Category: Swarajya | Page 3

23 December, 2015

Explained: What Raghuram Rajan Just Did To Make Monetary Policy More Effective

In the last monetary policy statement released by the Reserve Bank of India(RBI) on December 1, 2015, the governor Raghuram Rajan had said: “Since the rate reduction cycle that commenced in January [2015], less than half of the cumulative policy repo rate reduction of 125 basis points [one basis point is one hundredth of a percentage] has been transmitted by banks. The median base lending rate has declined only by 60 basis points.” Repo rate is the rate at which RBI lends to banks and acts as a sort of a benchmark to the interest rates that banks pay for their deposits and in turn charge on their loans.

What this means is that even though the Rajan led RBI has cut the repo rate by 125 basis points, banks in turn have cut their lending rate by only around 60 basis points on an average. This clearly tells us is that the monetary policy of the RBI (or the process of setting interest rates) has only been half effective.

Why is that the case? A major reason for this lies in the way the banks calculate their base rate or the minimum interest rate that a bank can charge its customers. How is this base rate calculated? As the RBI Draft Guidelines on Transmission of Monetary Policy Rates to Banks’ Lending Rates released earlier this year pointed out: “At present, banks follow different methodologies for computing their Base Rate. While some use the average cost of funds method, some have adopted the marginal cost of funds while others use the blended cost of funds (liabilities) method. It was observed that Base Rates based on marginal cost of funds are more sensitive to changes in the policy rates.”

What does this statement mean? Some banks follow the average cost of funds method to decide on the base rate of their lending. The average cost of funds is the average interest rate that a bank pays on the fixed deposits and other borrowings that it raises. In this scenario if the average cost of funds of the bank is high, a cut in the repo rate is not going to lead to a similar cut in the base rate of the bank.

Hence, even if the RBI cuts the repo rate, the chances of the bank passing on a similar interest rate cut to its prospective borrowers remains low. The trouble here is that banks do go ahead and cut their deposit rates without cutting their lending rates. Hence, they pay a lower rate of interest rate on their deposits but continue to charge a higher rate of interest on their loans. They make more money in the process. Over the last few years, the public sector banks have piled up a lot of bad loans and it has been interest to cut deposit rates without cutting lending rates. It also leads to a situation where the RBI repo rate cut does not percolate through the financial system, making the monetary policy only partially effective.

On the other hand, some banks use the marginal cost of funds to decide on their base rate. The RBI found that banks which used this method where much more faster in cutting interest rates on their loans. Marginal cost of funds is essentially the interest rate that a bank pays on its new deposits as well as other borrowings.

As the RBI Draft Guidelines referred to earlier point out: “The marginal cost should be arrived at by taking into consideration all sources of fund other than equity. Cost of deposits should be calculated using the latest interest rate/card rate payable on current and savings deposits and the term deposits of various maturities. Cost of borrowings should be arrived at using the average rates at which funds were raised in the last one month preceding the date of review. Each of these rates should be weighted by the proportionate balance outstanding on the date of review.”

In a release last week, the RBI said that from April 1, 2016 onwards it wants all banks to follow the marginal cost of funding method to decide on their base rate. This means that if the banks cut their deposit rate in the aftermath of a RBI repo rate cut, they will have to cut their lending rates as well, because their marginal cost of funding will automatically fall. By doing this the RBI has essentially ensured that new borrowers of the bank will have access to lower interest rates automatically once the bank decides to cut its deposit rates.

Further, banks cannot lend below the marginal cost of funds based lending rate. This rate needs to be declared every month on a given date, though during the first year banks have been allowed to declare this rate once every three months.

Also, banks have been asked to declare a marginal cost of funds based lending rate for overnight loans, one-month, three-months, six-months and one-year loan. The banks have been given the option of publishing the marginal costs of funds based lending rate of maturities longer than one year as well.

What this means is that the banks now have the opportunity of matching their loans with their deposits. Hence, a loan being given out for a period of one year can be given out at the marginal rate of interest that the bank pays on a deposit (or any other borrowing) for a one- year period plus a certain spread over and above it.

As R.K. Bansal, executive director at IDBI Bank Ltd told Mint: “The differentiation based on tenor will be a big positive for banks as now we would be able to price our loans based on the deposits of the corresponding tenor, rather than the older practice of considering 3-6 month deposit rate for computing base rates for all loans.” Following this process banks can now largely avoid the asset-liability mismatch between their loans and their deposits, that they used to get into earlier.

