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TheIndian EXPRESS

THE OP-ED PAGE

l THURSDAY l JANUARY 31 l 2013

13

The signature of the present RBI is contradictions leading to bad policy. It needs to join forces with the finance ministry, and allow 2013 to be remembered as the second coming of the 1991 reforms
NO PROOF

RBI, heal thyself

REQUIRED

SURJIT S. BHALLA
IT WAS so easy to hide ones follies just a few months ago. The former finance minister, and now president, Pranab Mukherjee,hadmadeitsosimple.Withhisministry practisingretrogradeeconomics,thecommon explanation to all of Indias growth problemswaspolicyparalysisattheCentre. To be sure, his policies were endorsed and perhaps even dictated by Sonia Gandhis National Advisory Council. The fact remains that India managed to have the most fiscally irresponsible policy under UPA 2: populism, high inflation, and sub-sub-normal growth. A sad aspect of recent economic policy in India was that the practice of self-destructive populism at the finance ministry prior to September 2012 allowed the RBI, and other advisers and agents of the government, to practise sloppy analysis, and indulge in even sloppier policy recommendations. Worse, they could bathe themselves in contradictions and still not be held accountable. It was a win-win situation for most such advisers. If the policy worked, they could take the credit. If the policy did not work, they could point to policy paralysis, bad investor sentiment created by retrospective tax amendments, etc. In other words, there was plenty to point fingers at, and no role for any action besides the lazily obvious.

Since September 12, 2012, the fiscal policyhaschangedmarkedlyforthebetter. Policy paralysis nightmare at the Centre is over. On Tuesday, the RBI reduced repo rates for the first time since April 2012, and did so by the minimum tradition allowed 25 basis points. The relevant question is: did the Indian economic situation warrant a larger cut? An associated question:aretheprospectsforfutureinterest rate cuts really as low as the RBI governor, D. Subbarao, indicated? It has been mentioned several times before by me, and it is encouraging to note that other analysts have also picked up on thistheme,thatthesignatureofthepresent RBI is that it not only indulges in obfuscation (which is good for a central bank) but also bundles itself into contradictions, and the changing of policy goalposts, which is a real bad. And bad because it severely erodes the RBIs credibility. We have a new addition to the everincreasing set of goalposts of the RBI. Apart from looking at domestic and international growth, food and core inflation, the eurozone and the US, the yen and currency wars, WPI and CPI and property inflation, pricing power of corporates, broad money growth, credit growth, savings deposit growth, fiscal deficits, the RBI has now said it will also look at the current account deficit (CAD). (Did we forget interest rates?) One explanation for the changing goalposts is that the RBI does not have a modeloftheIndianeconomy.Ithasseveral models, which is a polite way of saying that it most likely has no model at all. It is wingingit,whichmightbeokayinasophomore exam, but not quite correct in setting monetary policy in one of the more important emerging economies in the world an economy which may have hurtled down in growth precisely because of bad fiscal and possibly worse monetary policy.

SINCE SEPTEMBER 12, 2012, fiscal policy has changed for the better. Policy paralysis at the Centre is over. On Tuesday, the RBI reduced repo rates for the first time since April 2012. The relevant question is: did the Indian economic situation warrant a larger cut? An associated question: are the prospects for future interest rate cuts really as low as the RBI governor, D. Subbarao, indicated?
global economy, and that world growth faces headwinds, even in the US. If global growth risks remain elevated, with little prospect of world growth equalling potential, let alone overheating, does this not argue for a more aggressive rate cutting policy? C4: Not recognising that Indian growth is worse than it appears. The RBI continues to use year-on-year growth rates, but it is heartening to note that when it suits its goal (as in discussion about industrial production where it wants to argue that recent growth is not all that bad!) it pronounces on seasonally adjusted annualised rates (SAAR). Well, if the RBI were to apply seasonal adjustments to GDP growth, it would find that the first half of fiscal year 2012-13 had a growth rate of only 4.5 per cent (SAAR of 5.7 per cent in the April-June quarter and 3.3 per cent in the July-September quarter). Which means that the second half will have to witness an average 6.5 per cent SAAR for the RBI forecast of 5.5 per cent growth for the current fiscal year to be correct. That is unlikely which

