The Gimmick of Austerity Drive

“Austerity is good”; but this is not a universal truth. It depends on the time, place and the manner in which it is done. Remember: one man’s medicine is another man’s poison.
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I think whatever the central government does has a tremendous impact on the nation’s economy. I am not against tokenism per se, and hence I didn’t immediately discard INC’s and Nehru/Gandhi dynasty’s recently founded love for austerity. But let us judge if this tokenism in its right place and at the right time?
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In general, nations go on austerity drives when the fiscal deficit goes unmanageable. It is the last step which helps them repay loans and it sends the right message to creditors. Now let us look at the situation that we are in. Yes, our fiscal deficits have gone wide. But, is it the right time for austerity as a policy? Particularly when we are still fighting an economic recession?
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One of the major solutions and action plan that global leaders thought of fighting global economic meltdown and recession was through increased government spending. Now think about this austerity drive in this light. Does it hold water?
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If our (UPA) government was so serious about spending less and austerity as a policy, it would rather go big bang. Look out at their big spends. Even look in their backyard. Government of India gives subsidy of more than Rs 900 Crores every year to make Indian Muslims do their religious pilgrimage to Mecca. How many bucks Rahul G will save if he takes a train instead of a plane, to cover this loss to the exchequer? In anyway austerity as a government policy is not working. If Dr. Manmohan Singh is an economist, (we are growingly realising he is more political than an economist) I wonder how can centre’s policies like giving tax cuts to the public, cheap loans, increasing government sector pay scale and big hiring by public sector banks gel with an austerity drive? Even beginners would know that austerity and increased government spending can’t go hand in hand. Doesn’t it make it so clear that this austerity drive is merely a political gimmick?
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Tokenism is not bad as such. But Congress/UPA is taking it too far. I think the plan is to show that Rahul G is a real leader. Last time they had done it by sending him to spend one night in the house of a so called Dalit. But the gimmick this time may send a very wrong message to the masses. And this is why I would even call this drive evil. Spending less is good for individual citizens and customers in hard times. But government reducing spending and even asking the masses to spend less is extremely wrong at the time of economic recession that India is still fighting on. Either the govt doesn’t understand economics or it is too driven by lust for power and image building for the dynasty to care for it.
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Do we, as an educated citizenry, understand this simple design?
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(Rahul)

The Tata Finance episode

The American financial sector is in the turmoil. From Bear Sterns to developments with Fannie Mae and Freddie Mac, the crisis unfolded and took companies like AIG and Lehman Brothers in the grip. Coveted institutions which took generations to reach the enviable positions were down in some months. It is all in the newspapers these days. Somewhere somehow someone made mistakes which reached the US to these conditions.

Do you think Tatas did a mistake by deciding to set up the Nano plant in West Bengal? Do you hold the CEO of the bankrupt US finance major Lehman Brothers guilty? Did George W. Bush do a mistake by invading Iraq? Any question, that can be answered in ‘yes’ or ‘no’ need not be asked. Bad decisions and mistakes happen; so do frauds. One person’s gain may be the whole system’s loss.

Every event has far reaching repercussions, both positive and negative. The only thing that matters is – how you deal with them and how you let the event affect you. This small case is a very important one, because such cases set examples for years to come.

Frauds happen – deal with them

What does a corporate house do when the managing director of one of its companies commits a fraud? Does it try to put a lid on the affairs or does it make an all out effort to ensure that the stakeholders suffer no losses? When Tata Finance was engulfed in a financial mess, the Tata Group took the latter approach. Before the fraud could be detected by the regulators, it was the Tata Group’s self disclosure that opened the matter up.

Rather than sweep the issue under the carpet, Tatas decided on a two-pronged course of action. First, the interests of the small depositors who had placed their trust in the Tata name had to be protected. Second, an open and objective enquiry would be conducted to bring the culprits to book.

Tata Sons and Tata Industries made available to Tata Finance cash and corporate guarantees amounting to Rs 615 crores. Not many industries would have put hundreds of crores into a company that was sinking and that too without being sure that any of it could be recovered.

Despite the promptness with which the Tatas moved, the public perception of the Group and the Tata brand was affected initially. But it was the right thing to do, and the Tatas did what was required to be done.

Ref.: Tata Review