How will this work for new borrowers? They will pay the rate of interest determined by the marginal cost of funds method until the date of the next reset. The reset date has to be one year or lower and has to be a part of the loan contract.

And how will this work for old borrowers i.e. those who have already borrowed from the bank under the old base rate regime? In this case, the borrowers will continue to pay their EMIs as they have been during the past. The banks will keep publishing the base rate as per the old method. In fact, old borrowers have an option of moving “to the Marginal Cost of Funds based Lending Rate (MCLR) linked loan at mutually acceptable terms.” The RBI has asked the banks not to treat this as a foreclosure of existing facility.

This methodology is expected to help banks to react faster to the repo rate cuts by the RBI by passing on similar interest rate cuts on their lending to new borrowers. In fact, once banks move on to this new way of calculating lending rates, new borrowers are likely to pay a lower rate of interest on their loans, in comparison to what they currently are.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared in Swarajya Mag on December 23, 2015

22 November, 2015

Will The Pay Commission Hikes Boost Consumption?

The Seventh Pay Commission has recommended an overall 23.6% increase in salaries of central government employees and the pensions of the retired central government employees. The total cost of this increase in 2016-2017 has been estimated at Rs 1,02,100 crore (as can be seen from the following table).

Source: Seventh Pay Commission Report

This increase of Rs 1,02,100 crore has led several analysts and economists to conclude that a consumption boom is on its way. As analysts at Kotak Institutional Equities point out in a research note: “We expect automobiles, consumer durables and real estate sectors to benefit from the largesse. Although current demand conditions are somewhat subdued in both the sectors, the additional funds in the hands of central…government employees should be a positive for volume growth.”

The logic is very simple. If the recommendations of the Pay Commission are accepted the salaries of the central government employees will go up. The pensions of the retired central government employees will also go up. They are likely to spend this money and this spending will benefit the car, consumer durables (refrigerators, washing machines, television etc.) and the real estate companies. QED.

The truth might actually turn out to be a little more nuanced than this. There is no denying that there will be spending and that spending will benefit the economy, but the question is how much?

It is important here to consider those working for the central government and those who have retired from central government, separately. Let’s take the retired lot first. The increase in their case works out to Rs 33,700 crore (see above table). The Pay Commission report points out that as on January 1, 2014, the central government had a total of 51.96 lakh pensioners.

The increase of Rs 33,700 crore will be divided among these pensioners. This works out to Rs 64,858 on an average (Rs 33,700 crore divided by 51.96 lakh pensioners) or around Rs 5,505 per month (Rs 64,858 divided by 12). A portion of this will be taxed (I have no way of estimating how much, given that there is no way of estimating what is the average rate of income tax that India’s pensioners pay).

While this increase is substantial it is not substantial enough to make a huge impact on consumption. It will have an impact on consumer durables sales and two wheeler sales. But I don’t think this increase for pensioners will have an impact on sales of big ticket items like cars or homes for that matter. Also, it is worth mentioning here that pensioners are not as big spenders as those employed, anyway.

Those working for the central government will see a total increase of Rs 68,400 crore (Rs 1,02,100 crore minus Rs 33,700 crore of pensions). A portion of this increase in income will be taxed. Again, I have no way of estimating how much, given that I couldn’t find any data on what is the average rate of income tax that India’s central government employees pay. In fact, I could have used the average rate of income tax paid by individuals as a proxy, but I couldn’t find that number either. (Though the average rate of corporate income tax is available and is shared with every budget).

Assuming that the average rate of income tax paid by India’s central government employees is 10.3% (10% income tax + 3% education cess). This would leave around Rs 61,355 crore (Rs 68,400 crore minus 10.3% of Rs 68,400 crore) in the hands of the employees to spend.

The Pay Commission Report points out that there are currently 33.02 lakh central government employees. This means that Rs 61,355 crore will be shared among them. It works out to Rs 1,85,811 for the year (Rs 61,355 crore divided by 33.02 lakh employees), on an average. This works out to Rs 15,484 per month (Rs 1,85,811 divided by 12).

This is a substantial increase and will have an impact on consumption. It will lead to more two wheeler sales, more consumer durables sales and more car sales as well. But I still have my doubts whether this will lead to substantially more sales in real estate. Perhaps in smaller towns, yes.

