[Economy] Inflation, Policy Paralysis some more fodder materialJust some more fodder for Essay and Group Discussion (GD) taken from IE (Indian Express). Many ideas repeated.
- What is the problem?
- What is inflation?
- Why do we have inflation?
- What is the solution?
- What are the problems faced by Indian Businessmen?
- Chief Economic Adviser Kaushik Basu gives some wisdom
- China’s official news agency Xinhua gives even more profound wisdom
What is the problem?
Among the major developing nations, Only Russia has higher inflation than us.
India has the second highest inflation with an average inflation of close to 7 per cent estimated during the seven years from 2005-12.
What is inflation?
Inflation rate refers to a general rise in prices measured against a standard level of purchasing power.
Why do we have inflation?
High inflation generally signifies that too much money is chasing too few goods, essentially implying that the demand for goods and services is much higher than the supply, resulting in an increase in the prices of goods and services. (More on supply-side inflation, explained in older articles. See the archive on www.mrunal.org/economy
What is the solution?
massive investments to ease the supply side problem [such as lack of 24/7 electricity and water supply to factories, cold storage for agro-products, smooth road-connectivity between villages and cities and so on]
Government should cut down the subsidies (because they’re mostly misused for example cheap diesel for running generators that power unnecessary Airconditioners in shopping malls)
Government should try to divert the public savings into infrastructure, agriculture, human resource development and so on. [at present public savings go mostly in gold, real estate, share market speculation]
Private investments from India and abroad will have to be poured in large amounts.
What are the problems faced by Indian Businessmen?
High inflation = raw material is expensive : steel, cement, petrol everything.
Sluggish policy making environment,
High interest rates and
Uncertainty in global economy, particularly Europe.
Chief Economic Adviser Kaushik Basu gives some wisdom
Common man will have to live with high prices for another two-three months as inflation is expected to come down only by September.
Rupee is weakning against Dollar because when there is uncertainty in global market, investors look for safe havens (to invest) like the US treasury bonds, German bonds and Gold. You find the entire world’s money is going to all three of these.
Indian industrialists should make use of the opportunity because
In china, labour wages are on rise, so their manufacturing cost will increase.
When rupee is weak (+ our labourers are cheaper than Chinese) then our exports can become cheaper and attractive in international market.
Foreign direct investments must be allowed in retail sector for it would be "highly beneficiary" for the farmers and be a major thrust to Indian exports.
And most importantly India needs governance reforms and corruption control.
China’s official news agency Xinhua gives even more profound wisdom
From a Column “Indian Economy: The myth is shattered”
weakness of the Indian government cannot be changed for a long time…This means that after the 2014 elections, India could still have a weak coalition government, which is definitely bad news for reform…Indian political weakness will lead to a weak economy for many years.
In these two years, most politicians have to fight for votes and therefore, reforms will be set aside”.
Rahul still “does not have a dazzling performance”
Sonia has been “sick recently”
Mohan has become “conservative” and is facing criticism for his “complacency”.
opposition BJP too has its own “internal contradictions”.
It has used phrases like
“farewell to incredible India”,
“miracle has become a mirage”,
“from bullet train, the economic growth has become express train”
“reforms: an empty slogan”
once illustrious Indian economy is suddenly faced with numerous questions and has become a loose brick among BRICS countries
Incidentally, India played host to the BRICS summit in Delhi in March, which was attended by Chinese President Hu Jintao.
Giving the example of the stalled reform over allowing FDI in the retail sector, Xinhua says that India’s economy has not only lost direction but even its growth has lost impetus.
And finally, the most profound wisdom on Indian Education and Career system
I would like to coach the Indian Cricket team but I don’t have the level 1, 2, 3 certificates that people want sometimes.
-Rahul Dravid