Case for rate-cut?
Apropos of the column “RBI policy hurts India’s growth” (May 31). High inflation kept our key rates elevated for years now. Targeted pegging of fiscal deficit saw welfare schemes that channelled income to rural households pruned, affecting domestic demand. An indifferent global economy, signalled by low commodity prices, is stagnating our exports and we are unable to leverage a weak rupee. The negative growth of IIP must induce us now to address growth .Flow of FDI ,for years now ,has not been encouraging. Substantial public spending, inter alia on infrastructure, must come in to boost the economy, though transiently seeding higher deficits. But we must be confident to borrow from the future and make it up with a resurgent economy. It is time that key rates see a rational fall. We can not be the prisoners of the twin spectres of inflation and fiscal deficits, far longer than necessary. Economy evolves constantly. Inflation, fiscal deficits, exchange rates are no more enduring enemies than loyal friends nor are traditional monetary measures a lasting antidote. The US, with its $4 trillion of monetary flooding, found its dollar strengthening! That made imports cheap, particularly from China with its undervalued currency, and exploding manufacturing base. The US, while benefiting from low inflation due to cheap inputs, lost far more on job creation as its domestic manufacturing shrunk. Today, it wrestles with a painfully slow growth even as China stares at an overbuilt capacity, idling thanks to the fall of global demand.
Cleaning up FIFA
This refers to the report “Visa’s tough stance on FIFA augurs more sponsor demands” (May 30). We were under the impression that unethical practices were only confined to the gentleman’s game (no a deserving epithet) of cricket. But along comes the FIFA controversy, involving football, the beautiful game. The American prosecutors have indicted nine FIFA officials and five media corporation and sports management executives on federal corruption charges. It could well be the tip of an iceberg. The moot question is: Will the big banks named in this scandal face the music from the US authorities? Questions are being raised on the role of banks in FIFA bribery case. Recently, some banks got away for their financial crimes, by just paying fines levied by the US authorities. Are negotiated settlements a substitute for criminal proceedings? If banks were to contest criminal charges, they may end up losing their licences if found guilty, and banks feel that payment of fines is okay for them.
Deendayal M Lulla, Mumbai