C R SASIKUMAR

Some examples of the contradictions which have led to bad policy: CONTRADICTION NO 1 (C1): Could the RBIs own sky-high interest rates have resulted in the worsening current account deficit? Absolutely, and this is the contradiction that the RBI either ignores, or is unaware of. High interest rates lead to a deficiency in investment, and lack of growth. As does policy paralysis. Why not buy gold instead? So gold imports increase because investment in foreign assets yields a higher return. Gold imports may also increase because domestic residents are bringing back their assets from tax havens abroad. This makes the CAD large and bad in the

short run, but in the long run this is good. If monetary policy is tight, this will only aggravate the situation. C2: Related to C1 is the observation that the RBI itself makes about price inelastic imports like fuel and fertilisers and edible oil. A weak rupee worsens the CAD, ceteris paribus. A weak rupee also results from low growth, and low growth results from exceptionally high interest rates. So lower interest rates will strengthen the rupee as investors chase high growth returns, along with an appreciating currency. So aggressive rate cuts will help the CAD, not worsen it. C3: The RBIs policy statement has a good discussion of the risks to the

means that the RBIs revised forecast will be wrong by a full percentage point, that too for a year which ends in just two months. Embarrassing, no? For policy purposes, does this low growth reality not warrant a higher rate cut now and much more to come in future? C5: Even the prime minister has admittedtohighprocurementpricesasamajor explanator of high food inflation. And suchhighpricesareontheirwaydown,orat leasttheirrateofchange.Justamonthago, theprocurementpriceofwheatwasraised by 5 per cent, in sharp contrast to the increase of 15 per cent in the procurement price of rice in the populist go-go days of May 2012. If the wheat price is anything to goby,procurementpricesin2013arelikely to average around 5 per cent. This will be the lowest increase since the 3.6 per cent gainin2006.Andthisdeclineshouldclipoff 1.5 per cent from the CPI. Incidentally, November 2012s SAAR for the CPI industrial workers was a low 4.3 per cent; for the last three months, a low 5.8 per cent. WhichmeansthatinthepipelineisapotentiallysharplyslowingtrajectoryofCPIinflation. And does low inflation also not warrant a sharper cut in repo rates? It does not matter where one looks outsideorinside,growthorinflation,fiscal deficit or current account deficit, rupee or foodinflation,theRBIneedstojoinforces with the fiscal side, the RBI needs to provide the backbone to improve growth in India and help reduce poverty faster. The RBI needs to do its job. If it does, and P .Chidambaramdeliversonhispromisesof a responsible budget (very likely that he will), then 2013 will be remembered as the second coming of the 1991 reforms. The writer is chairman of Oxus Investments, an emerging market advisory firm, and a senior advisor to Blufin, a leading financial information company

