Saturday, February 18, 2017





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Public Debt Management ---Separation of Debt from Monetary Management in India  Edited by Charan Singh ; Published by Springer ; Pages 211; Price Rs. 10,099/-

 ( Import, 25 Nov 2016)



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The Editor Charan Singh is former RBI Chair Professor of Economics at the I I M, Bengaluru. He was for over two decades in the Reserve Bank where he dealt with debt management and fiscal policy implementation. His credentials for editing a book on public debt are impeccable.

The book contains papers discussed at the Debt Management Module under the aegis of the Ninth Annual  International Conference on Public Policy and Management organised by the I I M, Bengaluru in 2014. The Conference was aimed at exchange of ideas among international scholars, academia and policy makers connected with debt management.
The Keynote address was given by H.R.Khan, then Deputy Governor of R B I. There are seven other contributors including two experts from Asian Development Bank.

Public debt management is the process of evolving and implementing a strategy of managing government debt which garners the requisite amount of borrowings, achieves cost / risk aims and also attains  governmental goals. In this direction measures have to be taken to promote efficient primary and secondary markets for government securities.
The position as it is obtaining in India is that public debt management is divided between the Central and State governments and the  R B I. The R B I  manages the market borrowings of both Central and State governments. External debt is managed directly by the Central government. The R B I  is statutorily entrusted with the maturity pattern, calendar of borrowings, instrument design and other related issues in close consultation with Government.

A Middle Office was set up in the Finance Ministry in 2008 to formulate debt management policy for the Central Government. There were some steps taken to set up an Independent Debt Management Office in the Finance Ministry. However there was a serious reluctance to accept this by R B I  since there exists in R B I a separate Department and during critical economic periods need for coordination would be intense and Government lacks the expertise in this field.

The inaugural address of H.R.Khan explores the historical background and asserts the success of R B I  in achieving the objectives of debt management. According to him, R B I took adequate care of rollover risk, exchange rate risk and interest rate risk. R B I  has also contributed to a strong government securities market. He argues for a continuation of the existing system as involvement of the central bank in managing market volatilities and market expectations becomes necessary and central bank’s hands-on involvement is much better as is clear from the experience in recent years.

Peeyush Srivastava explores the aims and strategy  of debt management of the Government. Government should ensure meeting the financial requirements in a sustained pattern and cost-effective manner. He discusses in depth debt restructuring, consolidation of securities, market management mechanism and management of government cash surplus.

The cash and debt management in States are discussed in detail by Ritvik Pandey. He presents an analysis of State debt, sources of their borrowings and related issues. He explains Ways and Means and overdraft facilities available to the States. He throws light on debt cycle, inflexible sources of borrowing and interest rates on State Government securities.

Kanagasabapathy, who has immense first-hand experience in the  R B I , calls for a holistic approach to debt management. He strongly commends an Independent Debt Management Office (IDMO)  that should be a policy-oriented agency and allot the operational part to the   R B I as a banker and fiscal agent to  Government. The IDMO should handle both Central and State loans. A separate debt management office on the basis of the Financial Sector Legislative  Reforms Commission would result in debt management becoming wholly subservient to the Finance Ministry without any independent status. He suggests a Debt Management Corporation as an R B I  subsidiary with share holding of  Central and State Government and handle the debt of both Centre and States.

The Editor Charan Singh has given a lucid history of debt management. Separation of debt management from monetary policy is essential to preserve the integrity and independence of the central bank. Such a separation is in the interest of the economy as it grows and facilitates the development of financial markets.

The  two experts from the Asian Development Bank study the evolution of fiscal balances and public debt ratios in developing economies of Asia covering 24 countries. Countries in this region have reacted responsibly to increasing debt ratios through fiscal tightening and prudent fiscal policies.

A final chapter called “ Round Table” offers a discussion on debt sustainability and its separation from monetary policy authority. There is a vigorous and healthy discussion of the pros and cons of making debt management agency function of the government.

The volume—which has a valuable number of tables, charts and graphs -- is a very useful, meaningful discussion of the problem of public debt and is of immense use to policy makers, economists, bankers and students of India economics.

The volume is a part of the India Studies in Business and Economics dealing with research in areas of economics, business and management science.

P.P.Ramachandran.