Also, it is important to see how big this increase is with respect to the overall size of the economy. The increase of Rs 1,02,100 crore will work out to 0.65% of the gross domestic product (GDP) in 2016-2017. In comparison, the awards of the Sixth Pay Commission had worked out to 0.77% of the GDP.

Some portion of this increase will be taxed away. Some portion will be saved. I guess it is fair to say that around half to two thirds of this increase will be spent and that works out to around 0.33-0.43% of the GDP. While that is a substantial number, it is not very big in the context of the overall economy.

Also, analysts and economists who have been talking about a huge revival in consumption have the Sixth Pay Commission experience in mind. As Crisil Research points out in a research note: “Sales of automobiles (two-wheelers and passenger vehicles) increased significantly (25-26%) while consumer durables saw a growth of 2.5-3% bps in fiscal 2010 and 2011 after the implementation of the Sixth Pay Commission report.”

The major reason for this big boost in consumption was that the increased payments to central government employees was made in 2009 and 2010, even though it had been due from 2006 onwards. This time the increase is due from January 2016. Even if the payments are made from April 1, 2016, onwards, the arrears will be minimal.

As the Seventh Pay Commission report points out: “The awards of the previous Pay Commissions, both V as well as the VI, involved payment of arrears…However, Seventh Central Pay Commission recommendations entail, at best, payments of marginal arrears.”

Given that central employees will not be receiving bulk payments in the form of arrears, the impact on consumption will not be as much as it was the last time around. Also, sales went up in 2009 and 2010 because of a cut in excise duty and a huge drop in interest rates. Both scenarios are unlikely as of now.

Crisil estimates that: “The Seventh Central Pay Commission to boost sales of passenger vehicles and two-wheelers by 4-5% incrementally in fiscal 2017…Consumer durables, too, are expected to see additional growth of 1-1.5% in volume, while there could be broad-based growth in televisions, washing machines and refrigerators.” And that sounds reasonable.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on SwarajyaMag.com on Nov 21, 2015

18 November, 2015

Why exports have been falling for 11 months

Exports for the month of October 2015 fell by 17.5% to $21.35 billion in comparison to October 2014. In October 2014, exports had stood at $25.89 billion.

This is the eleventh month in a row when the exports have fallen. In fact, between April and October 2015, exports have fallen by 17.6% to $154.29 billion, in comparison to the same period last year. Between April and October 2014, the exports had stood at $187.29 billion. And this is indeed a worrying trend.

So why are the exports crashing? Much has been written about how India has benefited from falling oil prices. On April 2, 2015, the price of the Indian basket of crude oil had stood at $54.77 per barrel. Since then, it has fallen by 27.2% to $39.89 per barrel.

This has pushed down the oil import bill. And that is the good bit. Nevertheless, there are negative impacts of falling oil price as well. The export of petroleum products in October 2015 crashed by 57.1% to $2.46 billion, in comparison to a year earlier. In October 2014, the petroleum exports had stood at $5.73 billion.

The petroleum exports amounted to 22.1% of total exports in October last year. Since then, they have fallen to 11.5% of exports. In fact, in October 2014, petroleum products were India’s number one merchandise export. In October 2015, they came in third behind engineering products and gems and jewellery exports. So this is the flip side of falling oil prices. Surprisingly, this doesn’t get mentioned much in the media.

While writing this column, I heard an economist who works for a big American bank say on one of the business news channels that we should be considering exports data stripped of petroleum exports. If we do that a much better picture emerges. Exports (without petroleum products) have fallen only 6.3% between October 2015 and October 2014.

Nevertheless the thing is that such suggestions were not being made when petroleum exports had been on their way up because of the rising oil price. And they are being made only now, when the petroleum exports have crashed because the oil price has crashed. If a certain basket of products makes up for our exports, the need is to look at the complete basket and not remove certain items as and when it suits.

What is worrying is that exports by sectors like engineering goods, gems and jewellery and leather and leather products have also fallen. Exports of engineering goods has fallen by 11.65% to $4.58 billion. Exports of gems and jewellery has fallen by 12.84% to $3.49 billion. Exports of leather and leather products has fallen by 6.6% to $417 million. It is worth remembering that these sectors especially gems and jewellery and leather and leather products, are fairly labour intensive.

