Citizens' Issues
Vinod Rai demits office: A CAG that India will miss

Vinod Rai, the CAG of India is the man behind all the major headlines we have read over the past few years—the 2G scam, coal block allocations called Coalgate, the Commonwealth Games scam and so on. He is demitting the CAG office on Wednesday reminding us that “tomorrow belongs to the people who prepare for it today”

Vinod Rai, the man behind all the major headlines of the last five years steps down on Wednesday allowing the United Progressive Alliance (UPA) government to heave a sigh of relief. But to most ordinary Indians, Mr Rai was the new national hero—someone who used his official post to do the job that the Constitution of India envisaged for him and in the process demonstrated how politicians were ganging up to strip the national exchequer. In the process, many ordinary people who had no clue what the Comptroller and Auditor General (CAG) does, suddenly became aware about the powers of this office. The respect that Mr Rai commands was evident from the two-time standing ovation that he received at Moneylife Foundation’s third anniversary function on 15th February when the delivered the keynote address.


Interestingly, Mr Rai is also the first CAG to attempt to reach out to people by publishing the gist of audit reports in the form of colourful, easy-to-read and understand “Noddy Books” (character made famous by the favourite children’s book writer Enid Blyton). These are available on the CAG website for all to access.


In sharp contrast to this public adulation was the response of India’s political class. Congress leader Digvijay Singh called his appointment “…one of UPA government’s biggest mistakes”. Agriculture minister Sharad Pawar was equally critical about Rai’s “public utterances” and even the prime minister talked about the CAG going beyond its mandate. Fortunately, many former bureaucrats came out strongly in support of Mr Rai having “reclaimed the pre-eminence” of the CAG office.


No wonder, Mr Rai is the first of 30 Indian CAGs, who will be remembered for showing us that the government and politicians can be made accountable, if statutory bodies simply do their job.


CAG Vinod Rai’s relentless audit and fearless disclosures have told the story of the massive real and potential losses in the sale of 2G telecom spectrum, the Commonwealth Games, allocation of captive coal blocks and irrigation projects.


Never before has the CAG had such a powerful impact on public assessment of the government. It underlines one thing. Very often, we say: What can one man do? That is really an excuse for not doing anything. More interestingly, Mr Rai managed to face up to relentless political pressure with unflappable élan.


Speaking at Moneylife Foundation’s 3rd anniversary event on 15th February, Mr Rai had said that the government has been too used to paid audiences at political rallies and is now starting to be terrified of the silent majority. In a powerful speech, Mr Rai reminded the citizens the responsibility of ensuring good governance, saying that too much is at stake for this duty to be ignored.


While private institutions as well as individuals also need to be accountable, Mr Rai had said that more is required of the government. He said, “Accountability becomes more important when public funds are involved. This is because public funds come from taxes, which we have to pay. Because there is compulsion to pay, we need to know how the money is spent. This is why governments have higher accountability to its citizens.”


“Democracy without accountability is a body without a soul”

After years of slumber, Mr Rai believes, that citizens are finally waking up to find that they need to demand good governance themselves, rather than expect it. “Value-for-money in provision of public services,” he said, “is the basic tenet of democracy. Democracy without accountability is a body without a soul. But the public perception indicates that elements of ethics and integrity are lacking. The public has come to realise that governance is too important to be left only to the government. Each stakeholder is now vociferous, discerning and demanding.”


Mr Rai particularly noted the waking up of the urban middle-class last year. He said, “In 2012, the citizens took centre-stage, debunking the myth of the silent majority. This shows the maturing of Indian democratic forces. Citizens now seek a dialogue and this is the old order changing. Perhaps the urban middle-class united because of corruption at every government office. They have grown united and strong. This has taken the administration by surprise. They were never prepared. The government was too used to paid crowds at political rallies. This is the very reason for the insensitive and misguided response you saw in December and January.”


