We get what we deserve - Part 3 (corporate bullying on RBI)

So far in India no meaningful debate started about the ill side effects of this real estate bubble. In this article we discuss about the role of corporates.


Personally, I don't think our corporates (barring a very few, may be handful) are as intelligent as we think. Everytime when RBI comes up with Interest rate hike one Mr. Deepak Parekh would come on TV and talk bullshit. Basically guys like him does not want RBI to raise rates. Because they think that will reduce their company profits and consequently it would have an effect on their take home salary. How selfish?


K.V Kamath is another guy who resents every time interest rate is raised. These guys fortunately  headed their respective organisations during boom period and only because of that considered as intelligents. How pathetic? Basic common sense says that growth should be organic and reasonable. To control inflation we need to compromise on growth. These men would not agree to this fact and the only reason that comes to my mind is selfishness.

Now RBI Governor is facing the music. Eventhough they knew the real reason they are unable to raise their voices against their bosses and they cannot withstand the pressure brought by the corporate mafia. Corporates talk about the ineffectiveness of RBI's policy on interest rates. Bull Shit. Why not corporates bat for regulation in Real Estate sector in the same way they are shouting for retail FDI?

We all know how the corporates are fudging their books in India. Satyam computer is best example. Even now, I have my doubts about ICICI bank's books. During 2008 slump it was rumoured that ICICI bank lost a lot in toxic sub prime assets ( Under K.V.Kamath). Nobody knows what is there in their books.

They are crying now that interest rate hike is affecting liquidity. But how come they are still showing 30% more profit every quarter than the previous quarter ? If that is true why crying?

In my view, RBI should stop listening to these mafia and go ahead with their rate hiking spree to control the inflation. If the liquidity is sucked out, automatically the money from RE sector will come out and common man can live happily.

These corporate mafia are rumour mongoring now by saying that the interest rate cycle has peaked out. They show the IIP data and GDP data to substantiate their claim. But in my opinion only inflation should be considered for any rate decisions. I remember during 1998-2000 we had higher interest rate than the prevailing interest rates.

We get what we deserve - Part 2 (Real Estate Bubble and Interest Rate)

When I say Indian government fanned, patronised and encouraged the bubble in Real Estate sector in India I mean it.

The intention of the government may be good that they want everybody to have own home, comfort living etc. So exactly for this reason, they encouraged everybody to go for housing loan and pressed banks to give housing loans. Government is also giving tax sops for those who service housing loans. Sounds good until this point. But what the governments forgot to do is some sort of regulation in this sector. Due to this reason, the rates climbed up hugely and the greedy builders/developers lobby made a killing and still trying to do that by looking bakras in Aam Aadmi log.

As written in previous article, government has successfully avoided problems during last down trend by giving sops to builders/developers. Even then that down trend gave much needed reality check to large builders. But still they managed quite efficiently and even now they maintain there is nothing wrong in real estate in India and they claim prices are going to go up only for ever.

Many of us forgot the fact that, interest rates are high now and there is no reason why it cannot continue to stay at this level for quite a period? Inflation is not relenting. Government is shamelessly waiting for the base effect to take over to show some moderation in inflation instead of seeing the real reason.

RBI has raised rate for 13 times without any meaningful outcome. RBI has to be candid in their observation. They should have come out openly and said that they wanted to drain out the liquidity in the market to bring down the inflation. Instead of that, they said they wanted to keep the growth and at the same time they also wanted to control the inflation. I wonder whether they forgot their lessons learned in degree classes:)

The system has learnt to live with their 0.25 percent REPO/REVERSE REPO increase and it has not done anything to the liquidity and the bubble continues to grow. Had they rised interest rates at the rate of 0.5% for three consecutive months that would have been a stern message and that would have give us a much needed relief in the inflation front.

However, now it seems RBI has woken up and trying to tighten the screws after seeing the slump. Still I think Bankers lack the backbone to tell their political bosses the truth. The truth is that Real Estate has to soften if you want inflation has to soften.

( In the next article, we will see Corporate Broker's influence)