Enigma over Shyness of Bankers toward Small businesses

Concern expressed by the USA's Federal Reserve chief Ben S.Bernanke and other economists was that the lending to small businesses contracted substantially over the last two years. Small businesses -- those having fewer than 500 employees – employ half of all Americans and account for about 60 per cent of gross job creation. Lending to such companies fell to below $670 billion in the first quarter of this year from more than $710 billion in the second quarter of 2008. Many entrepreneurs say the bankers are wary of financing and denying loans to creditworthy borrowers as part of an overreaction to the bad loans of the last economic expansion and heightened scrutiny by regulators. A collapse in the value of real estate and other collateral used to secure loans posed a ‘particularly severe challenge’ to small businesses, Mr. Bernanke said.

We can expect a similar situation in India too where the role of small scale ventures/businesses is equally important from the point of view of its contribution to employment and value of production and exports vis-a-vis the medium and large-scale sectors. But the fate of its existence as well as its access to credit from financial institutions is less said the better. The governments in India both at the central level and state level are unfortunately found wanting in encouraging their manufacturing and marketing of their products unlike in developed nations like USA.

Intimidating Inflation

Food Inflation has a major role in impacting the Wholesale Price Index (WPI) of late in a realistic manner thanks to the due weightage given to food prices found to be fluctuating rapidly and almost consistently for a couple of years now. Both the Central and State governments are groping in the dark as how to keep inflation and especially food inflation under check. Look at the concerns being expressed by the Union Finance Minister from time to time. The latest concern is towards a sudden surge in food inflation to double digit at 12.13% for the week ended December 11. The Minister appears to have attributed the present rise to the sky-rocketing prices of the famous vegetable-spice namely the onion in the last few weeks which in turn was the result of excess rains and floods in some production centers of states like Karnataka and Maharashtra during this period.

Despite the concern expressed by the Minister and the Committee of Secretaries headed by the Cabinet Secretary in Government of India, the inflation continues to rise due to unrelenting trend in prices of onion, edible oil, milk, fruits and vegetables. The WPI inflation data reveals that the annualized increase in prices of onions worked out to 33.48 per cent, fruits 20.15 per cent, eggs, meat and fish 19.35 per cent, vegetables15.54 per cent and milk by 17.83 per cent. Onion seems to enjoy a pride of place in the market. Hence the necessity of a meeting of Committee of Secretaries on Thursday, December 23, 2010 to take stock of the situation while continuing to battle against onion prices that touched Rs 70-80 a kg in the last few days. Responsible people in the government and the trade unfortunately fail to set up a regular mechanism to study the situation, anticipate the factors responsible for fluctuations in the supply of those vulnerable goods and take timely remedial steps on a continuing basis. Fire-fighting exercises from year after year expose the hollow nature of understanding and awakening on such a burning issue.

Long-term planning and medium term strategy to thwart such a scenario is totally missing in the present scheme of things. And nobody is sure of finding a permanent solution to normal supply of agri-goods on a perennial basis without any hassles and excuses. Looking to the inelastic demand for such products in the short-run and medium term it should not pose any problem for the planner or administrator to estimate the actual demand of various food products at different times of the year under varying conditions and contingencies and once such an exercise is complete, the authorities should explore the possibility of meeting such sustained demand with the available self-correcting sources of production and systematic procurement by the private as well as public agencies. These calculations and arrangements for execution should ensure the availability of all those food products uninterruptedly in the market. It is easier said than done in the present scenario.

Prime Minister’s Economic Advisory Council Chairman Dr C.Rangarajan made a prophecy on Monday, December 27, 2010 that inflation was expected to come down to 5.5% by March, 2011. “ I think any level of inflation beyond 5% ( threashhold level of inflation) is unavoidable” he said. It is a paradox that an Economist functioning as the Prime Minister, a World Bank-trained economist Dr.Montek Singh Ahluvalia working as the Dy.Chairman of the Planning Commission and a well known Economist, namely, the Chairman of Prime Minister’s Economic Advisory Council and the farmer Governor of Reserve Bank of India viz., Dr.C.Rangarajan are unable to control the inflation in this country.

Poverty in Richest Country?

Is it the bane of human society or the inevitable law of nature that irrespective of what system man had improvised so far, the humanity is destined to live with irreversible income and intellect disparities for the ages to come? How does one comprehend otherwise that despite the golden mix of capitalism and democracy ruling the richest nation viz. the USA the government there can’t abolish poverty of its citizens in the last two centuries? It is indeed one of the inexplicable developments with the Census Bureau reporting that the percentage of Americans struggling below the poverty line in 2009 was the highest it has been in 15 years. The number of people living in poverty last year climbed to almost 43.6 million up from 39.8 million in 2008. The percentage of people living in poverty also increased to 14.3 per cent, the highest rate since 1994. Poverty in USA has been defined as pretax cash income below $ 22000 for a family of four. This is a development which one notices in spite of federal assistance like expanded unemployment benefits (helping three million families).