SONAL SHAH

But despite the headline grabbers and sideshows, the Jaipur festival protects its literary core
THIS is literature as spectacle the phrase was a common refrain at the recentlyconcludedDSCJaipurLiterature Festival. I heard it uttered, worriedly, by publishers,scepticalthatallthesongand dance would translate into sales. I heard it from journalists, expounding between complaints of the festivals two dry days (books without booze the horror). The sentiment was even echoed in the festivals blurb on its promotional materials, cadged from Tina Brown: The greatest literary show on earth! Cynics and worried intellectuals might argue that the JLFs spectacular aspects the overblown Ashis Nandy controversy (this years Rushdie incident), the inclusion of celebrities like Rahul Dravid or the Dalai Lama (this years Oprahs), the parties and the concerts could overshadow the books themselves. Though quieter and better organised, the sixth JLF also drew an increased footfall of nearly two lakh peopleoverfivedaysandyes,manyof them seemed to be there to show off outfits, distribute business cards, pose for photos, or stalk The Wall. Groups of schoolchildren were seen, notebooks in hand, collecting autographs like butterflies. British author Howard Jacobson joked that, at home, his audience is usually no younger than 90. Here, hed found a fan club of 14year-old girls. In some of the festivals wittiest sessions, the comic novelist had the audience chuckling, schoolgirls and retirees alike. nearly 700-page book on World War I Jacobson may have made question- and the conquest of Everest. ablejokes,buthissessionswereenjoyable These authors are by no means light because he didnt, like some, court con- reading, although the JLF certainly had troversyforcontroversyssake.Forexam- its typical, dizzying, mix of low- and ple, moderator and British Conserva- high-brow subjects and speakers. But tive MP Kwasi Kwarteng came off as if the florid flourishes of celebrity or needlessly belligerent towards Anjan controversy drew people in, there was Sundaram, tipped as this years hot non- enough solid literary programming to fictionauthor,inapanelonAfrica.More thicken the plot. Often the audience interesting than the panels focused on asked for reading recommendations: vague questions of nations or literature young Latin American novelists, Ruswere discussions between a few experts sians beyond Tolstoy and Dostoyevsky. on a particular subject Whatever else some of Indian miniatures, its speakers may court, for example or talks THE JLF certainly had its the JLF certainly featuring one deeply typical, dizzying mix of sparks literary interest. knowledgeable The mishmash of speaker. And of these low- and high-brow topics and speakers sideshow gems, there subjects and speakers. could actually make were many. for charming serendipBut if the florid Whats more, both flourishes of celebrity ity. One morning, I the spectacles and heard a reading of We these sideshows sold or controversy drew and They, Rudyard books. While publish- people in, there was Kiplings poem about ers regularly, shame- enough solid literary the arbitrary nature of lessly, use attractive au- programming to allegiances and prejuthor portraits to seduce dices. That afternoon, readers, at the JLF, the thicken the plot. Pakistani poet Fahless problematic fact mida Riaz recited her that eloquent authors sell books was ev- classic Naya Bharat, which judges ident. After a hilarious Latin America the rise of Hindutva through the voice session, marked by the bonhomie and of Muslim fundamentalism in its lines: banter between Ariel Dorfman and Pe- Tum bilkul hum jaise nikle. ruvian author Santiago Roncagliolo, Notably, in the second recitation, Dorfmans books vanished from the the audience itself begged Riaz for the bookstore shelves. Similarly, after an poem. This level of audience participaelectrifying talk by explorer Wade Davis, tion was typical of the few Hindustani the store ran out of Into the Silence, his talks I attended more humour, spontaneous clapping, and a few wah wahs in the aforementioned example. Including more Indian languages and possibly making provisions for translation could only add to the festivals richness in variety, increase the fluency of discussion and appeal to a wider audience. Ultimately, the free festivals broad appeal and unassailably literary core are itsstrengths.Despitethecommercialism of ads between sessions, headline-grabbers and other charges of spectacle levelled against it, the JLF cant escape the business of books, and the reading of them. If teenage girls from Jaipur have newly minted author crushes on a septuagenarian British Jew, its a testament to the transcendent power of language and humour. One hopes too that some of those teenagers wandered into, say, the launch of Ira Pandes translation of Prabha Khaitans Anya Se Ananya. With feminists and female authors as polar as Shobhaa De and Gayatri Chakravorty Spivak on its roster, the JLF hopefullydiditsbittobreakdownthespectacular nonsense of some of our national conversations about women. Over the years, the JLF has also done its bit to inspire similar festivals across South Asia. Compared to the gargantuan Delhi book fairs, these smalltown events have a greater scope for attracting new readership. If ferris wheels and mind-reading donkeys are still the mainstay of local melas, may literature toocontinuetomakeaspectacleofitself. The writer is editor, Time Out Delhi erts that Shinde must be tried for treason: Shinde deserves to be tried for treason and punished... Whether it is the law which is going to mete this out to him or the people of India is the question. While the law takes long to deliver justice, the anger of the people may not...