The finance minister Arun Jaitley explained this fall in a statement he made on November 17, 2015: “One aspect of India, which is adversely affected, is our exports because of shrinking global economy. The headwinds are against us.” This is yet another of those motherhood and apple-pie kind of statements that Jaitley specialises in. As he had said in May earlier this year: “The country has the potential of taking the economic growth to double-digit. The government will take appropriate action in the regard.”

In fact, exports are a very important part of economic growth and no country up until now has seen sustained economic growth without rapid export growth. As TN Ninan writes in The Turn of the Tortoise—The Challenge and Promise of India’s Future: “While optimists like Jaitley talk of getting to double-digit growth, it is worth bearing in mind that no country has achieved this on a sustained basis without rapid export growth—which, in an uncertain world economic situation, is not likely to materialize especially with continuing deficiencies of India’s physical infrastructure.” Hence, falling exports are a very worrying trend.

How are things looking on the imports front? Imports for the month of October 2015 were down by 21.15% to $31.12 billion. The total imports in October 2014 had stood at $39.47 billion. The fall in overall imports was primarily because of a fall in oil and gold imports.

Also, if we look at non-oil non-gold imports, an indicator of the strength of domestic demand, the situation doesn’t look great. The non-oil non-gold imports for October 2015 stood at $22.57 billion. This number is an improvement on the August 2015 number, but it is down from the September 2015 number. The non-oil non gold imports are down 0.76% from October 2014. This is a good indicator of flat domestic demand.

The total imports between April and October 2015 stood at $232.05 billion, down by 15.17% from $273.56 billion between April and October 2014. Despite this fall, the customs duty collections are up 16.8% between April and October 2015 to Rs 1,22,448 crore.

One explanation for this might be a fall in the value of the rupee against the dollar. But that doesn’t explain the whole thing. As TN Ninan recently wrote in the Business Standard: “Perhaps the import mix has changed, or there is some other explanation — the government has been upping import duties on specific items to combat imports. The point is, an explanation is due; an increase in the collection rate usually points to increased protectionism.”

To conclude, things aren’t looking good for India on the trade front.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on SwarajyaMag.com on November 18, 2015

28 October, 2015

‘Dal’onomics 101: Why dal prices have been going up

Toor_Dal_Tur_dal

One of the first things that gets taught in any basic course on economics (or Economics 101) is the substitution effect. This is a scenario where high prices of one commodity pushes consumers into consuming another commodity. If lamb meat prices are too high, consumers move to eating chicken. If coffee prices go up, consumers may move towards drinking the more affordable tea.

In the rational world of theoretical economics this makes tremendous sense. But things are a little different in real life. Take the case of the recent rapid rise in the price of various pulses, tur dal in particular. The prices recently crossed Rs 200 per kg. The annual increase in price has been more than 100%. In this scenario is the Indian consumer substituting tur dal for something else?

The most logical thing to do would be to consume other pulses like urad, moong, etc. But the prices of other pulses have also risen at a very rapid rate, though not as fast as tur dal. Further, it is also a matter of taste. If the consumer is used to a certain kind of food, it is not so easy to switch to something else overnight.

As economist Subir Gorkarn writes in a recent column in the Business Standard: “Unquestionably, there is some substitution going on between different pulses, but large parts of the country are predominantly tur consumers, while, in others, rising incomes create a long-term, superior-good shift towards tur.”

There have been several media reports talking about how chicken is now cheaper than dal.

It has been jocularly suggested on the social media that chicken being cheaper than dal will lead to regular dal eaters moving to regularly eating chicken. Only if it was as simple as that.

While chicken may be cheaper than dal, it still costs more than Rs 100 per kg and hence, cannot really replace dal as an everyday staple. Dal-chawal or dal-roti is an everyday staple for many Indians. And this cannot be replaced by chicken, unless it starts to cost what dal used to up until a few years back.

Also, it is worth remembering here that dal is a huge source of protein. Further, as incomes go up and people eat better, the demand for food high on protein tends to go up. Data from ministry of agriculture points out that the production of dal has gone up from 14.76 million tonnes in 2007-2008 to 19.77 million tonnes in 2013-2014. In 2014-2015, the total production fell to 17.2 million tonnes. The yield has gone up from 625 kg per hectare in 2007-2008 to 798 kg per hectare in 2013-2014.

