It is well known joke that economists and their thoeries are biggest problems.Economics as concept is totally theoretical and in ideal consitions which never can happen in real world.That supply and demand drive prices even a rickshaw puller can understand and does not have to take course in economics.These guys keep talking of various forms of inflation and try to explain reasons but fail. In a courrupt and weakly governed country like India economics theory just can't breathe for life. Corruption is biggest cause of inflation in India.See how Dr Desai is found to have Rs 1800 crores of dirty money and 1.5 tons of gold.Obviously almost same amount went to pockets of ministers and his other associates.Now where form all this money-4000 crores came? from medical colleges .And from where they paid this? from capitation fees.And high medical college fees.And from where this money comes from? from corrupt parents,tax avoiders, loans and so on.When these doctors come out,they start looting and indulge in corruption to recover at least 3-4 times of amount paid.So medical treatment costs goes up.Government added to problem by abandoning public health. Same is case with Proepty.There is no demand supply mismatch.In fact property is lying surplus in India.In any city and its periphery you can find atleast 30-40% land and houses lying unused.If rent laws are changed and some laws are made for holding vacant plots for only 10 years maximum, huge property will come in market.
Re: All the economists should be dumped in nearest sea
by Loan Shark on Apr 26, 2010 06:08 AM
you are a socialist ... let people decide what they want to do with their assets, not govt.
No doubt inflation has become a world wide phenomenon,that internally in India to a could a significant extent,could be due to black money & hoarding which spirals the prices of essential commodities indirectly affecting the price index which,in turn, leads to wage rises & thus increase in supply of money.While hoarding can be contained by effective implementation of the existing relative laws with due eye on corrupt officials,it is high time that govt comes out with a novel modes like Voluntary Disclosure schemes like which do not question the source of income by the individuals. Earlier,it was a grand success bringing out locking up the black money.The response was fantastic with efficient administration of it by the RBI which however delegated in a limited way to SBI also.Our Central Bank-RBI is one of the most efficient in the world with excellent work culture & efficient man power.It cannot over ambitiously fix the target of containing inflation to zero % for the obvious points brought out in the article. However,though not 10%,the inflation could be reasonable aimed at to be below 5%.There is lot of wisdom in every cautious step that RBI takes & none need have any doubts about its competence & capability.Time & again,it proved its mettle-the most recent one as to how Indian economy was managed with least incidence during the recent recession period suffered globally almost in all other countries.I
Re: None need to suspect RBI's capabilities & compe
by Rajendra Gupta on Apr 25, 2010 11:49 PM
Please dont talk loose without any analysis and knowledge.Where is inflation in world? Have you seen figures.Neither USA nor any european country or Japan had more than 5 % inflation in last 10 years period barring an occassional exception.This is our problem.People like you blindly praise and support incompteent and corrupt people in power in India be they politicians or babudom or judciairy.India is having hypocrites and fraudlent experts in various places.Please learn a bit more and understand how inflation takes place.It is bad governance greed,corruption and faulty public distirubution. It is hoarding and speculation.It is unending chain of taxcation in India.I can count hundred reasons for runaway inflation in india.Biggest factor is Manmoihan Singh.He should go and inflation will start coming down almost quickly. Prof R K Gupta
Re: Re: None need to suspect RBI's capabilities & c
by rahul on Apr 26, 2010 12:39 AM
I have a huge respect for Professors, but to tell u a truth you are comparing oranges and apple. Inflation of a developing economy will always be high without exception. USA, Japan are considered to be developed economy. Please check the GDP growth of USA, Japan and those european countries and please tell if any of them is even close to that of India's. I really couldn't understand the crib against Manmohan Singh. About him, probably I would need some argument and not a 'loose talk' (the same one you mentioned on top of ur message)
Re: Re: Re: None need to suspect RBI's capabilities &am
by Loan Shark on Apr 26, 2010 03:59 AM
he is no professor, and if he is ... he is obviously a failed one!!
Re: Re: None need to suspect RBI's capabilities & c
by Loan Shark on Apr 26, 2010 03:58 AM
rajendra gupta, you are a retarted BJP supporter ... Manmohan Singh has done a great job ... his economic policies are making India a stronger economy everyday ... the guys gets the first state dinner reception at white house ... not because of his party, but because his policies are making India a force to reckon with.
Vajpayee brought sanctions upon India, MMS brings world's business to India.
The whole system has been designed for the benefit of affluent class. Banks have been authorized to create money out of thin air and then can charge interest. It also suits government, because they can mint money as per their requirement and without taxation can tax the masses in the form inflation.
