The central bank is trying to redefine sick units and would soon come up with the new definition, says Dr Chakrabarty
Mumbai: The Reserve Bank of India (RBI) will come out with a new definition of sick units shortly, reports PTI quoting RBI Deputy Governor KC Chakrabarty.
"We are trying to redefine sick units... very soon we will come up with a new definition," Chakrabarty said while addressing a conference on SMEs organised by the Bombay Chamber of Commerce and Industry.
Talking about bank financing to SMEs, the senior most deputy governor said entrepreneurs have to be trustworthy and units have to be credit-worthy for getting bank finances. The SMEs have to maintain utmost transparency in their transaction with banks.
"Availability of timely credit is more important for SMEs than the cost of credit," he said, adding businesses can't only run on borrowed money and promoters have to bring in capital for growth.
He also said that SMEs should foresee their cash flow for at least the next 18 months to arrange for timely availability of bank credit.
FDI in pension funds is a welcome step for pensioners and the New Pension Scheme would benefit all subscribers, many of whom may have also opted for such schemes in operation in the private sector. How it will benefit a person who has subscribed to both remains to be seen
Last week, finance minister P Chidambaram announced sweeping reforms in terms of Foreign Direct Investment (FDI) in insurance up to 49% (from the existing level of 26%) and set a similar limit in the case of the pension funds.
The stock market reached favourably to both the proposals and the Sensex breached the 19,000 mark to close the day at 19,058. These moves, however welcome they may be to the stock market, are likely to draw both favourable and unfavourable reactions from the public once full data is made public. In fact, both issues are highly debateable.
The finance minister stated that all the five recommendations of the Standing Committee on Finance, which examined the Pension Fund Regulatory & Development Authority (PFRDA) Bill, 2011, have been accepted, without any reservations. Prima facie, the market reacted favourably but is awaiting full details.
Read here about what the PFRDA says about NPS.
In order to implement the New Pension Scheme (NPS) effectively, at the very outset, this has been made mandatory for all employees, except the Armed Forces, who have entered into service on or after 1 January 2004. However, with effect from 1 May 2009, the NPS has been opened to all citizens of the country, which, again, has been welcomed by all.
In due course, it is believed, a statutory PFRDA will be put in place so as to benefit NPA subscribers.
Read more about what ails the New Pension Scheme.
This is a welcome step for pensioners and the scheme would benefit all subscribers, many of whom may have also opted for such schemes in operation in the private sector. How it will benefit a person who has subscribed to both remains to be seen.
While full details of the scheme are expected shortly, the Cabinet-cleared scheme permits the NPS, which seeks minimum assured return, to opt for investing his/her funds in various schemes that may be notified by PFRDA from time to time.
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(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)
Various government bodies have warned that India should urgently slash subsidies to curb a growing budget deficit. But, considering the diverse region-specific issues, it would be near impossible to find a common solution for the problem affecting almost half the population of the country
While talking to the media after a function in Chennai on last Thursday, Reserve Bank of India (RBI) deputy governor Subir Gokarn observed that as regards fiscal problem, no solution will work unless the subsidy issue is addressed. He added that the subsidy bill is by far the largest single burden on the government finances. Reading in the context of the recent measures to tackle oil subsidy, the statement coming from the RBI could be seen neither as a threat nor a warning, but as advance information about the impending disastrous policy initiatives on the food front.
The RBI observation comes within days of the Kelkar panel warning that India is on the edge of a “fiscal precipice” and should urgently slash fuel, food and fertilizer subsidies to curb a budget deficit that could hit 6.1% of gross domestic product (GDP) this fiscal year.
While on the subject of subsidy, certain related issues deserve mention. These include:
With these thoughts in the backdrop, this article takes a look at the position of measures needed for ensuring food security.
Last month, by a mere coincidence, the observations on the impact of demand-supply situation on food inflation by Chief Economic Advisor (CEA) Raghuram Rajan and the release of 2012 Global Food Security Index by American chemical company DuPont almost coincided.