The spectacle of books

The hazards of being misquoted or misinterpreted, from Shah Rukh Khan to Ashis Nandy
from Nandy will live on for ever. The BJPs Yashwant Sinhas views left no room for (mis)interpretation. They were crystal clear: Modi as BJPs PM candidate. And that set off the other major debate of SHAILAJA BAJPAI the week: is Modi the BJPs prime ministerial candidate for 2014? This was not nearly as stimulating as the Nandy controversy: weve heard so many debates on the issue of SO WHAT were his exact words? Were they Modi for PM that it no longer seems to be quoted out of context? Were they blown an issue. That is what Tuesdays panel on out of proportion as Shoma Chaudhury the Last Word (CNN-IBN) said without amsaid on CNN-IBN? And should he or biguity Modi was the BJPs sole choice. should he not be made to apologise for his The discussion with Manini Chatterjee, controversial comments? Saba Naqvi, Ashok Malik and Nalin Kohli We are, of course, speaking of I am a was sensible, informed and it must be Khan. On Tuesday evening, TV news chan- said, quite peaceful. No one raised their nels like Zee News broadcast live Shah voices, no one needed to. What is it with TV Rukhs spirited defence of himself after an news that has transformed the idiot box into article he wrote had elicited unsolicited ad- a shouting box? vice from Pakistans interior minister on his NDTV 24x7 landed an exclusive and, safety in India. Khan read out his statement in this case, when we say exclusive, we mean like it was the autobiography of a well- exclusive. It was a global townhall meeting known Indian (sorry Nirad C. Chaudhuri): with outgoing US Secretary of State Hillary he was proud to be an InClinton in which seven TV dian, blah, blah, blah, his anchors from around the views in the article had ACROSS CHANNELS, world were chosen to quesbeen misquoted, miscon- Nandy interpreters tion Clinton. One of them strued. He implored the tried to explain what was Indias top female jourTV news channels to nalist Barkha Dutt. Clinton he had said, and yet, broadcast his speech to set was in her element, coyly did not say. Such is the record state. laughing at suggestions that Oh, the hazards of be- the nature of TV news she should be a presidential ing misquoted, misinter- that their complex candidate in 2016. preted, quoted out of conIn fact, Clinton has been arguments will be text, especially on TV on the air and making waves which lives by or falls by a forgotten while the over the last week. She was snippet from Nandy sound bite. fiery and sharp during her Take Ashis Nandy: his will live on for ever. appearance before the Senremark that most of the ate Foreign Relations Comcorrupt come from the mittee hearing (CNN); she OBCs and scheduled castes at the Jaipur was far more relaxed in the company of her Lit Fest was broadcast repeatedly by all president in an unprecedented interview news channels soon after he uttered them on with Barack Obama given to the American Saturday and ever since. Truth be told, CBS channel (60 Minutes). Wish some news when you hear this statement in isolation, it channel in India had managed to procure does sound as though he is saying that most the entire interview because never before of the corrupt come from the OBCs and have you seen a president lavish so much scheduled castes because that is precisely praise on a cabinet colleague. Five years what he did say. But that is not what he ago, Obama and Clinton engaged in a meant. Aye, theres the rub. The result? slugfest now both of them were smelling Many intrepid commentators found them- of roses (she even wore a pink jacket!) in a selves twisting their tongues in verbal cal- veritable love fest. Everyone, including the isthenics during TV debates, trying to ex- anchor Steve Kroft, wondered whether this plain, what he actually said, as Harsh joint press conference and Obamas warm Sethi put it (CNN-IBN). Across channels, words were an endorsement for the next Nandy interpreters like Sethi and Yogen- presidential election. That will need more dra Yadav, tried to explain what Nandy had than the interpreters of American politics to said and yet, did not say. But such is the na- establish. It will take time. ture of TV news that their complex arguments will be forgotten while the snippet shailaja.bajpai@expressindia.com

Felled by a sound bite

Tele SCOPE

RAJNATH RISING
BOTH Sangh Parivar weeklies carry prominent reports of Rajnath Singhs election as BJP president to preside over the next general elections. In their profiles, both the Organiser and Panchjanya highlight his association with the RSS. An article in the Organiser emphasises that he was a Bal Swayam Sevak associated with the Rashtriya Swayamsevak Sangh since 1964. While Singhs participation in the JP movement and election to the UP state assembly in 1977 are underscored as his first electoral grounding in politics, the fact that he undertook rewriting history texts and incorporating Vedic Mathematics into the syllabus during his stint as UPs education minister is dubbed as major highlights. His famous Anti-Copying Ordinance as education minister has also been highlighted as a turning point for his political career because it proved that he was the leader with a

View from the RIGHT

difference. While his stints as UP chief minister, Union cabinet minister and BJP president (2006-09) have all been chronicled, the Organiser cover story stresses the challenge he faces to retrieve lost ground, redeem the party. The report in Panchjanya underlines a motto for him, sabke saath, sabka saath (for everyone, with everyone), to carry out his job. Both weeklies, however, appear to have deemed it not fit to provide details of the last three years of Nitin Gadkaris work. als and reports. The editorial in the Organiser alleges that Shinde made this remark in an eagerness to please Sonia Gandhi. The editorial seeks to substantiate its allegation claiming that Sonia Gandhi has filled the party and the government with non-Hindus, and highlights the recent appointment of the IB head as the latest example of minorities superseding other members, creating a situation where of the top thirty positions in the government, only a handful are held by Hindus in a nation where over eighty per cent of the population is Hindu. While the editorial in Panchjanya laments that the Congress has not budged from its habit of pandering to the communal sentiments of minorities, both weeklies focus on Hafiz Saeeds welcoming of Shindes remarks. The Organiser editorial ass-

RAHUL, SO WHAT?

WHAT SHINDE SAID

THE row over Union Home Minister Sushilkumar Shindes remarks accusing the RSS and the BJP of conducting terror training camps has made both weeklies attack Shinde in their editori-

UNLIKE the coverage on Rajnath Singh, both weeklies have reacted mutedly to the appointment of Rahul Gandhi as Congress vice-president. An article in Panchjanya describes it as a mere acknowledgement of his being heir apparent to the Congress property. It says the Congress has no agenda but to pass on the mantle to Rahul, whose alleged failures in UP and Bihar are highlighted to claim that the younger leader brings no hope to the country. Compiled by Ravish Tiwari