Re: Completely Thoughtless & Mindless
by Maximus Meridius on Apr 25, 2010 07:32 AM
Depends on whose salaries you are talking about. Middle class salaries have gone up like crazy since late 1990s. In say 1999, Rs 2 lac was a big amount for engineering graduates. Today, only the bottom rung of the class will take up such jobs. People getting 30-40 percent pay rises was common. For these people, their salary rise is easily outpacing inflation. They spend more, and are thus in some way causing inflation. As families get more affluent, they start spending more on food, etc. Agricultural productivity in the same period has slipped. The poor (BPL) are not affected much by this since they get government subsidy. It's the lower middle class that is being hurt the most (factory labourers etc). Ideally as the author says, the government should import more food to keep the price down. I guess this will hurt the farmers, I don't really know.
Dollar rates were artificially maintained high 3 decades ago (like what china does, and it is said that it has come to a crisis point). That is bad, because it makes exports expensive. In around 2002 or so, it was Rs 49 to a USD. Today, it is more like Rs 43. This amount will go down as the indian economy improves (or the US goes down) or both
Re: Re: Completely Thoughtless & Mindless
by Ashok Khurana on Apr 25, 2010 11:05 PM
Dear Maximus... I talked about income and purchasing power while you only talked about salaries... perhaps you are not an entrepreneur... getting bigger pay packets as salary does not contribute in the growth of economy or GDP... You compared the dollar rates of last 1 decade only. You dont know the rate of dollar 30years ago...
Have our policy makers ever pondered about whether we have the requisite resources at our command to prop up this artificial growth ?? Just emulating the Western model will not bring us prosperity but only grief since the dynamics are totally different here in this Country. India is a resource starved Country and we have the liability of minimal resources supporting a huge population which is bursting out of control. In such a scenario, this obsession of the policy makers with unbridled growth is frightening in terms of the adverse impact it will have in the long term on the ecological front as well as the general standard of living of the population.
Growth and inflation are mutually conflicting objectives difficult to reconcile with one another. The hyper growth in the economy will naturally lead to increased money supply which will automatically cause inflationary spiral. In India, till the 1990s, we had what we call the Hindu rate of growth, but with less inflation especially of the core variety. Inflation was more rampant in items connected with technology but the basic items were cheap. Actually, this resulted in reduction of poverty levels than what we are witnessing today. Today, we see conversely the inflation on technological items coming down whereas the basic and manufactured goods going up disproportionately. Moreover, the Central Bank then adopted a very cautious monetary approach with flow of less money supply. But today we see the RBI deploy the monetary tools only to benefit high growth in the economy pleasing the Corporate Mafias, CIIs and FICCI. Naturally, the Aam aadmi suffers as a result of this ham handed approach.
Re: INFLATION AND GROWTH ARE MUTUALLY CONFLICTING OBJECTIVES
by Manoj Dev on Apr 22, 2010 10:47 AM
Very much appreciate your view. I would say - Sabnavis' contention does not apply to socio-economics of India at all. At the very basic - it is the level of quality of life and development of the lower income strata that matters. The so called Hindu rate of growth of the 90s obviously should be objective. Automatically, over a period of time, the higher technology items could become affordable to the lower income group spurting expansion of the economy. May I add - it 'low cost economy' that still gives India competitive edge in world market. The present economic policy can not sustain that over long period.
normally inflation/deflation occurs due to imbalance in the supply/demand . but the major cause for inflation in india is the distributors controlled by government. that doesn't mean distribution is nationalized what it means the same set of criminal network control the government and distribution. and it is them who primarily profit from inflation in our country.
Inflation is a creation of a flawed economic theory that bases its growth definition in terms of money only and the entire model based on this flawed definition of increased money defined as growth.
The fact that this model does not take into account other vital things needed for human survival that is air,water, and other natural resources makes it totally useless and actually dangerous to define growth.
this same model is used by companies to justify setting up factories by destroying forest / agricultural land and spew out toxins in air and water because that brings more money and it means "growth".
What use is money when the next glass of water you drink can contain toxins that are going to affect your entire body and destroy you ?
We today have a humorous situation where our pollution levels are record high, poverty levels are record high and country is telling us that we are "growing" what ??? the only thing we are growing is he11
Re: Inflation a creation of flawed economic theory
by Mr Walker on Apr 21, 2010 02:49 PM
Of course this same economic model is so flawed that it does not take into account culture and traditions built into human societies to ensure their survival for generations without external inputs.
An example for this would be our tribals and adivaasis who stay in forests and have done so for ages living in harmony with nature.
When we impose our definition of growth on them everything goes topsy turvy.
It is high time our elite economists and a/c brain tanks visit villages and understand their original self-sufficiency models.
M K Gandhi knew this far better than anyone else and hence his insistence on making the villages self sufficient as they were in past.
Someone please send these elite economists back to KG school and start all over again.
Re: Re: Inflation a creation of flawed economic theory
by Ananth Prabhakar on Apr 22, 2010 12:46 AM
"An example for this would be our tribals and adivaasis who stay in forests and have done so for ages living in harmony with nature.
When we impose our definition of growth on them everything goes topsy turvy."
More importantly, Inflation considers a reference basket of goods and services that was created by tyrants and wishful people like nehru with the underlying assumption being that this basket of goods and services are meant for the poorest folks in the country and that Govt will dictate what its subject should consume/not consume. Technically what India consumes now and even then does not reflect that basket anymore. The basket needs to be changed completely and it should include all lifesytle goods and services incl. alcohol, fuel, housing (steel and cement), cost of transportion, services like telecommunications, medicare, education-primary and higher on top of basic survival rations. Strictly speaking all the goods and servcies can be considered mutually exclusive in its contribution to inflation calculations even though the argument as given by Govt can be often the prices of basic raw materials will dictate the cost of baby diapers. But that's a far fetched argument.
CONgress being what it is, dictates the fact that citizens only deserve whats there in the basket. It is pretty retrograde and inward looking.
My guess would be if the basket expands to include all these products and services then we will sure be on something like 20-25% inflation and the Govt cant explain such a figure to votebanks and worldbanks of the world.
