Monday, August 22, 2016

The Outstanding Insider

Sudhir Raikar, IIFL | Mumbai | August 22, 2016 12:02 IST

Urjit Patel’s value prop spells a unique blend of knowledge and experience from splendid stints across spheres – academia to industry, government to corporate, IMF to RBI –that augurs well for India’s developmental agenda going forward.


The government has shown admirable restraint in keeping prudence above populism and business above politics with the appointment of Dr. Urjit Patel who brings proven credentials, dignified poise and steely resolve, all rolled into one grand stimulus package for the country. The investment community – whether at home or abroad – should cheer the appointment of a competent thought leader and practitioner who has been the cynosure of all eyes across ruling governments. His list of admirers includes names like Dr. Manmohan Sigh, PM Narendra Modi, Mukesh Ambani and Deepak Parekh – which give a fair idea of his widespread appeal. From designing IDFC blueprint to steering the Reliance energy mission, from aiding the GSPC governance to influencing the privatization of power distribution, he believes in ‘doing’ as much as in ‘knowing’, no wonder, his Yale and Oxford degrees have transcended academic boundaries, and his numerous thought papers are packed with actionable insights – incisive takes on a host of issues including Indian macroeconomics, financial intermediation, public finance, international trade and even the economics of climate change.

The harbinger of flexible inflation targeting in India, Dr. Patel has been working full steam even before assuming office as Mint Street’s top guy. That there would be no time lost in swinging into needful action is perhaps the most reassuring factor from the market perspective. In a world of perpetual uncertainty, flexible inflation targeting could well prove to be the perfect antidote for addressing the multi-hued challenges that hugely impact the larger twin cause of ensuring price stability and economic welfare. It remains to be seen how the new Governor tackles the key challenges in the path of flexible targeting including the supply-side sensitivity of CPI inflation, given the limited control of monetary policy over erratic variables like food and fuel prices. More importantly, the efficacy of his policy will hinge on credible support from the government in the form of prudent fiscal management. Patel is well known for his categorical stance, on the criticality of inflation control to steady growth and that of fiscal consolidation to achieving inflation targets.

Diffusing the NPA time bomb will be another top priority for Patel, so also steering the Monetary Policy Committee from thought towards action. That he has earlier advised the government on diverse matters including debt market management, banking & pension fund reforms, real exchange rate targeting and forex market progression gives an idea of his phenomenal range of expertise.

Patel’s appointment is beyond doubt one of Modi Government’s most momentous decisions. That media is unlikely to confer Patel with rock-star status is hardly an issue, given his proven and purposeful track record, as rock-solid as his illustrious predecessor's. Knee-jerk market response including impact on equity prices, bond yields and rupee movements notwithstanding, there’s no denying the fact that we have an outstanding insider in charge of the apex bank who has allowed us the luxury of a fresh ‘Low inflation, High Growth’ dream. We wish the new Guv every success in his monumental mission.

Thursday, August 11, 2016

Interesting memoir, Moving Au Revoir

Sudhir Raikar, IIFL | Mumbai | August 11, 2016 16:43 IST

With his no holds barred memoir, former RBI Governor Dr. Duvvuri Subbarao has inadvertently unleashed a new literary genre, a thriller of a primer. Sudhir Raikar takes a closer look at the style and substance of his enduring work which ex-ICICI Bank chief KV Kamath aptly calls ‘unputdowntable’.

Media is abuzz with citing, interpreting and analyzing the seemingly contentious issues of 'Who Moved My Interest Rate?' conveniently ignoring the delightfully enduring aspects of the incisive memoir. Hardly a surprise that, given the typical fourth estate obsession with theatrical story-telling, thriving on sensationalism that, more often than not, is bereft of sense.

But the undeniable fact is, Dr. Subbarao’s tell-all book is an endearing primer for posterity that unfolds a rainbow of his emotions - while at the helm of the Reserve Bank of India (RBI) in what was a terrifyingly tumultuous tenure – including fear, anxiety, hope, surprise, shock, delight, contentment, lament and predicament. He provides the context to each conflict he faced which in turn tells us more about the man’s stoic character and his resolute mission – beginning with the 2008 global meltdown and his struggle to shield India from the unforeseen tremors of an intertwined financial world (but with little say to emerging market economies) and ending with the nasty rupee fall of 2013 which raised lethal questions on the lack of forex build up in the relatively happy years. Interspersed in between was the chronic fight against the government’s hardcoded stance on the age-old Growth vs. Price Stability debate where Dr. Subbarao was implicitly expected to toe the line, more so given his long, eventful stint on the ‘other side’.

Dr. Subbarao’s sincere account, among other things, brings to light the pathos of the Governor’s job where acknowledgment of short-term pay offs is ephemeral while the unforgiving evaluation of long-term consequences in the light of hindsight experience seems eternal.

