Turbulence likely Let the RBI decide
This is with reference to the report, “Centre seeking to change auction terms to benefit telecoms: Congress” (October 5). The Congress media chief’s accusation that the Narendra Modi government is helping select telecom firms by abusing its discretionary powers, thereby causing an interest loss of ~23,821 crore to the exchequer, should not be dismissed as political rhetoric.
The Congress is right in asserting that the government’s unilateral deferment of recovery of a substantial part of the spectrum auction amount by six years violates a Supreme Court’s directive on auction of natural resources, with no room for executive discretion in the matter.
The party’s media head alleged that an inter-ministerial committee recommended alteration of auction terms and this was approved by both the telecom ministry and the Telecom Commission to allow the payment of ~33,789.12 crore within 16 years instead of the original 10 years. If the allegation is true, this is a case of extending undue financial accommodation to telecom giants such as Reliance Jio, Airtel and Idea in a surreptitious manner and against public interest.
The case becomes more serious if the recommendation to alter the terms of payment to the advantage of these telecom companies and to the country’s financial detriment was made after the auction was over.
As contended by the Congress, the plea of financial hardship made by the companies did not merit such a bonanza, considering that the Supreme Court rejected an identical plea in the case of Adani Enterprises Consortium on April 11, 2017.
If the Modi government goes ahead with such a questionable concession, it is bound to face political turbulence on a scale even greater that what the second term of the United Progressive Alliance faced over the 2G controversy.
S K Choudhury Bengaluru With reference to the editorial, “Welcome pause” (October 5), the slowdown may warrant a policy rate cut, but what’s possibly occupying the Reserve Bank of India’s (RBI) attention is why there has not been a quick transmission of its monetary policy actions by banks.
In this respect, the RBI expressed its dissatisfaction with banks in its earlier policy review on August 2. It had also hinted at setting up a core group to study the marginal cost of the funds-based lending rate for better transmissions.
Inflation appears comfortable for now, but the RBI expects it to go up in the near to medium term due to unavoidable factors. The monsoon, for example, has not been widespread this year, leading to some deficit conditions, which will affect prices of food items; the late rain spells trouble for kharif crops. The effect of the goods and services tax on prices of commodities will also have to be gauged.
Global uncertainties and geopolitical risks can’t be ignored either. The RBI would want the situation at both the global and national levels to stabilise before it cuts key policy rates. It may not be a surprise if the RBI maintains status quo at its next policy review on December 6. By the end of the current fiscal, the maximum cut could be 25 basis points.
The RBI believes there is enough room for banks to cut their lending rates and pass the benefits on to borrowers; it would accordingly push banks in that direction. Gains achieved so far should not be allowed to slip out of the hand, rather, wait for an opportune time to strike.
The government is understandably anxious and expects the RBI to consider easing interest rates as this would help incentivise investment and thus promote economic growth. The assumption is that inflation will stay at a benign four per cent in the medium term; this is somewhat in contrast to what the RBI has been projecting. As the sole monetary authority, the RBI is in a better position to take the right decision at the right time. It should be allowed to do so without interference.
Srinivasan Umashankar Nagpur