That is why we are lagging so far behind.

Ordinary folks like us often wonder why India is so poor when China, South Korea, Singapore and Taiwan have raced ahead. Our politicians love socialism because that gives them state control of industries, creates a license/permit raj, which facilitates massive rent seeking, and allows them to bribe the ' vote bank ' with taxpayer money to ' reduce poverty '. But surely we must have had economists who would be annoyed by and object loudly to such corrupt behavior to keep politicians under check? Well, we have a one page article by one such economist - Deepak Nayyar, Emeritus Professor of Economics, Jawahar Lal Nehru University. He was the Chief Economic Adviser to the Government of India from 1989-1991 and Vice Chancellor of Delhi University from 2000-2005. Wow. We remember that the great Balance of Payment crisis occurred in 1991 which resulted in India having to pledge 67 tons of gold reserve to the Bank of England and the rupee being devalued from 17.50 to the dollar to 45 to the dollar. There was a net outflow of NRI deposits from 1990-91. He writes that high inflation is good for developing countries and that the RBI should be cutting rates aggressively. Perhaps he supports President Erdogan of Turkey who accused the central bank of treason for not cutting rates. The interest rate in Turkey is 7.5%, in Indonesia it is 7.5%, in Russia it is 12.5% and in Brazil it is 13.75% while in India it is 7.25%. Perhaps he thinks governors of all these central banks are idiots. Savers lose when the interest paid on savings is less than the rise in prices. Borrowers gain from negative real interest rates, so it is a transfer of wealth from savers to borrowers, and since the government is the biggest borrower by far, low interest rate acts as a tax on savers. Perhaps the professor will explain why people bought 974 tonnes of gold in 2013 despite high prices. Last year gold worth Rs 10 billion was smuggled into India, which is about 10% of the total. Does he want another BOP crisis such as 1991? " If firms and households are credit constrained, lowering interest rates may mean that firms will have more money to invest and households will have more money for consumption," he writes. Firms are awash in credit which they are unable to repay so that bad loans at banks are over Rs 4 trillion. Banks are reluctant to lend until they can clear their books. Households do not need credit to buy items for daily use. They are unable to buy because of very high prices. Reason? Inflation. Credit card charges do not change with interest rates so why are shopping malls running empty? Finally, low interest rates do encourage asset price bubbles, as demonstrated by the sub-prime crisis and real estate prices in India are nearly the same as in the US. A long rambling article, with no evidence and full of left wing mumbo jumbo. Wonder what the good prof taught his students.