Mr. S S Tara-pore's (the former Deputy Governor of the Reserve Bank of India), "Poor content" bearing pre-scripted Live Television Speech, might have disappointed many young Economists:

An open letter to Mr. P Chidambaram:

[UPDATED-II]

I had in my frame of mind that Mr. Tarapore is a great economist among the old school of thoughts. But I got disappointed today, when I heard him live on a business channel and have now concluded that he also preaches and advocates "That Paan Walla type non-innovative polices". That is why we have seen many economic stalwarts pooh-poohing "Tarapore Report".

He calls the proponents of growth as a committing crime against Indian people--the poor and downtrodden. But does India only consist of Poor and downtrodden people. What about the Neo-rich population with deep pockets and who needs comforts at a price. But then who will determine the price??? It is the government like the old Socialists Countries or by the market forces??!! These types of "Control and Control" type policies have destroyed many economies in the past and will do the same in the future to Indian Industries, if pursued. There should be a discovery of price of commodities unless, the inflation goes out of hand like 15% plus. Till it is around 10% we should not worry much as it will get adjusted in the course of time as more and more supply come.

But I am not totally surprised at all by this move of Mr.S S Tarapore, as old government employees, having monetary shortage in their pockets will want the prices to come to such a low level that the Industries close down to meet " the outlandish & outrageous demands" of these "Selfish breeds"---who preaches, "Let we only live and others (read businessmen and Industries) perish".

His illogical point of comparing Indian Economy with Australian Economy is equally amusing and distressing. How can both the economies be compared, while India is bombarded with Foreign money now and then in the form of FIIs and FDIs; Australia actually deploys money in the emerging economies. While in case of US the exports gets boost due to dollar depreciation, which to certain extent balances trade deficits.

It is true India has a yawning trade deficit and the appreciation of the INR will worsen a little bit of the situation, but then we have to weigh all the factors before coming up with a blanket solution in the form of a rise in CRR or interest rate. If the interest rate is kept at higher levels, then a deluge of Foreign Money will start pouring into India inflating the Forex reserves and creating more problems. Will it not increase the Money Supply in the country?? With the Indian Economy growing at a scorching pace, in contrast to the US which is in doldrums, it is these kinds of Populists policies that wil drive the Indian economy to the streets. These kinds of measures in the past have destroyed one time giants like the USSR. What I feel is that India will have more problems in raising interest rate than to let Rupee appreciate to certain levels.

It is to be understood that this inflation is not due to fiscal tightening or loosening. Will tomorrow people will stop eating less food, if the price rises. Some things are inelastic in terms of demand pull factor. The high interest rate will in turn reduce the good effects of supply side factors bringing in more inflation in the future. The population of the world is increasing and unless this is met with proper supply side positives, the demand monster will always increase the price of the commodities world-over. Moreover much of the inflation in the food price is due to high crude price and has no bearing with the situation on the ground. Some of it is due to futures trading in those commodities or speculation--like the high crude price is to some extent due to the fall in dollar assets all over the over the world.

It is to be understood that unless industry makes profits, it cannot pay to its employees. How can Tarapore advocate measure which will only induce nothing short of a "Stagflation" which is worse than recession according to me. Recession according to a thumb rule is a de-growth of any economy for 6 months or two quarters. Stagflation on the other hand is Stagnation in the economy topping it up with inflation. If an economy stands still and at the same time the purchasing power of INR decreases will it be good???

A tight monetary policy will only worsen the situation and will just bring wonderful growth oriented economies like India to a screeching halt. These kinds of inflations are a by-product of high growth and should be left alone to be adjusted in the future according to demand supply ratio. The inflation should only be addressed when it reaches unmanageable proportions, hurting the rich as well as the poor. India has a sizable section of rich people who have invested their labour and capital with a goal in mind---Mr.Chidambaram should not distort their goals by subjecting them to unnecessary pressure if they increase the price of their good because of the increase in the cost of inputs. The shareholders who own industries are also citizens of this country and at the same time has the voting rights--I mean they can also make and break governmemnts. These kinds of Retrograde policies in the past, I mean in 1990, had destroyed steel industry.