19 / 02 / 2017






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Counting The Poor In India—Where Do We Stand by C.Rangarajan and S.Mahendra Dev ; Published by Academic Foundation ; Pages 150 ; Price Rs 895/-

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Dr.Rangarajan  is Chairman of the Madras School of Economics  and Chancellor of the University of Hyderabad. He was the Chairman of the Twelfth Finance Commission, Governor of Reserve Bank of India and Chairman, Economic Advisory Committee to the Prime Minister. He was President of the Indian Economic Association in 1988 and President of the Indian Econometric Society in 1994.  He was awarded Padma Vibhushan in 2002. 

S.Mahendra Dev is the Director and Vice Chancellor of the Indira Gandhi Institute of Development Research. He is the recipient of the coveted Malcolm Adiseshiah  Award for outstanding work on Development.

The book under review contains the Report of the Expert Group appointed by the Government of India to review and take a fresh look at the methodology for the measurement of poverty chaired by Dr. Rangarajan. A number of issues cropped up after the Report was released and these are studied in four articles.

How does one measure poverty?. The most appropriate is the one prescribing a minimum level of income or consumption expenditure. Households not achieving this level can be treated as poor households . This is based on the minimum expenditure on food and non-food items. Non-income indicators such as education,health, situation, drinking water, child mortality, etc can be monitored over time along with income or consumption poverty.

Many committees studied the methodology to measure poverty. The original methodology evolved by Prof.Y.V.Alagh was modified by the Lakdawala Expert Group and again by the Tendulkar  Expert Group. The latest Expert Group has Dr.Rangarjan as the Chairman and it makes several improvements over the Tendulkar committee’s poverty line. It reverts to the practice of having separate All India rural and Urban basket lines and deriving state level rural and urban estimates from these. The Tendulkar Committee took urban poverty as given and used it as the common basket for rural and urban household.The Rangarajan Committee derived the food component of the poverty line basket by reference to the average requirements of calories, proteins and fats based on the ICMR norms differentiated by age, gender and activity for all-India rural and urban regions to derive the minimum normative levels of nourishment.

Accordingly, the energy requirements was arrived at 2155 kcal per person in rural areas and 2090 kcal per person in urban areas. The Committee computed a fresh basket in the light of the most recently available minimum requirement of food. Also minimum non-food requirements for certain categories were included in determining the basket.

The Rangarajan Group recommended that the beneficiaries under target group oriented schemes of the Government may be selected from the deprivation specific ranking of households.

The Group noticed a two-fold approach to ameliorating poverty. First—Growth. Poverty ratios come down faster during periods of higher growth.As growth occurs it affects  all sections of society. A strong growth increases the resources available to the public authorities  and this leads to higher social sector expenditures. The Group affirms that the very fact that poverty ratio still hovers around 30 per cent means that growth by itself will not be adequate to reduce poverty. It is imperative that Governments launch specific programmes which go directly to help poorer groups and vulnerable sections of society.
Policy should work towards not only to reduce the number of people below the poverty line but also ensure that people in general enjoy a much higher standard of living. Policy makers must follow the twin strategy of letting the economy grow fast and directly attacking poverty through poverty alleviation programmes.Increased public expenditure on health,education and other social services will have to be taken into account while assessing trends in poverty.

The four special articles deal with comparison of Social Economic Caste Census data, Estimates of Poverty using different cut-off points and the impact of public expenditure on health and eradication of poverty and Poverty estimation.

According to the Rangarajan Group, the MOCC (Monthly Per Capita Consumption Expenditure) of Rs 972 in rural areas and Rs 1407 in urban areas is treated as the Poverty Line at the All India level in 2011-12.

A number of tables throw light  on the parameters analysed in the Report of the Rangarjan Group. There is an excellent bibliography of immense use to those who wish to study more of the subject.


This is a very valuable book which enables us to understand the level of poverty and the steps taken to alleviate poverty.

P.P.Ramachandran
12/02/2017

Saturday, February 11, 2017



COLIN POWELL

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it Worked For Me by Colin Powell ; Published by  Harper Collins ; Pages 283 ; Price US $ 27 /99.

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Colin Powell  is the former American  Secretary of State and a Four Star General. His book “It Worked for Me “ is a gold mine culled out of his remarkable experience and  the lessons he  learned.

 Powell gives  details his early life living with his Jamaican-born parents in the South Bronx of New York, working summers and Christmases at a furniture store , his experiences during two tours of duty in Vietnam, his philosophy on separating home and work, and his regrets and triumphs as a military and political figure over a span of 45 years. His life has truly been an impressive  journey and he puts forth many life lessons and advice for personal success and career satisfaction. Some of these are of universal value.