The innovation that Dr. Subbarao has steered towards making the RBI federal in thought and action – free of hierarchies and confirmation biases – is a case study for both public and private sector players. Wish we had many more CEOs with Dr. Subbarao’s vision and values. The quality of corporate sector governance is as big a problem as are cyclical ups and downs and external shocks. And there's a lot to learn from the prudence and precision of Subbarao’s outreach programs towards making our social development initiatives fit for purpose.

Dr. Subbarao’s effort to free each concept of its intimidating jargon - more so for the novice reader - is evident across all chapters, which makes this book a treasure trove for students of economics and finance in particular. Every illumination has been made in simple language with a discerning desire to reach out to the common people who don’t have the time, inclination or intellect to decipher inflation numbers and interest rates – whether of the measure of financial integration, double-edged sword of globalization, supply-side triggers of inflation, perils of working with flawed data, myth of inflation targeting being opposed to growth, RBI’s unflinching transparency on government’s fiscal stance, the typical central bank quandary in striking a balance between the demands of the privileged, vocal industry fraternity and the mute voice of the common people yearning for lowering of prices, intricacies of monetary policy transmission and ensuing liquidity management through instruments like Open Market Operations, RBI’s lesser known roles and responsibilities including its social development agenda, domestic issues behind the currency slide beyond the taper tantrum trigger, challenge of exchange rate management and the attached Do something vs. Do nothing dilemma, tenets of financial inclusion or modus operandi of NBFCs.

Even readers who feel they have little to do with economics and finance will find the revelation absorbing, one that will evoke a powerful imagery of things you don’t expect from a mainstream book by a bureaucrat – capturing vivid details of the structure and layout of the Governor’s office and the timeless charm of his British-brand BHNS-maintained residential bungalow with ‘its wafting fresh air, cacophony of birds and heavy bunches of jackfruit’. Don’t miss his incisive interpretation of Jean Paul Sartre’s existentialist observation ‘Man is condemned to be free’ in the context of the question on what he would have done differently as the governor of the Reserve Bank.

In wonderful contrast to his profundity on philosophical issues is the ex-governor’s passion for adventure and recreation which is evident from the umpteen references throughout the 300-odd pages – whether his interest in 24-carat Bollywood products like Chennai Express and offbeat Prithvi Theatre plays, craving for Tardeo Maharashtrian eateries or penchant for inquisitive history tours around South Mumbai in ardent appreciation of the city’s emblematic blend of diverse architectural styles. And his wit, a recurring highlight of his insightful account, is superlative to say the least. Of course, it’s best read than cited.

The engaging anecdotes in the course of his pan-India journeys for outreach programs and financial inclusion initiatives are truly inspiring. Wish our branded activists take a cue from Dr. Subbarao’s freewheeling, ventilated approach to financial literacy. Thanks to the arid, bureaucratic mechanisms of conventional NGO bodies, proletariat activists and CSR practitioners across the globe, social responsibility, knowingly and unknowingly, has come to harbour several blatant assumptions about the larger cause of end-beneficiaries (often generically slotted as ‘target groups’ or ‘deprived’ communities) Conveniently overlooked in the process is the plain fact that their deprivation is only circumstantial and in no way indicative of the instinctive and intellectual capacities inherent within the community. Contrary to popular perception, the supply-side forces, in the mad rush to emancipate the downtrodden, are themselves found deprived when it comes to even reading the minds of the audience, leave alone identifying its needs. In peddling their jargon-heavy black and white prescriptions on financial prudence and general well being, they are knowingly and unknowingly oblivious of the expressions of playful amusement and suppressed yawns that the so-called ‘deprived’ reserve for the seemingly ‘privileged’ - - stemming more from doubt than disbelief.

As for those from the journalistic tribe who wished Dr. Subbarao was more alpha male during his tenure, he has shown the virtues of a public beta release in the form of his book that now allows anyone to download his thought process. How many governors would attempt such introspection for open dissection which also talks of what he felt he could have done differently – like the need to adjust the stated policy on foreign exchange and make it more specific with respect to defining and managing volatility and building self-insurance?

Dr. Subbarao’s submission of the ‘twinges of guilt at the thought of millions of Mumbai slum dwellers under leaky roofs for whom the rain meant the loss of daily earning, and hungry children’ is particularly moving, given that he candidly shares his helplessness rather than choosing to overlook the obvious in line with the implicit demands of his official stature, for such predicaments, protocol says, are deemed too poetic for certified comfort.

Given Dr. Subbarao’s conviction in sharing his no holds barred account, the real tribute to his effort won’t merely be the book’s critical acclaim; but some quality introspection by the powers-that-be as to how could the Government-Central Bank relationship be made more cohesive and solution-centric without diluting the sovereign fabric of the latter that we are all proud of.

