03-01-2007, 03:39 AM
<!--QuoteBegin-rajesh_g+Mar 1 2007, 12:01 AM-->QUOTE(rajesh_g @ Mar 1 2007, 12:01 AM)<!--QuoteEBegin--><!--QuoteBegin-gangajal+Feb 27 2007, 05:00 PM--><div class='quotetop'>QUOTE(gangajal @ Feb 27 2007, 05:00 PM)<!--QuoteEBegin--><!--QuoteBegin-rajesh_g+Feb 28 2007, 01:03 AM--><div class='quotetop'>QUOTE(rajesh_g @ Feb 28 2007, 01:03 AM)<!--QuoteEBegin-->As aam-aadmi all i will say is sure it is supply-side but i think it might be because of money-supply and I do think that GoI has to acknowledge the problem and face it head-on.
http://www.rediff.com/money/2007/feb/27bud10.htm
<!--QuoteBegin--><div class='quotetop'>QUOTE<!--QuoteEBegin-->It squarely blamed the supply side shortages for the inflationary pressures, for which there were no immediate solutions, and said: "Poor agriculture performance, as the current year has demonstrated, can complicate maintenance of price stability with supply side problems in essential commodities of day to day consumption."<!--QuoteEnd--><!--QuoteEEnd-->
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Not easy to face the problem head on. A squeeze of the money supply may also trigger a recession which will be like jumping from the frying pan to fire.
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Gangajalji
I didnt say it was an easy problem to fix - infact I have expressed my inability to understand hyper-growth environments. The fact is however that cheap money supply is definitely hurting people and has led to putting real-estate (for eg) totally out of reach for the aam-aadmi. My dad used to have a small business which had a few employees. The salary about 3-3.5 years ago (around 2003) for this particular employee was around 1800 rupees. I think it might have gone up to 2100 rupees now. The real-estate prices in the meantime has gone up 2.5-3 times in ahmedabad. Whatever hopes he had of owning his own place is totally out of question unless solution can be found for inflation. An economy-inside-economy where the benefits trickle down will work eventually but in a society like India this will lead to unbelievable pressures (jealousy is a b1tch) on the social fabric.
Bottomline is, even if problems are difficult they have to be acknowledged as such before a solution can be thought out. Coming up with silly claims like PC is definitely not the solution.
[right][snapback]65105[/snapback][/right]
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Rajesh,
PC's present budget is an election mode budget. So we can not expect him to take the hard decisions.
However, even if he wanted to it is not easy to bring down the inflation. Real estate price is high because of land ceiling laws. Given the political situation it will be hard to change these laws. More towns need to be built in India to bring down urban land costs. India needs to build at least 7000 towns to relieve the shortage of housing. Such a strategy will impact on farm land and will create tensions. Just look at the tensions in Singur, Nandigram, Kalinga nagar.
Food prices are rising because there is genuine supply side constraint. Only additional food will bring prices down. Food prices will not necessarily go down if money is made dearer.
Yes, cheap money is certainly one reason behind inflation. However, if Reserve Bank makes money dearer then that will affect future investments and slow the economy down. A slow growing economy will not help the poor people either.
Given this situation, PC has opted for the easy route. He has dumped the entire responsibility of fighting inflation on the shoulders of RBI.
Gangajal
http://www.rediff.com/money/2007/feb/27bud10.htm
<!--QuoteBegin--><div class='quotetop'>QUOTE<!--QuoteEBegin-->It squarely blamed the supply side shortages for the inflationary pressures, for which there were no immediate solutions, and said: "Poor agriculture performance, as the current year has demonstrated, can complicate maintenance of price stability with supply side problems in essential commodities of day to day consumption."<!--QuoteEnd--><!--QuoteEEnd-->
[right][snapback]65061[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->
Not easy to face the problem head on. A squeeze of the money supply may also trigger a recession which will be like jumping from the frying pan to fire.
[right][snapback]65073[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->
Gangajalji
I didnt say it was an easy problem to fix - infact I have expressed my inability to understand hyper-growth environments. The fact is however that cheap money supply is definitely hurting people and has led to putting real-estate (for eg) totally out of reach for the aam-aadmi. My dad used to have a small business which had a few employees. The salary about 3-3.5 years ago (around 2003) for this particular employee was around 1800 rupees. I think it might have gone up to 2100 rupees now. The real-estate prices in the meantime has gone up 2.5-3 times in ahmedabad. Whatever hopes he had of owning his own place is totally out of question unless solution can be found for inflation. An economy-inside-economy where the benefits trickle down will work eventually but in a society like India this will lead to unbelievable pressures (jealousy is a b1tch) on the social fabric.
Bottomline is, even if problems are difficult they have to be acknowledged as such before a solution can be thought out. Coming up with silly claims like PC is definitely not the solution.
[right][snapback]65105[/snapback][/right]
<!--QuoteEnd--></div><!--QuoteEEnd-->
Rajesh,
PC's present budget is an election mode budget. So we can not expect him to take the hard decisions.
However, even if he wanted to it is not easy to bring down the inflation. Real estate price is high because of land ceiling laws. Given the political situation it will be hard to change these laws. More towns need to be built in India to bring down urban land costs. India needs to build at least 7000 towns to relieve the shortage of housing. Such a strategy will impact on farm land and will create tensions. Just look at the tensions in Singur, Nandigram, Kalinga nagar.
Food prices are rising because there is genuine supply side constraint. Only additional food will bring prices down. Food prices will not necessarily go down if money is made dearer.
Yes, cheap money is certainly one reason behind inflation. However, if Reserve Bank makes money dearer then that will affect future investments and slow the economy down. A slow growing economy will not help the poor people either.
Given this situation, PC has opted for the easy route. He has dumped the entire responsibility of fighting inflation on the shoulders of RBI.
Gangajal