People get hefty raises, govt sector just saw a big pay raise ... private sector is giving huge salaries too .. Indian economy is booming ... now let the poor maid, sweeper, cook, security guard and vegetable seller also make some extra money .... so that everyone is happy
The fact is that inflation will be there in all economies. But the way it impacts different economies are not same. Therotically if inflation is lower , the prices should be lower or rather not rising. If indian rupee is stronger, imports should be cheaper. But this does not happen in India due to several factors including sheer population size, huge public exp, and govt mechanism. to cite an example- when rupee was 60 vs dollar the price of fuel was cheaper vs rupee at 45. Does this inflation has any impact on reality prices?, So in summary inflation rate has very little correlation with what is really happening in the ground. ( only exception may be food inflation)
Re: Inflation and reality!
by rahul on Apr 25, 2010 04:10 PM
When dollar was Rs50 (not 60) crude oil was $45/barrel. Nowadays when dollar is Rs 45, crude oil is $85 per barrel. Hence whole argument is flawed.
Re: Re: Inflation and reality!
by Rajendra Gupta on Apr 25, 2010 11:58 PM
When you don't have fuel why are you allowing mad rush of car manufacturing in India? That is how you can control fuel demand and maintain prices.Why we are following excesive consumerism model of failed US economy?Amerians live on international debt, cheap labor outsourcing and huge profoits they make from high tech sales and arms sales.Can India do this? No chance? So live sustainable simpler life and growth rate.All this India shining campaign is crap and biggest lie.We are being exploited in name of globalisation.Indian wealth and manual energy is being exported and very highly costly equipment and technology is being imported. Billions of rupees are siphoned off by FIIs every year from stock markets alone.Price earning ratio of 40 and 50 is simply absurd and crazy but our planners are happy so far as they get their kickbacks.When people like Dr Desai charge rs 2 crores from amedical college for approval,inflation is bound to happen.Money is getting concentrated in hands of few.India is having blotting paper economy. Prof R K Gupta
Re: Re: Re: Inflation and reality!
by Loan Shark on Apr 26, 2010 03:54 AM
Failed US economy? are you nuts or retarded? Look at their GDP, look at the quality of life in USA ... and some 14 trillion in annual GDP .. so what if there is debt? who has the best military in the world? who makes the best aeroplanes in the world? who sent a man on moon? who makes the finest medicines in the world.
USA is the number one country and you call it failed.
Re: Re: Re: Inflation and reality!
by rahul on Apr 26, 2010 12:34 AM
What we are talking about here is not shortage of fuel. But the reason for increase in its price. Do you know that india stands 85th in the list of corrupt countries (as per a survey). That means thr are 84 countries more corrupt than ours. So lets stop making corruption an excuse, and try to improve ourselves wherever we can. Having an high or low inflation does not account for good or bad economy.
I feel that govt. on all levels (Central, State or Local) must not take LOAN internal or external to run their business. Whatever is the deficiate should be met with printing of notes of higher denominations. Today I find that we are burdened with RISING DEBTs and that is being passed over to the next generation. Will there be end to this phenomena anytime? If yes HOW?
Re: LET THERE BE INFLATION
by rahul on Apr 25, 2010 04:12 PM
What you are talking about it called as fiscal deficit. To tell you a fact, india's fiscal deficit is 5% of its GDP. America's is 10% of its GDP. Considering America's GDP is 7 times that of India. America has 14 times more borrowing from outer world. And that is where the progress is.
Re: Re: LET THERE BE INFLATION
by Rajendra Gupta on Apr 26, 2010 12:03 AM
Please dont compare only one ratio. USA has per capita income of Dollar 47000 and a nice flat in NY is vailable at 2.4 lac dollars just 5 times.In India per capita is Rs 40000 and flat in delhi is vailable at Rs 35 lacs, 85 times. In USA inflation rate hardly goes above 4% ever.In USA base interst rates are 1% .In India it is 5%.Please dont pick one atio and discuss.Either copy full model or dont tinker with any ratios.This selectiuve picking is cause of our woes.We start giving examples of USA.Wgen we talk of hotel rates we say a cup of tea is 2$ in USA or 90 Rs. But forget to quote income side also.Half truth.Very dangerous.No pl. dont start preaching me about PPP of econmists.I know what it is.
Re: Re: Re: LET THERE BE INFLATION
by rahul on Apr 26, 2010 12:29 AM
I really think you have put a lot of nice facts. However, about 1. the flats thing, i guess thr are reasons associated with that. One of them is demand and supply. In india every year about 3 percent of population looks buys a new house, however in USA the demand stoops down to as low as less than .5 percent. As the demand is low, as are prices and as is property appreciation / inflation. 2. Low base interests lower inflation = High fiscal deficit. I don't think any economy should have that high fiscal deficit unless you can control economies of other countries (Iraq, Afghanistan) like USA. And thus we have an exception. Now as I can see, that you know a lot about Economics, could you please suggest some alternatives that india have apart from having high interest rates and proportional inflation? I am used to hear cribs and vibes about my country. So instead of that, please put some suggestions.
