Managing an economy with a committee format is a challenge in itself. A professor friend once joked and said that "A Camel is a horse as defined by the Committee".
Inflation based on wholesale prices has been reported at 2.8% and Consumer price based inflation has been reported at 5.1% at these inflation numbers the real interest rate is 3.2% (based on the repo rate of 6% as the nominal interest rate). This must be one of the highest real interest rates in the recent past. When we look at these figures a casual question that pops up in the minds is: Why doesn't the RBI reduce its rates?
Probably the committee form of decision making is the culprit. when the five wise men meet to decide the fate of interest rates in the country, some members tend to look far into the future and predict an upsurge in inflation or a deep plunge in the value of the INR. The members must be thinking really hard about the future and doing a lot of number crunching. This reminds me of another professor of mine who used to say "too much of analysis leads to paralysis". That's the same paralysis that afflicted the UPA government during 2011-2014. I am afraid that the same disease has contracted the NDA too.
A lot of people have been talking about the banking system being full of NPAs and the whole system has gone to dogs. I wish to remind the readers about our government's own quantitative easing during 2008-2012 when the purse strings of all banks were loosened and laid bare before the corporate borrowers, the central banker was "Gung Ho" on having managed the world financial crisis in 2008. This loosening of Banks purse strings has come to roost. The Banks are staring at NPAs from large scale borrowers in the corporate sector.
Whenever somebody points out at the cause of rampant economic mismanagement in the erstwhile regime, one is branded as a "BHAKT". The previous regime has not only been guilty of mismanaging the economy but also played a part in manipulating the stock markets on various occasions. The minister was known to make dangerous statements and pull the market down and then retract the statements to assuage the investors on a regular basis.
Now the new regime is treading the path cautiously and has given the responsibility of setting interest rates to the MPC. Not only that, but the right / responsibility of deciding the GST rates has also been given to a committee of finance ministers (that makes it more than 30 wise men on a committee). Democracy in picking a ruling party and entrusting governance to a party is alright but entrusting major policy decisions to committees slows the entire decision making process and holds the country to ransom.
Hope that some corrective action is taken, some responsibility is taken and not everything is entrusted to committees of bureaucrats.