 The quintessence of the book are  Powell's "Thirteen Rules"— which became  the basis for his universally popular  lectures the world over. His short but sweet rules are illustrated by exquisite  personal stories that form the foundation for  his principles for effective leadership--: conviction, hard work, and, above all, respect for others.  Powell declares "It's about how we touch and are touched by the people we meet. It's all about the people."

 Powell is a born story teller and keeps us glued to his  parables loaded with advice on succeeding in the workplace and beyond. "Trust your people," he advises his subordinates in the State Department . "Do your best—someone is watching," he advises those just starting out, recalling his own teenage summer job cleaning floors in a factory making soda.

He  combines the insights he has gained serving in the top ranks of the military and in four presidential administrations with the lessons he's learned from his immigrant-family upbringing in the Bronx, his training in the ROTC, and his growth as an Army officer. The result is a powerful portrait of a leader who is at once a lofty thinker, wholly bereft of pride and highly appreciative of the role of those he worked with.

 Powell distilled ideas and anecdotes are an entertaining read and quite  charming.A few illustrations. A woman “in a local mall” who approached him in the parking lot, said, “I recognize you. You’re? …” After giving her some time to recall  his name  he thought better to erase  her misery with, “Ma’am, I’m Colin Powell,” to which she said, “No, that’s not it” and drove off.

When a London newspaper suggested that Princess Diana and Powell shared a genealogy that could be traced back to the Earl of Coote in the 1500s,  he “pocketed the news immediately” for future use. He subsequently had occasion to claim, at a charity gathering where Henry Kissinger was also appearing, “a relationship” with the princess. Whereupon Diana began her remarks, “Dr. Kissinger, ladies and gentlemen and Cousin Colin, good evening.”

 A persistent theme is how “Kindness Works” , in which he endorses a clergyman’s advice, “Always show more kindness than seems necessary, because the person receiving it needs it more than you will ever know.” A second theme concerns how important it is for leaders to listen to the ranks. He notes without elaboration how, on three occasions during his time at the State Department, he had to act on information he had received through informal channels to remove an ambassador quietly “before formal channels woke up to the problem.”A third theme is the importance of family or “tribe”: “Children need to be taught early in life what is expected of them and how they must never shame their family. They must be taught to mind their adults. If a kid isn’t spoken to properly, read to, taught numbers, colours, time, how to behave, how to tie his shoelaces, play nice, share, respect others, and know the difference between right and wrong, he will be miles behind by the time he reaches the second grade.”

Powell  explains how he came to give the infamous presentation to the United Nations justifying the invasion of Iraq on the basis of what proved to be faulty intelligence about weapons of mass destruction. He still broods about those  who accuse him of “knowing the information was false. I didn’t. And yes, a blot, a failure, will always be attached to me and my UN presentation.”

He also notes that, four months after the fall of Baghdad, “even as their sources collapsed and no WMDs had been found, the CIA continued to formally report that based on what they knew and believed at the time they were made, they stood by their original judgments.”


 In “Tell Me Early” Powell emphasizes the importance of keeping your supervisors informed about any challenges or issues with which you’re faced. Powell recalls the 2003 revelation that American soldiers and interrogators in charge of Iraqi prisoners in Abu Ghraib prison in Baghdad had abused, tortured and humiliated these prisoners. Later that year, pictures taken by the soldiers themselves showing the level of abuse surfaced and were shown to ground supervisors, but this information was never conveyed to senior leadership. The state department, the chair of the joint chiefs of staff and President Bush all looked foolish in the eyes of the world.

 Powell  stresses the importance of creating a work environment in which healthy competition is encouraged so each individual can be the best at whatever they do.

 He reminds us that, “A life is about its events; it’s about challenges met and overcome—or not; it’s about successes and failures. But more than all these put together, it’s about how we touch and are touched by the people we meet. “

This is an extremely absorbing memoir by one who held the highest military posts in USA and learnt lessons the hard way.

P.P.Ramachandran
05 / 02 / 2017





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Choices: Inside the Making of India’s Foreign Policy by  Shivshankar Menon ; Published by Penguin ; Pages  224 ; Price Rs 599/-

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 Shivshankar Menon was Foreign Secretary from October 2006 to July 2009 .He was a career diplomat, who  has served as India's envoy to Israel (1995-97), Sri Lanka (1997-2000), China (2000-03), and Pakistan (2003-06). He was the NSA from January 2010 to May 2014.He has brought out an insider’s account of the decision-making process of India’s foreign policy in the book under review.

