Praxeology: My Reflexions on India

Since December 2013 the US central bank Federal Reserve has decided to scale back its dollar printing program called QE (Quantitative Easing). The Indian economy is very fragile looking at these new developments. Raghuram Rajan, the Indian central bank RBI's governor, has criticized the uncoordinated policy of the selfish US Fed saying the withdrawal of stimulus by the Fed is rocking the emerging market economies. Despite this, he is assuring the Indian public that the Indian economy is quite resilient and immune from any shock coming from the US central bank. In my following economic report I call Raghuram Rajan's bluff and analyze the impact of US Fed's tapering policy on the Indian economy.   Loop Start playing when buffered ( Only Notify ) - % Smart Buffer Estimated Time: Will start buffering when initialized. Donate to SmartVideo! Global Preferences Loop Start playing when buffered ( Only Notify ) ...

RBI governor Dr. Raghuram Rajan a day before yesterday described Inflation as a destructive disease . This is his exact statement as reported by the newspapers: “Inflation is a destructive disease. Industrialists complain about high interest rate and when inflation is high at 8 per cent, citizens want to have their savings earning 10 per cent interest to marginally beat inflation. Industrialists want an interest rate of about 5 per cent. Both cannot be satisfied. The mismatch is because of inflation.’’ Delivering the 8th R. N. Kao Memorial Lecture, organised by the Research and Analysis Wing (RAW), here, he said that a long time could be spent in debating the sources of inflation but ultimately inflation came from demand exceeding supply. “It can be curtailed only by bringing both in balance. We need to reduce demand somewhat without having serious adverse effects on investment and supply’’ ( here ). Let’s analyze his statements.   First, as usual, his mainstream definition...

This is what the Hindu news item reported today: “An expert committee appointed to examine the current monetary policy framework of the Reserve Bank of India (RBI) has suggested that the apex bank should adopt the new CPI (consumer price index) as the measure of the nominal anchor for policy communication. The committee felt that inflation should be the nominal anchor for the monetary policy framework. The nominal anchor or the target for inflation should be set at 4 per cent with a band of +/- 2 per cent around it. ( here ). What is the meaning of all these? If we remove all the technical jargon and linguistic trickery of the central bankers and mainstream economists, then, this simply means that the Urjit Patel committee is proposing to steal 4% of our annual wealth! It is as simple as that. Anyone with a sound understanding of monetary economics can easily uncover this hidden agenda of RBI. Inflation is nothing but theft of savers’ hard earned wealth. By...

The Indian government passed the popular anti-corruption Lokpal bill recently, and the anti-corruption crusader Arvind Kejriwal and his Aam Aadmi Party is now in power in New Delhi. Many people are thinking that these two developments in the Indian polity will now help remove corruption. But, is it so? Can Kejriwal and his Aam Aadmi Party fulfill its election promises? Can they fulfill everyone's demands? I answer these questions in my latest economic report below. Loop Start playing when buffered ( Only Notify ) - % Smart Buffer Estimated Time: Will start buffering when initialized. Donate to SmartVideo! Global Preferences Loop Start playing when buffered ( Only Notify ) - % Smart Buffer Estimated Time: Donate to SmartVideo! Global Preferences Loop Start playing when buffered ( Only Notify ) - % Smart Buffer Estimated Time: Donate to SmartVideo! Global Preferences ...

Last Wednesday the Indian central bank RBI, according to media language, surprised the markets by keeping its policy rates unchanged despite growing inflationary pressure in the Indian economy. Both WPI (Wholesale Price Index) and CPI (Consumer Price Index) are rising again; RBI's tone was also mostly anti-inflationary before the policy announcement, but they still kept the rates unchanged. As I am saying since quite long time, to see the impact of RBI's policies on the economy, we should not focus on what RBI is saying, but what they are actually doing; We must focus on their actions . On one side when they are talking about taking a tough stance against inflation, they actually continue to inflate! Raghuram Rajan is trying to manage the inflation expectations while at the same time creating more inflation. This happens because his mainstream economic theory defines inflation as a persistent increase in the general price level . Rise in price is not inflation, but an effe...