility of a broad-based improvement in the Indian industrialoutlook

E X P E R T V I E WH A S E E B D R A B U

Respond to this column at

[email protected]

quite complete. He got the academic grounding at IGIDR, a feelfor micro-economics at Crisil, empirical and analytical rigourat the NCAER and a macro-monetary mastery at the country’scentral bank.

His rise in public policy was quite remarkable. But unlikemost who grow into their job, the remarkable thing about Subirwas that he didn’t grow into any job. He somehow made the jobfit him; tailor made it to be precise. I saw him as an associate pro-fessor at IGIDR, and he was the quintessential professor. And

then, when I saw him at the RBI, itstruck me that he was made for mone-tary policy management! The onlyother academic whom I know did themoney manager job so well, was Dr C.Rangarajan.

This showed the versatility of histalent and the depth of his knowledge.He was a well-rounded macro econo-mist, who understood fiscal policy,

had a nuanced and insightful view of monetary policy, knew thebolts of industrial economics, and was thorough in trade mat-ters.

Through all these high-profile jobs and many accomplish-ments, two things never changed: His unruly mop of hair andscruffy beard!

He will be missed; not only by his family, friends and felloweconomists, but by the country. He could have contributed a lotmore for quite some time more.

Haseeb Drabu is the former finance minister of Jammu andKashmir.

Subir Vithal understood market’s needs and appreciated the govt’s compulsions

after the payment defaults lastyear by Infrastructure Leasing& Financial Services Ltd, a sys-temically important shadowbanking entity.

The revised normsannounced on Tuesday alloweligible businesses to borrowabroad for their working capital

SUBIR VITHAL GOKARN(1959–2019)

Gireesh Chandra Prasad

[email protected]

NEW DELHI

The Reserve Bank ofIndia’s latest move toease foreign borrowing

norms for businesses and non-bank lenders is aimed at miti-gating the effects of a creditcrunch that is hurting invest-ments and hindering distressedbusinesses from paying backtheir dues.

The relaxation in externalcommercial borrowing (ECB)norms announced by the cen-tral bank on Tuesday, a steptowards financial disinterme-diation, opens up low-cost for-eign funds to businesses andnon-banking financial compa-nies (NBFCs) in areas whereforeign lending was so far

restricted. The Union Budgetfor FY20 had proposed that thecentral government too wouldraise some of its gross borrow-ings for FY20 from externalmarkets in foreign currencies.Accessing funds directly fromoverseas lenders could ease thecost of borrowing for busi-nesses in financing new pro-jects at a time domestic banksare holding back from makingfresh loans as they take ondefaulting clients in bank-ruptcy courts.

The credit crunch the indus-try is grappling with, if notresolved effectively, couldaffect Prime Minister NarendraModi’s goal of making India a$5 trillion economy by 2024.What has added to the woes ofbusinesses is the liquiditycrunch non-bank lenders faced

requirements and general cor-porate purposes, as well as forrepaying loans taken for capitalexpenditure in manufacturingand infrastructure sectors thathave turned toxic. They alsoallow NBFCs to borrow abroadfor on-lending to local custom-ers. In February, the centralbank had allowed those whoare interested in taking overbankrupt companies to raiseexternal commercial borrow-ings to finance their acquisi-tions. Another important con-text to the easing of foreign bor-rowing norms is the slowdownin the domestic economy, amidworries of a global recession.The International MonetaryFund in July scaled down itsglobal growth projection by 0.1percentage point each to 3.2%in 2019 and 3.5% in 2020.

Reserve Bank’s new foreign borrowing rules aim to fix credit crunch crippling businesses

Reserve Bank’s relaxation

opens up low-cost foreign

funds to businesses, NBFCs.

RAMESH PATHANIA/MINT

Growth concernsThe grim performance of core sector in June combined with restricted spending by the govt in Q1FY20 may push RBI to go for further rate cuts.

0

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5

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7

8

-5

0

5

10

15

20

25

-7

-6

-5

-4

-3

-2

-1

0

Fiscal deficit

FY19 (Apr-Jun) (as a % of budget estimates)

Revenue deficit

Source: DIPP, CGA

(Year-on-year in %)

68.7

4.7

21.9 -0.8

-6.8-1.50.2

84.7

61.4 79.4

FY20 (Apr-Jun)

Core sector Cement Crude oil

Apr 2018 Jun 2019 Apr 2018 Jun 2019 Apr 2018 Jun 2019

PARAS JAIN/MINT

A BANKER WHO COMBINED THE BEST OF

TWO SCHOOLS OF ECONOMIC THINKINGMINT

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