I feel that govt. on all levels (Central, State or Local) must not take LOAN internal or external to run their business. Whatever is the deficiate should be met with printing of notes of higher denominations. Today I find that we are burdened with RISING DEBTs and that is being passed over to the next generation. Will there be end to this phenomena anytime? If yes HOW?
we are living in inflationary state. to control price rise there is best way to appreciate rupee. for Example inflation from last 10-15 years @ 5% if you appreciate rupee by 5% effect of inflation will be negative.
if we appreciate rupee imported material available at cheaper rate more import means more income to govt in way of taxes. cheaper fuel, raw material, power, labour etc.
appreciate rupee leads to costlier export means less export which means lesser demand which also help to reduce rate of raw material. export & industry should take cost cutting step to stay healthy in market means lesser waste of money or industry should work on low margin to stay afloat.
domestic demand to raise to help industries
waste of natural resources should be develop, infrastructure should be develop
these will defiantly help indian economy transform as super power ahead of chine & usa.
Re: BEST WAY TO CONTROL PRICE RISE
by Maximus Meridius on Apr 25, 2010 07:12 AM
Except that we cannot "appreciate" the rupee, it is free-floating. The price of the Rupee is determined by the amount anyone is willing to pay for it. In other words, it's determined by other countries. If the Indian economy does well, the rupee automatically appreciates wrt the USD, due to increased GDP, greater forex reserves etc.
THe best way to control inflation is to eliminate the fiscal deficit. Reduce the size of government and thus its spending. We have departments for anything and everything with an army of bureaucrats and politicians who sit around doing nothing. We can fire 60 percent of the bureaucracy and it will make no difference to the functioning of this country. Why do we need an Information and broadcasting ministry, or a ministry for telecom? Why do we need a ministry for civil aviation, ministry for corporate affairs, ministry for heavy industry, ministry for minorities, M. of Women and child welfare (the last 2 can easily be part of HRD ministry). No politician has the guts to do that. They can't even freeze hiring new IAS officers. The bureaucrats get paid almost like private employees after the 6th pay commission, and get perks like free housing and staff. To top this, they get lifelong pensions and job guarantees. Who pays for this wasteful expenditure? Everyone, even those who don't pay tax. Because inflation hurts everyone.
Re: Re: BEST WAY TO CONTROL PRICE RISE
by Rajendra Gupta on Apr 26, 2010 12:07 AM
My dear friend.Indian rupee is holding strong in international currency market ( moving between 45-50 Rs a dollar).But it has gone down 400% in India in last 7 years due to infaltion.This is ridiculous and absurd state of affairs.It is illogical.There is something seriously wrong with Indian economy management.The domestic governace.Can we get the point? Prof R K Gupta
Re: BEST WAY TO CONTROL PRICE RISE
by Loan Shark on Apr 25, 2010 09:36 PM
nalayak, rupee shd be devalued to give impetus to exports and deter imports, so that the domestic industry can prosperous ... if rupee gets devalued, coke and pepsi ... because of higher import cost of concentrate will be costlier and nimbupaani cheaper.
Re: Inflation is a must for economic activity to take place.
by rahul on Apr 25, 2010 04:16 PM
lets say thr is no inflation. that means 100 Rs of today is as good as 100 Rs after 10 years. If that is so, people will lose interest in investing the money. and money won't flow in the market. Simple logic. Now you know that 100 Rs will be as good as 50 Rs if i don't invest it somewhere...and thus you invest forcibly.
Re: Inflation is a must for economic activity to take place.
by Maximus Meridius on Apr 25, 2010 07:24 AM
Absolutely true. You need to understand how economics works instead of making broad statements without any proof.
Without inflation, where is your incentive to spend? Where is your incentive to increase your income both as an individual and as a business? If your money gains value or at least does not lose value even at 0 percent interest, would you not keep it in the bank? That's why people buy gold: because it holds it's value. Negative inflation or deflation is a sign of a depression... look at the US... the US government is pumping cash into the economy and yet inflation is very low. In a thriving economy, this will cause hyper inflation due to excess supply in the market. Money, oddly enough is also a commodity that can be bought and sold, and has demand and supply forces.
Arsenic is poisonous, but is required by the body in trace amounts. Too little, and it's bad, too much and it's bad as well. Inflation is just like that.
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...
