Monday, July 09, 2012

Reserve Bank's Too Much Use of Pyrotechnics Could Crash Land Indian Economy!!
A misguided missile is making preparation, to enter Rashtrapati Bhavan, while his junior, I mean the RBI governor is still clinging on to the post, probably on the recommendation of Dr.M M Singh, who was his senior in the same chair. 
Now, allowing a inept RBI governor, who does not understand how much fire power to use, is a danger to any economy. Moreover, such recommendation to allow someone, whose track record of balancing the Inflation--growth conundrum is not so encouraging by the PM, is a pure case of favoritism. 
Now, while a low inflation based economy provides greater opportunities for central banks to fight any visible slowdown, too much use of power can have a damaging effect. I think we are slowly moving towards that, before we crash land in the Indian Ocean. The RBI during the last 2 years have been talking of fire, but still it wants to measure the approach, according to the heat of the flame. Strange isn't it, the ways of dousing the Inflation fire?
Moreover, all the governors, do not seem to speak in one voice. While one says that inflation is the peg on which the interest rate cut would depend. The other says, there is room to cut rate. Huh!! This is the condition of the Apex Bank and its top office bearers. They themselves do not know, what to do or how much cloth to use for a man or a monkey!!
India never seems to learn from the neighbouring countries. There are already talks about China, that  too much medicines to control the inflation, has already been used and is damaging hopes for an early rebound. It is to be noted that, 
inflation in China eased to a 29-month low of 2.2 percent in June. Does India want the same kind of hard landing? 
While many of the economic pundits speak of supply side factors for controlling inflation, very few speak of the infrastructure bottlenecks created by keeping the interest rate too high for too long. Does the government want the infrastructure projects to stand still? The home (real estate) prices are shooting over the roof in Mumbai (Bombay) as the borrowing cost of the builders have increased in the last few years. When there are infrastructure bottlenecks, then how can one expect the price of commodities to come down? We see arm chair economists speaking about inflation, from air-conditioned studios. But then most of them say the same thing and you analyse their forecasts....I am sure more than 80% of those will either look pedestrian or will prove false in future. 
Another jocker in the circus is Montek Singh Ahuluwalia. He is a like, the clapper boy in the street magic shows. He is best suited for saying, "Ha Ustad" or "Ha Hoga", etc. He had been talking of an 7-8% growth almost in the whole of FY12, but when it came below that, he found some issues to obfuscate the real problem. Mr.C. Rangarajan (or Chakravarthy Rangarajan) the former MP and Governor of the Reserve Bank of India and Currently, the Chairman of the Prime Minister's Economic Advisory Council is another one. I have never heard this person saying something extra-ordinary or something which shows his intelligence. The problem in India is what is shown in the movie, 3-Idiots. Here cramming and ramming masters are given fat government jobs, while the real intelligent ones either open their own enterprises or end up in good private sector companies. 
To, speak the truth, after watching Mr.Jayram Ramesh, Dr.Bimal Jalan, Dr.Kaushik Basu, Dr.Omkar Goswami, Dr.Surjit Bhalla, and the likes, I find the present lot, to be best suited for my dust--bin. 
I think it would not be an exaggeration to mention that while in college, I have seen one of the bests brains of India (and the world), including the students who held ranks in 10th and 12th board examinations in India and abroad. And therefore, I get get disappointed after watching these kinds of governors and their ilks. However, I have found one thing is needed to occupy high posts: you have to be a "Yes man"  of a political class who has to follow his boss like a drummer follows the singer. 
Interesting point is that all, these brain-dead fellows are now in a virtual competition, to become the best "Errand Man" of the cabinet or the council of ministers, especially the PMO and/or the FMO. That is why there is so much deterioration in the quality of the RBI board and the quality of its governors. Why not? Most of the good students opt for Engineering, Medical or  does specialization in Pure Science (Physics, Chemistry, Mathematics and Biology). After that what is left gets into other streams including economists (may be less than 5% are the real brilliant students of the total students passed, opt for economics as a specialization). Therefore, we can see the dearth of real quality assets in this segment. 
Now coming to the economy again, it is imperative for the RBI to cut the interest rate immediately, before the inflation suddenly drops and precipitates the chances of either stagflation or deflation---which would be more dangerous. There are other methods also to control inflation and RBI should clearly direct the government that their course for further treatment for the economy afflicted with the "Inflation fever" is over and now it is time that the patient is given, some solid food so that it can recover from this illness. Hope the RBI governor, the media and the economist fraternity understands. 
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