Despite an increase in yield as well as production, the troubling point is that the per capita availability of pulses has come down over the long run. A 2014 research report titled India’s Pulses Scenario authored by the National Council of Applied Economics Research (NCAER) points out: “Pulse production has recorded less than one percent annual growth during the past 40 years, which is less than half of the growth rate in Indian human population. Consequently per capita production and availability of pulses in the country has witnessed sharp decline.”

“Per capita net pulse availability has declined from around 60 grams per day in the 1950s to 40 grams in the 1980s and further to around 35 grams per day in 2000s. However, in the past four years, there has been significant increase in consumption averaging around 50 grams due to somewhat higher production,” the report further points out.

This largely explains why despite an increase in yields as well as overall production, dal prices have gone up over the last few years, with huge spurts in between. How can this be corrected?

A recent newsreport in the Mint points out that a part of the correction has automatically happened through the substitution effect. People are eating more eggs than they were in the past.

Between 1961 and 2013, the per capita availability of eggs has jumped from 7 to 58. At the same time consumption data provided by the National Sample Survey Office suggests “a declining trend in the consumption of pulses—from 11.8 kg per person per year in 1987-88 to 8.4 kg per person per year in 2009-10.”

During the same period “the consumption of eggs went up from 6 per year to 21 per year in rural India and from 17 to 32 in urban areas.”

This is something that the World Health Organisation also suggests when they say: “There is a strong positive relationship between the level of income and the consumption of animal protein, with the consumption of meat, milk and eggs increasing at the expense of staple foods.”

Nevertheless, what about the vegetarians? A significant proportion of Indians are vegetarians and that also needs to be taken into account. They need to eat dal for their protein needs.

The area under production of pulses over the decades has more or less been stagnant. In 1980-1981, the area under production had stood at 22.46 million hectares. This has increased marginally over the years to 24.79 million hectares in 2013-2014. In fact, the number was at 22.09 million hectares in 2008-2009.

The yield in 1980-81 was at 473 kg per hectare. It has since jumped to 798 per kg hectare in 2013-2014. This is an increase of around 1.6% per year. The Indian population has grown at a faster rate.

Further, as the NCAER research report referred to earlier points out: “Most of the increase in pulse production in recent years has been in gram. Low pulse yield in India compared to other counties is attributed to poor spread of improved varieties and technologies, abrupt climatic changes, vulnerability to pests and diseases, and generally declining growth rate of total factor productivity.”

Take the case of tur dal. Between 2007-2008 and 2013-2014, the total production increased from 3.08 million tonnes to 3.34 million tonnes. During the same period the production of gram jumped from 5.75 million tonnes to 9.79 million tonnes. So once one adjusts for the production of gram, the production of other pulses hasn’t gone up by much though their demand has.

A major reason for the area under production of pulses remaining stagnant can be explained the way economic incentives are have been structured for Indian farmers. The incentives are heavily skewed towards production of rice, wheat and sugarcane. And that explains why we have excess stock of these food products.

If prices of pulses are to come down in the years to come, the area under production needs to go up. For that to happen, the economic incentives the way they are currently structured, need to change. And that’s ‘dal’onomics 101 for you.

The column was originally published on Swarajyamag.com on Oct 28, 2015

7 October, 2015

Of Jaitley, black money and much ado about nothing

In May earlier this year, the Parliament passed the Undisclosed Foreign Income and Assets (Imposition of New Tax) Act. After the passage of this Act, also known referred to as the black money Act, the government offered a compliance window.

This window allowed those with undisclosed foreign assets and income to declare them, pay a tax of 30% and a penalty of 30%. The window was closed on September 30, 2015.

Taking advantage of the compliance window 638 declarants declared assets and income of Rs 4,147 crore in total. This meant that the government will be able to collect around Rs 2,488 crore (60% of Rs 4,147 crore) as tax revenues. This means around Rs 3.9 crore of tax and penalty will be collected on an average from every declarant.

For all the hype and hoopla that has happened around black money in the last one year, this is barely peanuts. The tax and the penalty need to be paid to the government by December 31, 2015.

The annual report of the ministry of finance for 2014-15 has some interesting data points that need to be mentioned here. The total number of assesses in 2013-2014 had stood at 4.7 crore. These includes individuals, families, trusts and corporates. What this clearly tells us is that not many Indians pay income tax.

