Thursday, May 2, 2013

Golmaal hai bhai sab Golmaal hai




The recent articles mentioned above about the erroneous claims by noted macroeconomists took me back to my blog post regarding the credibility of the data being used for the purpose of policy making.


however my questions still remain unanswered. Some of these question were raised in one of the articles.

The inflation which we are facing today is not a completely demand led inflation and which cannot alone be resolved by changing monetary policies inorder to curb demand. The entire system needs to be looked at and requires a serious overhauling.I tend to believe that it is a supply driven inflation which needs to be addressed by focusing on the supply side of the economy. There is a serious need to relook at our food distribution channels for the various loopholes. Or else, is it possible that tonnes of grains are rotting away in a country which is facing steep food inflation and quite a considerable segment of its population is below the poverty line.

Excerpt from one of the articles:

An unfortunate case of such denials and misreading of facts is the case of inflation management. Despite evidence that inflation in food prices was structural, using monetary policy to curb inflation has not helped inflation management in the last four years but has certainly affected investment and growth because of high interest rates. The problem in India today is not only a policy paralysis but also the absence of an honest assessment of what is wrong with the economy. This can only happen when facts are interpreted objectively and not based on the priors of the government of the day.

 It is a very sad but true state. Our economic policies are based on such dodgy data. The markets come crashing down based on the news regarding IIP data, RBI’s monetary policies etc.

 But how accurate are these decision and on what kind of sound research have these decisions been based upon…

I doubt if I will ever find answers to my questions but there is one thing which keeps the world going.. and that is HOPE.

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