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Welcome move by RBI

opinionWelcome move by RBI

The 25-point lowering of the repo rate by Reserve Bank of India is welcome. For too long has the country’s Central bank seemed to prize the interests of a handful of global financial firms above that of the people of India. Successive RBI Governors have taken delight in mercilessly raising interest rates in the name of fighting price rise. This was the excuse used by Raghuram Rajan, who has long been a favourite of the Congress party, which appointed him to the top job in the Central bank. Rajan tinkered with definitions and measurements of inflation in order to present a false case that “inflation risk” was high in India even while inflation was low. This became the excuse to keep raising interest rates, already high during the period in office of his predecessors. The Chicago School of economics, to which Rajan belongs, is known for the massive suffering that it inflicted on the poor in South America, Africa and Asia through success in the propagation of policies designed to help the billionaires and millionaires of North America. It is, therefore, a commentary on our politics that Rajan has become, along with the charge-sheeted former Finance Minister P. Chidambaram, the economic face of the very Congress that is claiming the mantle of the messiah of the poor. Only towards the very end of his term did Rajan devote sufficient attention to the problem of NPAs in the banking system. Much of the mess was created by business failures caused by North Block-RBI policies of high interest rates, restricted money supply and high taxation. Both North Block and RBI have jointly made India an extremely challenging environment for those entrepreneurs who lack political and official patronage. As a consequence, several of India’s brightest minds are migrating abroad in order to ensure that the startups launched by them do not perish in the cradle. Double digit interest rates are the norm for businesses in India that compete with foreign companies enjoying much lower interest costs for their borrowings. Yaga Reddy, Rajan and other aficionados of hyper interest rates bear a heavy responsibility for the growing puddle of NPAs, as several companies ceased to be profitable only because of the high costs of borrowing and the credit restrictions imposed by the RBI under such chiefs as the telegenic Rajan, who is always being talked about as a prospective Union Finance Minister should the Congress get a tally close to 150 Lok Sabha seats in the general elections. The RBI deserves to be congratulated for having come out of the shadow of the international merchants of global greed and mass suffering by refusing to do their bidding and keep interest rates high. Indeed, even a 6% repo rate is too high, but its lowering to that level is a good start. There ought to have been a change in the outlook from neutral to accommodative, but hopefully this will come together with another cut in rates at the next review. The country needs to get the economy into double digit mode and the role of the RBI in such a transformation is crucial.

Another welcome sign that the country may finally be moving into a period of accountability is the sudden bunching of revelations in the AgustaWestland helicopter deal. It is impossible to believe that only Air Force officers were involved in the selection of that make of chopper, when the reality is that politicians and the civilian officials close to them decide on such purchases. The Sunday Guardian has long argued that India needs not Sant Narendra but Chowkidar Modi, but an effective chowkidar must catch thieves. The sorry mess that has been made of the attempted prosecution of Chidambaram, added to the absence of any action against him or Sushil Kumar Shinde for inventing the chimera of “Hindu terror”, has not gone to the credit of the Modi government. The public expects the top names named by the BJP in its many poll campaigns to be brought to justice. Thus far, the Modi government has not sent a single UPA-era VVIP to prison on any charge, although Prime Minister Modi says that several are on the threshold of such a fate. The legal system in India may move at a pace that would make the movement of glaciers seem rapid, but the public will not excuse the fact that a party to which it gave a Lok Sabha majority has thus far failed to send even a single VVIP perpetrator of frauds to prison. Corruption is the enemy of the country and to act in a forgiving fashion against the corrupt is to do damage to the interests of the people of India. The Enforcement Directorate seems to have functioned in a very sleepy manner, for only now has it succeeded in prising at least a few nuggets of information out of Christian Michel and others accused of the Agusta scam, which surely is not the only act of misfeasance to have taken place in India. The public in India will no longer stand by while scamsters with connections within the establishment escape justice. Voters expect a complete cleansing of the filthy stables of corruption within the dovecotes of power in India, and the sooner this takes place, the better.

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