“If the government doesn’t perform, we have none other than ourselves to blame”

Mr Rai said what we need to do to ensure that the government does not forget what its job is. “The judiciary ensures horizontal accountability. What we need is vertical accountability, from the citizens, mass media and society in general. We need to remember that we ourselves give the government. If the government does not perform, we have none other than ourselves to blame. But it now looks as if the people are waking up again, as is evidenced by, for example, the reopening of Jessica Lal case. India demonstrated its ability to rise up at the time of independence, then again when democracy was snuffed out in 1975, when the economy was liberalised, and now again. We need to keep this up. There is too much at stake to give up,” he said.


Mr Rai took over as the Comptroller & Auditor General of India on 7 January 2008. He has a Master’s Degree in Economics from Delhi University and Masters in Public Administration from Harvard. A 1972 batch IAS from the Kerala cadre, he was the Additional Secretary, Banking and later, Secretary, Department of Financial Services, in his previous assignments.


According to media reports, defence secretary Shashi Kant Sharma, an IAS officer of the 1976 batch from Bihar cadre, would replace Mr Rai as the next CAG of India.


The Aam Aadmi Party (AAP) in a statement has alleged that in the absence of a formal selection process for the job, the appointment is entirely arbitrary, non-transparent, and based on the decision of the finance ministry. It has also said that as CAG, the new appointee will be in charge of auditing defence contracts that he was involved in deciding. This compromises his “institutional integrity” as laid-down by the Supreme Court and his appointment is liable to be challenged.




4 years ago

He will always be remembered as a game changer in India. He showed to bureaucrats that , in case they decide, they can attempt to change the destiny of the nation. NO CAG SHALL BE A RUBBER STAMP IN FUTURE.

shailesh gandhi

4 years ago

Some Congress spokesmen are saying Vinod Rai was not loyal to the Government! Someone says loyalty should be to the Supreme Court! The loyalty of every right-thinking Public servant should be to the Constitution and the people of India only. India salutes Mr. Vinod Rai.



In Reply to shailesh gandhi 4 years ago

I join you all in giving Salute to this Big bureaucrat. Some Central ministers, who ought to mind their own business, find mistakes in the work done by our favourite CAG. Wish, our future CAG s also follow the principles and courage of Shri Vinod Rai.


4 years ago

Replacement of Mr. Vinod Rai is difficult to come but the stock is not insufficient as not to point one from the rot. In fact Mr. Rai has laid the foundation for the future CAGs to act effectively as most of the Chief Election Commissioners have been after Mr. T. N.Seshan. PILs have already been filed against the appointment of Def Secretary as CAG. Presently, the issue is out of the hands of the political leadership.


4 years ago

Salute to Shri Vinod Rai and wish all the Best for future.

Wish, all the Ministers and the bureaucrats in our Governments had the similar qualities like Shri Vinod Rai. But, that appears to be too much to expect.

nagesh kini

4 years ago

In Mr. Vinod Rai, TN Seshan and Chaturvedi we had for a change real game changers who made it known what good governance means.
The Office of the CAG are no mean bean counters who churn out big fat reports that are more often than not just filed away by those are expected to act.
His Noddy Book reports have brought the working of his office to the aam janata.
Long time back in a Doordarshan TV interview he said he was contactable on the internet by making available his personal ID. On a simple mail, his office provided me with an Environment Audit Report.
Before demitting office he deftly avoided any responses to TV Anchors queries on his reaction to Manish Tiwari and Kapil Sibal.


Amritha Srinath

In Reply to nagesh kini 7 months ago

Hi, can you please share the contact details of Mr Vinod Rai?

nagesh kini

4 years ago

In Mr. Vinod Rai, TN Seshan and Chaturvedi we had for a change real game changers who made it known what good governance means.
The Office of the CAG are no mean bean counters who churn out big fat reports that are more often than not just filed away by those are expected to act.
His Noddy Book reports have brought the working of his office to the aam janata.
Long time back in a Doordarshan TV interview he said he was contactable on the internet by making available his personal ID. On a simple mail, his office provided me with an Environment Audit Report.
Before demitting office he deftly avoided any responses to TV Anchors queries on his reaction to Manish Tiwari and Kapil Sibal.

