Govardhana Rangan (for Info only, not official)

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Govardhana Rangan

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    ...In an unprecedented move, the then Finance Minister, P Chidambaram, forced the governor to recall his speech and clarify that no such proposal was on the horizon. That was January 12, 2005. The flow of US dollars fuelled asset prices across the board – from real estate, to stocks, to commodities, to precious metals. That lulled corporates into believing easy money is forever. When the tide turned those with dollar liabilities were whipsawed. Within a few years of tackling the problem of plenty with the Greenback during Reddy’s tenure, the country quickly moved to scarcity under Governor Duvvuri Subbarao in 2013. Subbarao and his successor, Raghuram Rajan, worked overtime to arrest the collapse of the rupee and come up with yet another special scheme to bring in US dollars. Come 2017, life at the Reserve Bank of India (RBI) appears to have come a full circle. Yet again, it is a problem of plenty. The foreign exchange reserves are at a record high of $393 billion. ...

    TOI on Aug. 11, 2017, 1:44 a.m.

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    ...When drug-maker Biocon said it would issue bonus shares this week, its shares rose 9.4%. Obviously, there are investors out there who believe that 12 slices of a pizza adds up to more than four slices of the same pizza. That should tell you how rational investors are. Should one fret so much about the Sensex at 30,000? How is it different from 29,380? Do indices reflect fundamentals? Experience is markets more often trade far away from what the fundamentals support. The father of value investing, Benjamin Graham had this to say: “Under valuations caused by neglect or prejudice may persist for an inconveniently long time, and the same applies to inflated prices caused by over enthusiasm or arti ficial stimulants.” With monsters that would collapse the market ­ Brexit and Trump ­ fizzling out, it is all optimism now about global economic prospects. ...

    TOI on April 28, 2017, 1:33 p.m.

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    ...They are passionate and an emotional bunch, hence prejudiced. These blind them to reason and often put them in conflict with the majority view which is the cornerstone of a democracy. Many a time social activism militates against businesses that keep the economy humming, providing livelihood for people. Businesses have rules and regulations and the job of the government is to enforce them. Wherever there are gaps, they need to be filled. But it is unwise to change the rules of the game midway just because a minority is passionate about an issue. We aren’t talking about the cow vigilantes and the fallout on meat business here. It is a public interest litigation at the Bombay High Court filed by Sumitra Hooda Padnekar and six others seeking to end state-run insurance companies’ investments in tobacco firms. The petitioners are eminent people who deal with cancer patients, and they know the misery tobacco causes more than anyone else. ...

    TOI on April 21, 2017, 11:49 a.m.

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    ...Free financial markets are especially problematic because they provide resources to newcomers, who then can make other markets competitive.-Raghuram Rajan and Luigi Zingales in Saving Capitalism from Capitalists. It is that familiar territory . Be it telecom, transportation, financial services or oil exploration, when the giants in a business feel threatened by nimble newcomers, they raise the bogey of security , integrity and reliability. If all of those are overcome, they then gang up and find ways to kill the newcomer by erecting obstacles. In their eagerness to counter emerging competition, they end up saying something contrary to what they preach. Big Indian banks are just there. The issue is the interchange charges they have to pay the providers of Micro ATMs whenever the customer of a big bank uses the service. The Indian Banks Association, the industry lobby group, recently ordered that charges that big banks pay for Micro ATMs be cut by 90%. That’s unreasonable even on a multinational pharma company that has earned billions on a patented drug, leave alone a start-up bank. ...

    TOI on March 31, 2017, 10:18 a.m.

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    ...Few looked through the Indian system at that point when analysts, regulators and investors were all intoxicated by 9% economic growth and they were intent on keeping it high irrespective of the global meltdown as if it was India’s birth right.In fact, the government and the RBI not only turned a Nelson’s eye to the banks’ efforts to paper over the simmering crisis, but also encouraged it. Here is how: Between 2009 and 2013, thousands of crores of loans were restructured without a thought on whether the projects involved were viable. As banks threw good money after bad, the government cheered and the regulator was just a spectator. Fast forward to 2017. More than half the Indian banking system is technically insolvent because their stressed assets -loans ever-greened to avoid defaults and those where borrowers have defaulted -are more than the capital they own. ...

    TOI on Feb. 17, 2017, 8:07 p.m.

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    ...In a world where central bankers struggle to figure out the known unknowns, to declare a remedy for an unprecedented ailment would have been just bizarre. The six-member committee admitted that it just cannot specify what withdrawal of four-fifths of currency notes would do to the economy. It spit-out what is common knowledge ­ growth will be shaved off, and inflationary pressure would ease. “While supply disruptions in the backwash of currency replacement may drag down growth this year, it is important to analyse more information and experience before judging their full effects and their persistence ­ short-term developments that influence the outlook disproportionately warrant caution with respect to setting the monetary policy stance,“ Patel said in the policy statement. It is a norm for financial markets to seek quick-fix solutions whenever growth wobbles, but it rarely appreciates caution. ...

    TOI on Dec. 8, 2016, 3:10 p.m.

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    ...If only Prime Minister Manmohan Singh were half as powerful as Prime Minister Narendra Modi is, the proposal would have seen the light of the day and Singh, Chidambaram & Co would have stolen the black money thunder on which Modi is gloating now. More than a decade ago, Chidambaram had this to say: “The NCMP (National Common Minimum Programme) requires the government to introduce special schemes to unearth black money and assets,’’ he said in his Budget speech in February 2005. “I am obliged to carry out the mandate, but without giving undeserved relief or an amnesty. I am concerned about large cash transactions, especially withdrawals of cash, when there is no ostensible purpose to withdraw such large amounts of cash. These cash withdrawals leave no trail, and presumably become part of the black economy. ...

    TOI on Nov. 14, 2016, 4:52 p.m.

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    ...In August 2011, Standard & Poor’s, downgraded the US from Triple A which the Wall Street Journal described as shaking the ‘cornerstone of the global financial system.’ At that time, the US government was paying 2.3% to borrow for ten years. Five years later, Uncle Sam pays 1.8%. That illogical movement, partly, reflects the easy monetary policy, and reminds about the diminished credibility of the ratings itself. On Wednesday, S&P saying that it won’t upgrade India for the next two years has upset many, including the Economic Affairs Secretary Shaktikanta Das. Bureaucrats and politicians are fuming that their reforms are not being recognised by the rating companies. It is not worth wasting your time on it, Mr. Das. The likes of S&P are becoming irrelevant even to investors to whom they should matter. Every fund manager doing his own intense research before buying bonds reflects the doubts about the quality of ratings. ...

    TOI on Nov. 4, 2016, 11:46 a.m.