Praxeology: My Reflexions on India

US based bond credit rating agency Moody’s upgraded Indian government’s bond rating from Baa3 to Baa2. This is one level up from their lowest rating grade. They have changed their outlook of the Indian economy from positive to stable with this upgrade. Modi government ministers and its supporters are terming this upgrade as an endorsement of their policies of demonetization and GST for which they are under intense backlash and criticism of late. One thing that I vividly remember about Moody’s is that this is the same credit rating agency which failed miserably in seeing the sub-prime credit crisis coming in 2007. Just before the sub-prime bubble busted in 2007, this agency was rating the toxic mortgage backed securities (MBS) with their highest rating level of AAA! After the crisis this rating came down to their lowest level of junk ! Does this upgrade matter so much? The fundamental theory behind this bond rating upgrade is the flawed Keynesian idea of ‘borrowing...

The capital of India New Delhi is once again engulfed in toxic smog. The usual blame games by politicians have begun about the cause of this pollution. The Delhi chief minister Arvind Kejriwal is blaming the burning of crops in the adjacent states of Haryana and Punjab for this pollution. Other major causes cited by authorities and activists are vehicle exhaust and dust and industrial emissions . Delhi government has tried every measure like spraying water or the famous odd-even scheme for vehicles etc., that it had in its policy portfolio to combat this pollution but failed. Now the authorities are hoping for rains to come and naturally clean this pollution! Most people discussing this issue are of opinion that only government can tackle this problem of (air) pollution. But is it so? The usual problem with such opinions is that they ignore the alternatives available. For example, in the field of environmental sciences there is a school of thought known as free market ...

GDP: A Brief but Affectionate History by Diane Coyle (Revised and Updated Edition 2014, Princeton University Press, pp. 167 ) Diane Coyle’s little book GDP: A Brief but Affectionate History tells a very mainstream history of the statistics of GDP (Gross Domestic Product) in brief 145 pages. The book is divided into six chapters not including the introduction. The introduction discusses what GDP actually means. Coyle throws light on this often confused statistic: GDP is the way we measure and compare how well or badly countries are doing. But this is not a question of measuring a natural phenomenon like land mass or average temperature to varying degrees of accuracy. GDP is a made-up entity. The concept dates back only to the 1940s. As Coyle clearly states, when looking at GDP numbers published by the newspapers, journal articles or uttered by the politicians from their bully pulpit in election rallies, we must keep this fact in mind that GDP is purely a made-up ...

The Supreme Court of India on Wednesday ruled that a man is committing rape if he engages in sexual intercourse with his wife who is aged between 15 and 18 . How logically sound this Supreme Court ruling is? To know the answer of this question we must first understand what ‘rape’ is. An online dictionary of law defines rape as the crime of sexual intercourse (with actual penetration of a woman’s vagina with the man’s penis) without consent and accomplished through force, threat of violence or intimidation (such as a threat to harm a woman’s child, husband or boyfriend). This means, a rape basically is a violation of others’ bodily property right. It is an initiation of aggression against others’ private (bodily) property. Any case of such initiation of aggression re sexual intercourse is a rape no matter what the age of the person whose bodily property is violated is. The age factor is irrelevant here. The ruling of Supreme Court is purely arbitrary and illogical having...

Former RBI governor Y V Reddy said that Coalition governments in India have produced better economic growth rates in the last three decades than a strong majority government… Interestingly, the highest growth in India from 1990 to 2014 was really during coalition governments… So, in a way it’s consensus based… in Indian situation, a coalition probably produces better economic results than a strong government. Mr. Reddy is committing a logical fallacy of Cum Hoc, Ergo Propter Hoc. Just because two things are occurring simultaneously and are closely connected with each other doesn’t mean one is causing the other. Better economic growth has nothing directly to do with what kind of governments, either coalition or majority, India has. What matters for growth is what kind of economic policies these governments are going to follow. If the government is small and less meddling in the free market enterprise system then it will produce stronger economic growth like what hap...

The full impact of Narendra Modi government’s economically unsound policies of demonetization, GST as well as lose money policy of RBI in the form of lending cheap artificial credits to insolvent borrowers via commercial banks resulting in huge load of unproductive debt has started to show on the Indian economy. Finance ministry officials are now saying that India could be forced to cut spending on key infrastructure such as railways and highways as lower-than-expected tax collections and sluggish growth have upset the government’s budget calculations . This was well expected. As we have said in past here on Mises India, when the government gets bigger and totalitarian, the economy tanks rapidly. When the business environment becomes extremely uncertain, entrepreneurs will halt their business plans and stop any further present or future investments, and this will hit the economy hard because only production, saving, investment and capital accumulation can increase e...

The exercise of demonetizing around 87% of all circulating currency note supply taken by Narendra Modi and RBI last November has resulted into nothing but overall disaster for the economy. In his televised speech on 8 th November, 2016 Narendra Modi talked about three main goals of the whole demonetization exercise, and they were : 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 At that time Modi government was expecting that the substantial amount of black money that people were hoarding will never return in the banking system and that will become a windfall gain for RBI which it can then transfer in the government account. Now that 10 months have ...