Suiketu Shah

4 years ago

Wonderful leader Mr Rai was.The fact that he was so so so much disliked by some leaders itself is an indication how honest he was under loads of political pressure.Diamonds among pebbles,Mr Rai.All the best in yr future career.

Dayananda Kamath k

4 years ago

sri vinod rai has shown what cag can do what are his powers. but unfortunately since 1968 cag reports were not discussed in parliament and most of the time they were gilotinned. some time in 1984 one mr. chaturvedi a former cag(if i am correct wrote an article in indian express regarding cag reports) i rmember at that time itself the double payments, fraudulent payments and unauthorized payments are far more than our fiscal deficit.the members of parliament have failed miserably the people of india by not discussing and insisting action on these reports. this is one of the primary duties of a member of parliament to see that the funds are used properly and adequately for the public good. hope the incumbent will rise to the occasion.already there is news of conflict of interest he being secretary defense (westland helicopter deal) i do not understand why the govt does such appointments like vijayan to irda u.k sinha to sebi. it shows the vested interest in these appointment's. this is the reason for all scams and corruption. it is protected promoted by the authority which is devised in democracy to prevent.


ashwin bahl

In Reply to Dayananda Kamath k 4 years ago

Bro, it is obvious most important appointments have one thing in common, you have to be YES MEN of the rulers, that is the main qualification and criteria !


4 years ago

Thank you Mr Rai for leaving a legacy behind for others to follow . The corrupt politicians are shouting from the roof tops because you hurt them , where it hurts most , their pockets . Hoping you would continue to serve the country in your post retirement life . Best of luck .

suresh hegde

4 years ago

As has been apty told by others, India in general and common people in particular will really be missing Mr. Vinod Rai. People have seen him as role model. Can we hope that the incumbant will also try to follow the footfrint of Mr.Rai and thrive to contnue the great work done by Mr. Rai. Mr.Rai wishing you a very happy and safe retired life.

Ratna Magotra

4 years ago

Vinod Rai's robust management at the helm made institution of CAG known to common man. It was Sheshan who brought power of Election Commission home some years back. Institutions need but one man at the top to discharge the responsibilities given to them by our Constitution. Rai has proved to be the most influential person in the recent times to restore confidence of public. Wish him the best and may he continue to serve people in a role of his choice.

ashwin bahl

4 years ago

One of its kind, a brave man who took on the establishment fearlessly, wish him all the best in the future.


4 years ago

Sandwiched between a hostile community of beneficiaries of largesse from government via different routes and a government benevolent in showering praises on CAG only when it has to defend itself from opposition attack, Vinod Rai had to assert his stance defending public interest in public on an ongoing basis, which is a tough task for any civil servant in India. If the institution of CAG and the individual have been able to carry on unperturbed, proactive support from media and organisations like Moneylife Foundation did help the process.
The efforts taken by Vinod Rai and his predecessors to sharpen the available tools by infusing expertise into the organisation and by training and educating cadres down below have brought professionalism in the performance of audit function and improved the confidence level of staff. If similar initiatives had come from his counterparts heading several government departments and public sector or statutory organizations, the agony the UPA II government is now subject to would have been much less.
The critiques who are saying that accountant and auditor should bother only about the accuracy of figures are, for reasons best known to them, pleading ignorance of the changes that have happened in the law and practice of accounting and audit and the reforms in the CAG’s office brought about in recent years.
Let us wish Vinod Rai an active, healthy and ‘busy’ post-retirement life pursuing the causes he keeps close to his heart.

Online life term plan: Did you get your medical reports?

