Praxeology: My Reflexions on India

Last night in a surprising and an unexpected move PM Narendra Modi appeared on the national television and started announcing that his government overnight is going to ban the use of old 500 and 1000 rupee notes. In his own words, those notes will no longer be the legal tender; they will be just pieces of paper.The communique from the department of economic affairs stated the goals of this move: With a view to curbing financing of terrorism through the proceeds of Fake Indian Currency Notes (FICN) and use of such funds for subversive activities such as espionage, smuggling of arms, drugs and other contrabands into India, and for eliminating Black Money which casts a long shadow of parallel economy on our real economy, it has been decided to cancel the legal tender character of the High Denomination bank notes of Rs.500 and Rs.1000 denominations issued by RBI till now. This will take effect from the expiry of the 8th November, 2016. So the Modi government wants to tackle terrorism a...

Indian nation state's prime minister Narendra Modi, while celebrating Diwali with soldiers at the North-Eastern front, said that, “Because you guard our borders, people sleep at night. If you were not on the borders, people couldn’t have slept.” The war hysteria is at its peak in India after the so-called "surgical strikes" by the Modi government along the LoC. Mainstream news media and the ruling government BJP's ministers are constantly beating the drums of war to secure votes at the home front in coming crucial state elections in Gujarat and Uttar Pradesh. A kind of mini war has already started between the Indian and Pakistani nation state armed forces on the borders of Jammy & Kashmir. Everyday soldiers of these nation states are dying on both sides of the border. Anytime this war can spread in the rest of the regions and the whole country. The above statement of PM Modi came in the wake of this background conditions. When the war drums are beating it is n...

As expected from the forceful removal of former RBI governor Raghuram Rajan by the Modi government and his replacement with Modi's own man Urjit Patel, the new governor has reduced the interest rate as told to him by his political masters. Narendra Modi and his lawyer turned finance minister Arun Jaitley think that higher interest rates is what is keeping the Indian economy from growing at a faster rate, and the solution of this problem, naturally, is a lower interest rate. This is an obvious outcome of they being surrounded by Keynesian economic advisers. Modi and Jaitley have no clue whatsoever about economics; they are doing whatever their advisers are telling them. As I have said many times in past, this Keynesian thinking is totally wrong. Artificial lower interest rates will never help the Indian economy grow. In fact, it is this manipulation of the market rate of interest by the RBI governor, and now the monetary policy committee (MPC), is what is stopping the Indian econ...

Kashmir is burning again. After the killing of the young Kashmiri fighter Burhan Wani by the Indian forces the valley has erupted in violence again. After many Kashmiris protested the killings of Wani by demonstrations of roads, the Indian armed forces tried to suppress that protest by firing pallet bullets and killing scores of innocent Kashmiris and injuring thousands. To take the revenge of these killings militants attacked the Indian armed force camp in Uri sector few days ago at dawn killing 18 Indian soldiers. After this attack the tensions between the Indian and Pakistani nation states have reached their highest in the recent history. The mood in the Indian public is that of revenge and a final war with Pakistan to teach them a lesson of their lives. Many, especially retired army personnel, are calling for very stiff retaliatory action from the Indian armed forces; they want them to cross the line of control (LoC) to dismantle the terror camps in the so-called Azad Kashmir (aka...

Recently the Modi government with the help of other political parties of India unanimously passed the Goods and Services Tax bill both in Rajya and Loksabha. This bill is now to be ratified by the state assemblies for its implementation, and already states like, especially where the BJP is in power, Assam and Gujarat have ratified it in local assemblies. The Goods and Services Tax will be imposed in India from April 2017 onwards. The moment it was passed in both houses, the Modi government started boasting that GST will boost economic growth in India and it is a policy of creating "one single market" in India as well as slogans like "One nation, One tax" started splashing in newspaper headlines. Are these claims of the Modi government about GST true? In my latest economic report I analyze GST and its impact on the Indian economy.

The unexpected happened last week. The black swan event, which no one were expecting or hoping for, shook the world pretty hard, especially the power to be. Brexit [1] happened! A majority of British people, 52%, decided to secede from the European Union leaving the whole world in a shock. In this present blog post, after discussing briefly the history of British entry into EU, I am going to address two fundamental questions: Why the British people decided to leave the EU? And now that they have decided to leave, what are the short and long term repercussions of this ground shacking event?   A Brief History of Britain’s Entry into EU [ 2] British peoples’ love affair with the EU is quite old. The EU began in the fifties as a free trading economic community (European Economic Community or, in short, the EEC). As discussed by Philip Bagus in his book on Euro (Bagus and Soto 2012) , which is a common currency of EU countries, there are two ideological camps involved in the ...

So finally the RBI governor Raghuram Rajan decided not to accept the second term at RBI 's helm under the barrage of ludicrous attacks from the BJP MP Subramanian Swamy (see here , here and here ). This decision was expected of Rajan and anyone who has left little bit of self-respect inside them. Rajan announced, in an internal letter to RBI staff, that once his term finishes in September he will return to academia where he basically belongs. Rajan is a professor of finance in the Booth School of Business, University of Chicago, USA. In my latest economic analysis below I discuss two things: why Rajan decided to resign from his position as RBI governor and, most importantly, what are the implications of his decision, especially how this decision will affect the Indian economy in future?