Central bankers across the globe, we have seen time and again, are compelled to facilitate government access to near-free debt under the guise of fiscal spends. This ends up building a toxic cocoon for government debt issuance in the name of achieving growth targets. The haphazard lending that follows, eventually leads to systemic chaos in the form of rampant bank failures and consequent turmoil in bond and equity markets.

A healthy synergy between the Central Bank and the government should lead to more credible and sustainable solutions to various problems that stand in the way of India’s economic development. Prime among them is the NPA issue. It’s common knowledge that dealing with doubtful and distressed assets has always been the Achilles Heel of the banking sector. Barring a few players known for their stringent lending norms, most bankers try and downplay the whole issue through the usual philosophical sermon: That NPAs are an integral part of banking given the criticality of broad-based operations to profitability which exposes banks to all kinds of unavoidable factors like economic downturns and political upheavals. So, they claim, even the safest of loans can be rendered unproductive…

High time we stop hiding behind these lame excuses and collectively address some tough questions that make NPAs more elusive than what meets the eye. There’s no doubt that more RBI enactments would follow in the time to come. But unless we turn our attention to the fundamental questions surrounding NPAs, every RBI intervention will always seem more palliative than curative.

Hope the new wave ushers in an environment of proactive prudence that penalizes banks and auditors for suspect motives that serve as a green house for NPAs. This way, banks, ARCs and their regulators would be left to deal only with the genuine cases of NPAs. For the Indian banking sector, that would a big leap forward.

It’s high time we also demystified the glorious economic abbreviations that fuel a debate among practising economists and fiscal experts and yet mean little or nothing to the common man. Rather than board ceremonial flights of imagined realities consequent to the published data, our experts would do well to demand a governmental initiative to simplify the data for better public comprehension. Needless to say, caring for this precision and validation is the collective responsibility of the government and the private sector.

As Dr. Subbarao astutely reflected during his inaugural address at the July 2011 Statistics Day Conference: “The decisions that we in the Reserve Bank make have a profound impact on the macro economy, and errors can be costly. Our policy judgement should therefore be based not only on state of the art skills in data analysis and interpretation but also on an intellectual value system of ruthlessly honest validation and peer review.”

Thursday, August 04, 2016

Memories of a Parking Lot

Only a few months ago, I had a hearty discussion with one of the co-inhabitants of the (supposedly) co-operative society that incidentally (rather accidentally) happens to be my residential address. I have little to do with the society - given the recurring nuisance value of several members in different forms - some over-inquisitive, others perpetually hostile, few causing headaches with their poor civic sense or their rash driving in the society premises, and many with their insatiable appetite for 'structural changes' to their apartments, not to mention the toxic politics of convenient committees, mundane meetings, monotonous minutes, hasty resolutions and dubious deals.

But I shared a rapport with him that was unique in every respect. Not that we met often or that our families were close-knit, but there was something reassuring about his unconditional smile every time we bumped into each other. His concern for you reflected in his gestures, there was hardly any need to express it.

That day, he was all charged up to begin a new innings post his impending retirement. He was in fact planning a vacation to celebrate the grand transition. I had recently lost my father, so the conversation was about my father's life work into archaeology. He was genuinely interested to know more about dad's incredible excavations in far-flung places like Arunachal Pradesh and Port Blair, his insights into rock-cut architecture and his unique contribution to the study of history and archaeology. We were in the parking lot near his car, engaged in some hearty talk, oblivious of time and space. I suggested consultancy as a viable option for him in his new innings and he said he was open to the idea but needed a break before delving deep into the possibilities.

The discussion then moved to my favourite topic of travel and we exchanged notes on our respective past escapades and outings planned for the near future. He narrated his recent Madikeri and Coorg experience in great detail before we parted ways. A month or two later, when my son cleared his Xth Board exams with flying colors, he was one of the few among my friends, relatives and acquaintances who was profusely happy with my son's academic feat. Way more than feeling happy about it, he took immense pride in it, a gesture even the supposedly near and dear ones were found short of.

And then, a couple of days ago, news came that he is no more. A chapter had closed even before it could begin. He was detected with blood cancer, we learnt from his family, that caused the untimely demise in fifteen days. Certain exits leave you devastated and no sermon on the fickleness or impermanence of life can ever seem convincing. Every morning as I look out of my window, the image of a tall, dignified and cheerful man walking towards his car at a leisurely pace assumes center-stage in my mind's eye. The parking lot, the historic venue of our last sojourn, is now a cherished landmark. Hemant Kekre sir, you will be sorely missed.

Right Season, Wright Reason

Recalling a dated piece that has enough to keep it relevant in the wake of the Kohli-Kumble controversy... John Wright’s Indian Summers m...