Insurers make you go through medical tests when you buy an online term plan. Apart from nasty surprises of premium escalation, you may be even denied the medical report. Avoid an insurance company that refuses to share the medical reports. You will need them for your records

Moneylife Insurance Helpline received the following email from Uttam Kumar Dubey. “I am 31 years old. I went for Rs80 lakh term plan after cancelling the Rs75 lakh HDFC Life click2protect term plan (30 years/Rs11,000 premium) under the condition that they will conduct a complete health check-up. In the hospital we went through several tests, but only the urine cotinine test details were available on HDFC Life website. When I asked them why all details were not available, the manager said only urine cotinine test was required and they did not collect all reports from the hospital. There was no change in premium after medicals, but I should have got all the reports.”

While the customer deserves to get all the medical reports, self declaration of the customer is as important. This is because doing medical tests is not a replacement to self declaration. There will be only a limited number of tests and it cannot catch everything that is wrong with your health. So, having done medical tests is not a conclusive proof of utmost good faith in case of death claim dispute. It surely supports your case and hence it is best to keep all the records of your medical tests.

Here is the response from HDFC Life—“We keep revising our non-medical limits from time to time based on actual experience. Most of the times, we revise the non-medical limits and give the benefit of the revised limits to the proposals, which are pending for conversion. We had changed the non-medical limits just when Mr Dubey went for the medical examination. The centre had collected the samples and done the reports.
However, as we had informed them of the revision in the non-medical limits, they only forwarded the cotinine test report to us, on the basis of which we went ahead and converted the proposal. As the cotinine test was the only medical test required for the conversion of Mr Dubey's policy because of the revision in non-medical limits, so we had uploaded only that report. On receipt of the complaint, we have checked with the centre and they could produce the other reports which they had retained at their end. We have now uploaded all the reports, which Mr Dubey can view at his end.”

Mr Dubey was ecstatic to get his reports and the issue was solved. But, we have come across examples of customers being denied medical reports, premium escalated after medicals without sharing the medical results, inaccurate medical reports leading to premium increase, rechecking needed if there is discrepancy between insurance company reports and your reports that were recently done and many other issues. 

Escalation in premium should be justified with medical reports otherwise customers will question if the premium declared by online term plans are just for enticing customers. You can write to Moneylife Insurance Helpline for your insurance issues.

Read - Online term plans

Moneylife Foundation seminar on Life Insurance:“Online term plans can be deceptive”



Himansu S M

4 years ago

In 2005 I made a manual insurance under Amsure of Newyork Life. They arranged and paid for the Medical Test, But they never gave or showed me the Medical Report. When I approached they said the IRDA insurance rules say so. I also checked up with another LICI agent, he also said so. But I'm still not sure, because the insurer can always say that there was flaw/existing illness at the time if any claim, for which we have no documental proof. Also they can manipulate if they want to at their end. I don't think there is any integrity in Insurance companies, now that most of them are not doing well.
= Himansu S M


4 years ago

Aviva couriered me all the medical reports when i signed up for their ilife policy on 2011.

Inflation Index Bonds: Five things you must know

Inflation indexed bond is not a plain vanilla financial instrument. The real working of these bonds will be out only post 4 June 2013.  Investors need to understand these bonds thoroughly before taking a call of investments

No financial instrument has made the news in India in recent times like Inflation Indexed Bonds (IIBs). There is a lot of curiosity and excitement about these bonds. For some it looks like a panacea for all woes related to inflation, while for others it is still a Pandora’s Box. While the complete picture of these bonds will be out after the first issuance of these bonds, here are five important things that retail investors must know about these bonds before investing in these bonds:

A retail investor cannot quote the price/yield of his choice during issuance: Inflation index bonds will be issued through a process of auction. Retail investors will be able to buy Inflation Indexed Bond (IIB) through a process of non-competitive bidding. Non-competitive bidding means that a person would be able to participate in the auctions of dated government securities without having to quote the yield or price in the bid. As per the RBI (Reserve Bank of India) website in a non-competitive bidding, “Eligible investors cannot participate directly. They have to necessarily come through a bank or a primary dealer (PD) for auction. Each bank or PD will, on the basis of firm orders, submit a single bid for the aggregate amount of non-competitive bids on the day of the auction.”So retail investors become price takers in inflation index bond issuance process.