An unexpected development but a welcome one from the stand point of joint family system in US society is the necessity of younger generations along with other members of nuclear families to shift to the homes of their parents to tide over the poverty situation for the present. The Census study found an 11.6 per cent increase in the number of such multifamily households over the last two years. Unemployment remains near 10 per cent and there are strong signs that the high poverty numbers have continued into 2010. Poverty had been concentrated among young adults without college education and their children.
One indirect sign of continuing hardship is the rise in food stamp recipients, who now include one in seven adults and an even greater share of the nation’ children. By mid-2010 the number of recipients had reached 41.3 million, compared with 39 million at the beginning of the year. Food banks too report swelling demand.

The poverty rate for non-Hispanic whites was 9.4 per cent, for blacks 25.8 percent, and for Hispanics 25.3 percent. The rate for Asians was unchanged at 12.5 percent. “This is the first time in memory that an entire decade has produced essentially no economic growth for the typical America household”, Mr. Lawrence Katz, an economist at Harvard. The poverty line is no doubt a flawed measure, experts agree.

STEPHEN HAWKING'S NEW THEORY

The greatest and the most revered scientist after Einstein, namely, Stephen Hawking is a formidable mathematician and a powerful salesman. He, otherwise a declared atheist, has confirmed and reiterated his thesis on the basis of M-theory that several universes in existence have had necessarily not required the hand of a supreme being for this happening. This is what one reads from his latest sales-sensation entitled "The Grand Design" co-authored with Leonard Mlodinow.

I take nature and the supreme being as one entity, or give any name you like, and feel that something is required to lead to another. Nothing is created out of vacuum, I suppose. So my theory is that some super nature or being is responsible for what we have or what we perceive in the universe.

POLICE REFORMS

Government of India and some State Governments seem to be quite reluctant to implement the reforms suggested by the Supreme Court of India in the year 2005. They seem to be quite perturbed particularly by two directions issued by the Court i.e,

1. Fixing of tenure for Director General of Police (DGP).

2. Selection of DGPs from the empanelement done by the Union Public Service Commission.

It is a well known fact that the State Governments especially the Chief Ministers normally try to select a person who is amenable or appears to be pliable to the dictates of the state-level political boss. Since the top cop of the State is meant to toe the lines of the Chief Minister blindly, it would be very difficult to expect the Police Force working under him to act independently. This is exactly the reason why the Apex Court thought it proper and better to introduce the police reforms in the aforesaid manner.

It is therefore beyond one's comprehension that the Apex Court is being approached or pressurised after five years by the Government of India and some States to have a rethinking on the direction given by the Court. It would be quite unfortunate if the Apex Court concedes to this request and allow the reforms to be diluted to the disadvantage of the law-abiding citizens of the country.

Where do we live? And how do we move about?

We the Indians live in mansions, villas, houses, apartments and skyscrapers, slums and shanties and even on platforms in metros in the midst of filth and garbage stacked and stored for eternity with sewage and drainage flowing on the sides or in the middle of the roads depending on the mercy of civic authorities. Are we entitled to call ourselves civilized citizens or inanimate barbarians of pre-historic ages? Who is at fault? Are we short of resources all over India? or Are we short of thinkers, planners and the people to execute?

Who is to sweep our streets, remove the garbage and construct underground drainage and when do we reach the standards of western and even some of the Asian countries?

Submission of Suspicion

Justice V.R.Krishna Iyer rightly questions the callousness and the boldness with which the Attorney General G.E. Vahanavati made a statement before the Supreme Court on November 22, 2010 on behalf of the Union Government that since the appointment of judges to the Supreme Court was made many a time without questioning much on the integrity of the proposed candidates, it was therefore not necessary to go deep into the appointment of the present incumbent on the post of C.V.C namely P.J Thomas although he was facing criminal prosecution in a Kerala court on account of his earlier conduct.

His outburst in the absence of a similar protest from any other quarters is understandable. May be such reactions are perhaps not highlighted by the V.I.P-savvy media?

A most serious monster has shown its ugly head by fluke. I would say so because many such posts are filled not on the basis of pure merit but on some other considerations. Unfortunately Dr Manmohan Singh as P.M is forced to take decisions without applying his mind due to the overwhelming presence of officials hailing from one state namely Kerala. In such cases the conduct of D.O.P.T (Department of Personnel & Training in Governement of India) is not above board. Its policy and practice seem to jusitify the widely-prevalent statement: ‘Show me the person, we shall show you the rules’. A wretched system in Indian Bureaucracy after 60 years of independence! Different yardsticks are boldly applied without any fear or decency. A review of similar cases related to cadre appointments, promotions, postings and disciplinary matters related to the members of Indian Administrative Service in the last 6-7 years would reveal and expose a number of naked skeletons in the cupboard.

P.S

Of late Justice Iyer seems to have aplogised to the Attorney General after seeing a rejoinder and clarification from him. However the point regarding CVC's posting is under terrific controversy.