The reason is J.Nehru's soviet central economic planning policies.. which is still continued. once MMS was head this planning commission.
Free market and competition is the only solution. And Fiat currency should be eliminated and we should bring back gold. With fiat currency govt will print money at will.. which is the primary cause for inflation or devaluation of rupee.
One of the important duty of the citizen is to question the govt.. but till date non of us did...... we are paying for it
You're right in theory that a little bit of inflation is a good thing. But the argument, strictly as a point of logic, is flawed. You say: " if the price of an automobile is Rs 400,000 and that remains for all the inputs too, then the company can never increase its rate of profit growth. Workers will receive the same wage and will have a problem facing rising prices in other areas." For your example to be valid, inflation has toexist in other areas. Your argument then becomes "inflation is good because inflation exists"!
Re: Economics demystified?
by kristalsoldier on Apr 21, 2010 02:32 PM
Correct! In addition to which uncalibrated inflation erodes the purchasing power of the people because, in real terms, the money value of the salary falls as the cost of good rises. The question then arises, how will a lower purchasing power allow for the growth of the economy as there won't be buyers of goods and services. The Chinese model circumvented this by orienting their economy towards exports. While this allowed them to build huge forex reserves, which they deploy during recessions, but this does not guarantee that their internal consumption capability increases, which is a problem that they are facing now. So, the question stands, what are optimal levels of inflation, which can be set against the earning power of the consumers? For an economy to grow the purchasing power of the masses must be slightly greater than than the level of inflation. In the current situation in India today, this is not happening. Yet, we find that the economy grows. The question is how? Is it because of the huge parallel economy that exists in India?
Re: Economics demystified?
by Mr Walker on Apr 21, 2010 02:39 PM
You are bang on target and this is something I point as a major flaw in the economic model that defines "growth" in terms of money only.
Surprisingly this is a very narrow and dangerous view point because growth should also mean good quality of life meaning good quality of food, environment,water ,education etc.
Because of this flawed economic model we have the so called growth in terms of money figures but absolute destruction of countries natural resources , food and water quality, air etc.
Only when people start dying of pollution and pesticide diseases will they realise that money chase was all wrong.
It is very simple. Inflation is necessary evil and required for growth and development. Without inflation there will not be any growth, hence x% and not zero.
Re: Why x% inflation and not zero
by Mr Walker on Apr 21, 2010 02:41 PM
no it is not such simple and not true either but relies on a very flawed theory of growth learn to question some basic things you are/were taught
In the last budget deficit is Rs.3.6 lacs crores, it means either taking loan or printing currency, if Govt. takes loan, it is a burden on future geneeration, if prints currency means inflation. Somehow our politicians are bent upon to ruin the fiscal discipline for their vote bank, no one is interested for a common man, who is actually a slave to these rulers after British regime.
Re: Inflation
by selvasundar bala on Apr 21, 2010 10:30 AM
"bent upon to ruin the fiscal discipline for their vote bank, no one is interested for a common man," isnt the above a contradiction in the statement- if vote bank is not a common man then who is?
You have written that " necessary condition for investment to take place is that prices should keep increasing"...However there is actually no link between salary rise and inflation. Inflation should roise but salaries should also rise to compete with inflation so that people can survive in the costly markets. But it is not so !!
Who will bring back the politicians black money from swiss banks? To know about the politician-multinational company nexus, open site of bharat-swabhiman dot com and click on videos link
Can we get the exact rate of inflation not the WPI but all in terms means full. Govt in RBI monetary policy said they want inflation 5.5% but wht's the exact figure?
How india Grows ? it is 8% inflation 1% population growth and India grows 9%. if inflation reduces growth also will reduce. so RBI/Government Never wanted inflation go down. India is Not really growing
Re: Growth ?
by yuggaurav chaudhry on Apr 21, 2010 10:19 AM
instead of bragging about india not growing you should see what's the reason behind and act accordingly.........be a nice citizen of your country and stop complaining....we all know india is not growing.
Re: Re: Growth ?
by jhonny k on Apr 21, 2010 02:20 PM
The reason is J.Nehru's soviet central economic planning policies.. which is still continued. once MMS was head this planning commission.
Free market and competition is the only solution. And Fiat currency should be eliminated and we should bring back gold. With fiat currency govt will print money at will.. which is the primary cause for inflation or devaluation of rupee.
One of the important duty of the citizen is to question the govt.. but till date non of us did...... we are paying for it
The arguement that price should rise in order to incentivise production is realistic. We believe that economies get more efficient over time. If so, the cost of production, transport and services should come down due to improved efficiencies. As a result, I would like to expect that there should only be progressive deflation not increase in prices. Therefore, I assume that inflation is more a sign of speculation which benefits the rich and weakens poor. However as referred in the write-up information and regulation are keys to control inflation. In realtiy, idea of deflation would remain a myth bcos govts are run by politicians who are funded by big tycoons. Pro-rich formulation is an inevitable evil of all societies. It needs reformers to save society from spiralling increase in cost. Its common sense to understand that an idly need not cost Rs.15/- a dosa Rs. 50/-, paratha and curry costing Rs.150/- and so on. But, who bothers? Why should hotels not serve water free as they did for centuries? Why should one litre water cost Rs.15/-. Why should govt services be stinking? I dont think we need great brains to understand this. The problem is sheer lack of commitment to common people.
Re: Why not deflation
by Ramaswamy on Apr 21, 2010 10:00 AM
Cost of Dosa is Not cost of Dosa only. It includes All operation cost of Hotels like rent, Electric Bill, cost of service and many other things.