Rajan’s observation goes like this: “One of the concerns of the last few years has been food inflation, which has been not so much within the control of the government. This is… because our population has become richer, a good thing, and therefore has demanded more high-end products such as milk, eggs, meat rather than the cereals.” According to him in order to rebalance or reduce food inflation, “we have to produce more of such products. So, productivity is going to be part of fighting inflation.” The relationship between productivity and inflation being well-known, normally, Rajan should not have attracted the criticism his statement has been subjected to in the subsequent days.
The DuPont report observed that with India expected to be the most populous country by 2025, feeding the population is likely to be one of the serious challenges the country will face in the coming decades. The position the report gives to India among the nations covered by the report is not that much important as such reports do not compare the comparables.
From the information that could be gathered, the Food Security Act (FSA) is still under the consideration stage, somewhere. The National Advisory Council (NAC) was in consultation with ministries on FSA sometime back. It is understandable that the NAC has to take a view at macro level for the whole country for advising on optimum utilization of available resources for ensuring food security. But, considering the diverse region-specific and income-strata specific issues concerning procurement, pricing and distribution at grass-root level, it would be near impossible to find omnibus fit-for all legislative solution for the problem affecting almost half the population of the country.
Sooner than later, we have to reconcile with the fact that, measured by any parameter, economic development has not been uniform in all the regions of the country. Therefore, the perception of poverty, share of expenditure on food in the family budget, expectations about lifestyle and development of rural markets vary across geographical boundaries within India. These aspects will need to be factored in, in any policy initiative including legislative measures to ensure food security. Some parts of the country will justify the CEA’s observations on productivity of milk and eggs, while 70% of the population will still need price management of cereals at the retail level, just for survival.
To read more news analysis on issue of subsidy, click here.
The Common Minimum Programme (CMP) of the United Progressive Alliance (UPA) government released in May 2004 had these promises on food and nutrition security:
“The UPA will work out in the next three months, a comprehensive medium-term strategy for food and nutrition security. The objective will be to move towards universal food security over time, if found feasible.
The UPA government will strengthen the Public Distribution System (PDS), particularly in the poorest and backward blocks of the country, and also involve women’s and ex-servicemen’s cooperatives in its management. Special schemes to reach foodgrain to the destitute and infirm will be launched. Grain banks in chronically food-scarce areas will be established. Antyodaya cards for all households at risk of hunger will be introduced.
The UPA government will bring about major improvements in the functioning of the Food Corporation of India (FCI) to control inefficiencies that increase the food subsidy burden.
Nutrition programmes, particularly for the girl child, will be expanded on a significant scale.”
It was expected that policy formulations by the GOI affecting food security will be broadly guided by the spirit of the CMP. But, it took more than seven years for the above promise to find expression in the form of an intention to introduce a Food Security Bill in Parliament. The burden of subsidy which disturbed the former FM’s sleep (luckily he could get a change of berth and can sleep well now!) is now threatening the hunger levels of the common man, as subsidy has become a bad word in the current “Reforms dispensation”.
During the last two decades, agriculture as a sector and foodgrain cultivation particularly lost the national priority they enjoyed during the pre-reforms days, marked by stagnant foodgrain production and dwindling share of crops in agricultural GDP. The neglect has resulted in under-utilization of land available for cultivation, the country not taking advantage of modern agricultural practices and inadequate storage and processing facilities for the agricultural produce.
A change in approach to cropping patterns, agricultural practices, storage and processing facilities factoring in the changes in food habits like the urban bias towards processed food, non-availability of traditional food articles in villages and the need to ensure minimum nutritional needs to the under-privileged is overdue and in this context the Food Security Bill is to be welcomed. Only a small section of the urban population can afford the prices of imported processed food and bottled drinking water. The well-being of the remaining one billion people is dependent on the food and water available locally.
From a short-term point of view, the FM should keep in view the following factors while considering lowering of ‘subsidy’ intervention as an instrument to support food security:
Lest I will be misunderstood, let me clarify that my case is not for continuing the status quo. What I am trying to say is that instead of cutting and pasting reform measures tried elsewhere in different periods of time in different historical contexts and in different geographical regions, we should tailor-make India-specific measures to meet our present day needs.
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(MG Warrier is a freelancer based in Mumbai. He can be contacted at [email protected].)