Face value of inflation indexed bond will be adjusted to inflation: In the inflation index bond face value of the issued security will be adjusted to the cash flow. The coupon will be paid on the adjusted face value; however the coupon decided at the time of issuance remains same till maturity. Effectively the coupon payment received by the investor changes but the coupon fixed at the time of issuance is not altered. Let us look at the example below of an inflation indexed bond at the time of issue:

  • Face Value: 100
  • Maturity: 10 years
  • Coupon: 6% per annum, payable semi-annually

Now assume the inflation changes by the inflation number given below in the period one. As a result of the change in inflation a new face value is arrived at which is 103 and coupon payment of 3% is made on the inflation adjusted face value which translates into 3.09%. In the 5th year, inspite of negative inflation of 8%, the face value does not fall below 100. As per the RBI circular the face value of inflation index bond will never go below par value.



Inflation, Semiannual














































Note: This is only an example for understanding the working of IIB and not actual


Real yield of inflation index bond may become negative:  Real yield here means that the inflation exceeds the yield offered by inflation index bonds. This has happened in both UK and US markets.  In order to buy inflation indexed bonds, the investors quote a very high price which results into a very low yield for these bonds. If the inflation exceeds quoted yield, real return becomes negative. In March 2013, the UK Treasury 2.5% 2024 index-linked bond had a current real yield to maturity (the return you get, after inflation, if you buy now and hold until the bond is paid back in 2024) of minus 1.06%. The US Treasury 0.625% 2021 bond had a real yield of minus 1%. The primary market issuance of these bonds in the US were also done at negative yield. (Refer: Treasury Sells TIPS at Negative Yields as Buyers Doubt Bernanke).


In India, whether this happens or not needs to be seen. However, the possibility of this cannot be ruled out. On a long-term basis this may be the case, but it can happen for a series of years or randomly till the time of maturity of bonds.

Price of the bond will be derived through an auction at the time of issuance: Price of inflation indexed bonds will be derived through a method of auction. This means that the price at which an investor purchases these bonds will be different from the face value. This will be a new experience for most of the retail investors as they are not used to buying security in an auction format.

Inflation indexed bonds will be taxable: These bonds will be taxable which means that the effective return post taxation will be less for an investor. The taxation may blunt the inflation beating capacity of these bonds. The investor will need to calculate post tax return of these bonds to see, if they have been able to beat inflation or not.

Inflation indexed bond is not a plain vanilla financial instrument. The real working of these bonds will be out only post 4 June 2013.  Investors need to understand these bonds thoroughly before taking a call of investments.

(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)



Vinay Joshi

4 years ago

Only to the uninitiated writing the above article it may be IIB’s panacea or Pandora’s Box.

June 4,2013, the said bonds will be issued, by May, 24, RBI guidelines follow.


ARE YOU AWARE THAT L&T, last week issued 100CR inflation linked, capital indexed, non convertible debentures, 1.65% yield p.a,‘AAA’ CRISIL RATING!

Glaring deficiencies in your write up; TEN PONTS as under, comment if you must!

1] Comparison with overseas bond issues – just no relevance.

2] Not knowing L&T issue.

3] The bonds will not be auctioned. Not MEANT for retail at the moment. Will be sold in tranches, 1K/2kCR to mop up 12/15KCR as announced, four months indexation lag.


5] IRRESPECTIVE, if WPI linked, retail investors will have other options including SIP’s .

6] NO QUESTION RAISED AS TO WHY NO LINK TO CPI & WHEN? [only after CPI stabilization FYI! When can it stabilize?]

7] IN WHICH MANNER, further scheme[s] of issuances can protect savings from inflation?

8] The said IIB’s are not TAX EXEMPT but capital indexation CAN BE claimed. No mention!

9] It can be counted towards SLR requirement of banks. [many banks may switch securities in excess of 23%.] Coupon rate of 0.45% - 0.52% attractive proposition. Fifty basis points expected.

10] When & how the instrument can be priced? Now i've told you.

Expect each & every point will be answered.


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