Hence, as a result every year a significant amount of black money on which tax is not paid is generated.

And given this, a collection of Rs 2,488 crore is basically a bad joke especially once you take into account the tremendous amount of political capital that the Narendra Modi government has spent on the black money issue.

Having said that, this should hardly come as a surprise to the government given that the black money recovery skills of the Income Tax department are nothing to write home about. As the ministry of finance annual report points out: “The Income Tax Offices throughout the country continued their drive against tax evaders. During the financial year 2014-15 (upto 30.11.2014), 2068 (provisional) search warrants were executed leading to the seizure of assets worth Rs 538.23 Crore (provisional). During the financial year (upto 30.11.2014), 1174 surveys (provisional) were conducted which yielded a disclosure of undisclosed income of Rs 4673.11Crore (provisional).”

So, once Rs 2,488 crore is looked at from the point of the numbers mentioned in the above paragraph, it doesn’t look so dreadful. The basic point here is that the black money recovery skill of the Income Tax department has been very poor.

There could be several reasons for this. Corruption. Incompetence. Not enough people. Or simply the fact that the crooks are always one step ahead of those who are supposed to catch them.

Long story short—people who have a large amount of black money know fully well the competence level of the income tax department and their ability to recover black money from those who have it.

Once we take this factor into account, the finance minister Arun Jaitley’s comment that those who declared their black money to the government could “sleep well,” can be categorised as an empty rhetoric and nothing more.

In fact, after the flop-show, Jaitley seems to have discovered that the bulk of the black money is within India. “The bulk of black money is still within India,” he wrote on his Facebook page. I have been saying this on various media platforms over the last few months.

A lot of this domestic black money has made its way into real estate over the years. As a report on black money brought out by the business lobby FICCI in February 2015 points out: “The Real Estate sector in India constitutes for about 11 % of the GDP of Indian Economy, as these transactions involve high transaction value. In the year 2012-13, Real Estate sector has been considered as the highest parking space for black money.”

What has this government (or any other for that matter) done to target the black money that has made its way into the real estate sector? Absolutely nothing. In fact, the surprising thing is that sector continues to operate more or less without any regulator despite constituting 11% of the Indian GDP.

A simple explanation for this is the fact that bulk of the ill-gotten wealth of politicians is in the real estate sector. And given that no government wants to disturb the status-quo.

A recent report in The Economic Times points out that: “Doctors, engineers and former senior managers who used to work overseas — these professionals formed the biggest chunk of those who made use of the 90-day grace period for the declaration of unaccounted wealth.” Politicians did not come out of the closet to declare their black money. And politicians, as I pointed out earlier, have their black-money in real estate.

Black money has also made its way into the stock market through the anonymous p-note route. P-notes are derivative instruments issued by foreign institutional investors (FIIs) to investors to invest in the stock market as well as the debt market without registering with the regulator i.e. the Securities and Exchange Board of India.

What this means is that FIIs issue p-notes to investors whose identities are not known to the Indian regulator. Now compare this to the KYC that any Indian has to carry out in order to invest in a mutual fund, open a bank account or get a credit card. The world is definitely not a fair place.

The investments coming into India through the p-note route were at Rs 2.72 lakh crore as on February 2015. A major portion of this money came in through Cayman Islands, Mauritius and Bermuda. As a recent report in Business Today magazine points out: “Cayman Island with a population of less than 55,000 routed investment worth Rs 85,000 crore.”

Hence, p-notes are possibly being used to re-route black money generated in India into the Indian stock as well as debt market.

The last time government tried banning p-notes in 2007, the decision did not go down well with the FIIs. The government had to withdraw the ban. Having said that, as the Business Today report points out: “since 2007, the market regulator tightened the noose, and their share in FII investments came down from 50 per cent in 2007 to 11 per cent in February 2015.”

Nevertheless, even 11% is a big number. The question is will the government ban p-notes? The answer is no. The stock markets are anyway edgy these days and the government needs to raise Rs 69,500 crore during the course of this year. And for that it needs a strong stock market.

Over and above this, there are operators running “black ka white” schemes as well, points out columnist Debashis Basu in a recent column in the Business Standard. Basu writes that not much has been done on this front either.

To conclude, people in decision making positions know what the problem is. They also know what the solutions are. They choose to talk a lot about it, without doing much about it.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on SwarajyaMag on October 7, 2015