Praxeology: My Reflexions on India

Two Arvinds, Arvind Panagaria and Arvind Subramanian , have resigned from the top economic positions in the Modi government before their terms ended. Arvind Panagaria was the vice chairman of the NITI Aayog, the former economic planning commission, and Arvind Subramanian was the chief economic advisor. They both resigned and went back to their former teaching and research positions at the American universities. Announcing resignation of Arvind Subramanian his boss the finance minister Arun Jaitley cited personal reasons for his departure, but obviously something else is going on as in the case of Arvind Panagaria. The case of Arvind Panagaria is quite revealing. After resigning from his position, he penned a scathing criticism of rising protectionist policies of the Modi government. His criticism is important because he was an insider and knew exactly what Modi government was doing. In an important article published in the Economic Times he said: When GoI raised...

Finally after a gap of 4 years the Indian central bank RBI raised its interest rate – the repo rate – by mere 25 basis points to 6.25% yesterday. RBI cited a concern for rising price inflation in the form of oil price shock as a major reason for hiking the interest rate. They said, while hiking rate will combat price inflation, its policy stance remains “neutral” i.e., it is ready to lower rate again if the hike in interest rate starts to hurt economic growth. The mainstream view of the role of the central banks in the economy and society is that they are the monetary institutions that stabilize the economy and help it grow. But the reality is exactly opposite to this mainstream view. RBI is the main source of all kinds of instabilities in India. Its policy of interest rate manipulation, via creation of money out of thin air, is the source which creates major problems like inflation, boom and bust cycles and the inequality of income and wealth. Inflation Moder...