 Menon dissects  five absolutely crucial moments in recent history  that have had a crucial  impact on current events in  India. These are some of the most crucial scenarios that the country  encountered  during his long career in government and how key personalities were compelled to  make choices based on incomplete information under the pressure of fast-moving events.

Menon refers to important  Indian foreign policy decisions with which he was closely connected with.

These include 1) India-US nuclear agreement, 2) the first-ever boundary-related agreement between India and China, 3) India's decision not to use overt force against Pakistan in response to the 26/11 terrorist attacks in Mumbai, 4) the 2009 defeat of the brutal civil war in Sri Lanka and 5) India's disavowal of the first-use of nuclear weapons. Menon devotes one chapter for each item and one for summing up.

In each case, Menon lays out the context, discusses the choices that Delhi had to make and the broader lessons from those decisions. This framework gives the reader a panoramic view as well as the granular texture of each issue area. Menon’s clear prose and command of the essential detail makes each account riveting. Even more important, Menon successfully captures the melancholy of modern statecraft.


Menon thoroughly discusses the parameters that dictated choices that throw light on   India's strategic culture and decision-making, its policies toward the use of force, its long-term goals and priorities and its future behaviour.

"Choices will be of interest to anyone searching for answers to questions about how India, one of the world's great, rising powers confronts and arrives at decisions on the world stage, and the tough choices that sometimes have to be made,"

According to him ,”The real threats to India are ‘internal’ and emanate from communal and social violence, not from outside forces such as Pakistan or China “. There’s no existential threat to India’s existence today externally, unlike in the 50s or when we were formed. And for many years till late 60s there were actual internal separatist threats, not any more. I think that we have actual dealt with,”

His long career in public service spans diplomacy, national security, and India’s relations with its neighbours and major global powers.

This is Menon's first book post  after retirement. “If you look at violence in India, deaths from terrorism, from left wing extremism, declined steadily throughout this 21st century until 2014-2015. Even now the basic trend for terrorism, left wing extremism is down. What has increased is since 2012, communal violence, social violence, internal violence has increased. That is something we need to find a way in dealing with,”

This is not a traditional law and order problem, which our traditional instruments, the police, the states know how to deal with. You look at violence against women, communal, caste violence, if you look at those firms of violence, these are all a result of tremendous social and economic change of uprooting of population, urbanization-- various forms of change, which we still need to learn how to deal with.”

According to Menon  these are the threats, which in the long run, have  a ‘potential to make real difference’.“India has changed. It is normal. It happens to most societies where there is change. But you also have to learn new ways of dealing with.” He  attributed the new threats to the rapid and fast development of the country.

According to Menon this  is a consequence of the change that the Indian society is undergoing now.

He has written in his book that the ‘real threat’ to Pakistan’s nuclear weapons is from rogue elements inside its military rather than from the terrorist outfits.Noting that terrorists have easier and cheaper ways of wreaking havoc, Menon said the nuclear weapons are complex devices that are difficult to manage, use and deliver and require very high level of skills.

‘To my mind, the real threat (to Pak nukes) is from insiders, from a Pakistani pilot or a brigadier who decides to wage nuclear jihad, with or without orders,’ Menon writes. ‘The risk increases as Pakistan builds tactical nuclear weapons for battlefield use, control of which will necessarily be delegated down the command chain.’

Menon says Pakistan is the only nuclear weapon programme in the world that is exclusively under military control.

Menon writes that India has nuclear weapons for the contribution that make to its national security in an uncertain and anarchic world by preventing others from attempting nuclear blackmail and coercion against India.

While India has a declared policy of no-first use of nuclear weapons, Menon  warns that if Pakistan were to use tactical nuclear weapons against India ‘even against Indian forces in Pakistan,’ it would effectively be opening the door to a massive Indian first strike, having crossed India's declared red line. ‘Pakistani tactical nuclear weapons use would effectively free India to undertake a comprehensive first strike against Pakistan. There are several responses short of war available to a state like India,’.

Regarding the 26/11 atack on Mumbai, Menon was in favour of retaliation, overt action against LeT Headquaters in Punjab and LeT camps in POK. But he candidly concedes now that “ …on sober reflection and hindsight I now believe that the decision not to retaliate militarily and to concentrate on diplomatic and other means was the right one for that time and place.”

This is a very significant contribution to the making of public policy in thr Country, at once useful to politicians. Policy makers and students of Indian polity.

P.P.Ramachandran.

29—01--2017