If stagflation starts, this will will create more complex problems like increase in the unemployment and of course the most important moving out of the world map, as far as holding the envious tag of: 2nd most fastest growing economy of the world. The the UPA is bent on destroying the "India Shinning Story" which NDA created and propogated, throughout their tenure.

What is lamenting is that: it is taking place when we have an eminent economist as the Prime Minister, a Finance Minister having an MBA from Harvard and an experienced Dr.M S Aluwlia. It seems at the prime of his age Dr. Manmohan Singh has lost his earlier financial prowess. He is now more comfortable with the "Street Smart Policies" rather going in for the innovative ones like he did in early nineties.

Now coming to what Mr.Tarapore said, which he read up from an already prepared speech, during a Television Interview. He was equally wrong when he says that tighter monetary policy will not bring down growth. He does not have to look too far. Just see how a tighter monetary policy to contain 10% plus inflation has brought a de-growth the Chinese economy--it is simple and I do not know why Mr.Tarapore does not understand that and one does not have to be a great economist to understand these simple facts.

Economics is a simple subject unlike Maths or Philosophy where much depends on how one looks at things from a distance. Will it be viable to solve Complex Differential Equations by using Algebra---but then Mr.S S Tarapore seems to be advocating that kind of convoluted procedures.

If the industry gets cheap loans it will go for capex and which will bring in more goods, bringing in the supply pull--this will balance the demand forces into play slowing the price rise and in turn bringing down the inflation. Simple isn't it???!!!! I told you, these are all simple facts but if one wants to converts "Ones trousers into a shirt there is bound to be problem.....isn't it. Mr. S S Tarapore is trying to do that only through his "brain storms".

Also, we do not have to look at the underdeveloped and a dark country like Zimbabwe to find a solution to our inflation problems. Does Zimbabwe have a government at all to be compared even with Bangladesh??

So a humble request to our FM is to do something so that Indian Capital markets become vibrant again like the US Fed is doing. While Father Ben Bernanke, the most benevolent Priest of the US's Financial System, has been toiling hard, what has Mr.Chidambaram and his "so called dream team" done??? He should tell these to Poor Indian's like me?? Instead of helping the capital markets come out of crisis he and his team is trying to add to the crisis, by taxing and increasing the carry forward cost for the day traders. During the NDA rule at least India was shinning in the "corridors of Dalal Street". But look what Mr.Chidambaram has done to legacy handed over by his predecessors (NDA). He should not believe these Leftists, because these animals sided with the Chinese during the Indo-China war in the 1960s. A section of Communists supported the Indian Partitiion, saying "Just and progessive demand of Indian Muslims". Last time I saw one of the Members of US Communists party saying ills about her own country!!! It was distressing to see that the member actually instead of highlighting the goods of her country was asking India not to Sign the Nuclear treaty because according to her it will only give impetus to US imperialism. I could not believe that one could be so treacherous, when loyality to a country is concerned. If communism is so ideal a principle then whole world would not have thrown that ideology into the dust bins. From more than 50 countries in last century, we virtually do not have any communist country in the world (excluding Cuba)---most of them are socialists for namesake, like we have a communist government in West Bengal preaching and propogating Capitalists Ideologies.

After all does Mr. P Chidambaram not want the votes of millions of participants in the Indian Bourses?? Like many markets Stock Market is a Market and Mr.Chidambaram is bound by the Principle of Justice and Social Security to protect it. Mr. Chidambaram, you are killing the bread and butter of these highly skilled professionals by taxing them to the hilt and subjecting them to indirect troubles. How long can the growing sectors like Cement, Steel, Oil and Gas be tortured by your "Financial Sword"?? It is true that much of the fear about inflation has been generated due to "media circus" but then Mr. Chidambaram should come out of his shell and allevate the fears among the common shareholders who are already feeling mental agony due to a miscarriage in the US.

Just look at the US and one will understand the difference in governance of the two democracies.

Mr. Finance Minsiter, please find an innovative solution to these complex problems. We do not want "Rickshwalla type" economic solutions to these problems----which Mr.Tarapore is advocating. I shall be highly obliged if you (Mr. P Chidambaram) live upto my expectations. This time I think you will not disappoint me this time.......will you???!!