Thursday, July 21, 2016

What if we do not want to serve our masters?

Former Governor of the Reserve Bank, D Subbarao, has written a book saying that the then Finance Minister, Chidambaram tried to force him to reduce interest rate when inflation was already running very high. When Subbarao refused to comply the Congress government retaliated by refusing to extend contracts of 2 deputy governors of the RBI. Recently, former minister in the same Congress government, Jairam Ramesh had this to say," So, this controversy, which now Dr Subbarao has also entered, it is most unnecessary.....because the Finance Minister has to weigh so many considerations, whereas the Governor of Reserve Bank of India can afford to be single-minded in his approach. Prime Ministers cannot, Finance Ministers cannot. So, I think Dr Subbarao has done grave injustice to his political masters." Firstly, politicians are not our masters, although they have given themselves all the powers to suppress us, and keep devising new tricks, like Aadhar cards and cashless society, to take away whatever little freedom we have left. Secondly, all ministers should be single-minded in their efforts to improve the economy, reduce poverty and make the nation stronger, and not follow orders blindly to hang on to their posts. Ramesh is, or was, an economist and the former Prime Minister, Manmohan Singh boasts of a D.Phil in economics from Oxford, no less. The present government is no different, having forced Raghuram Rajan to resign by treating him with great disrespect, because he is not reducing interest rate, when retail inflation is rising. A politician in India would never resign regardless of insults or humiliation. Rajan has cut policy rate by 150 basis points, from 8% to 6.5%, while retail inflation has risen to 5.77%, after dropping below 4%, and the Asian Development Bank is predicitng a rate of 5.8% next year. Politicians argue that inflation is caused by food, which is a supply side problem and not of demand, and inflation has come down because of lower oil prices, and not because of the high interest rate by the RBI. What they are hiding is what inflation rate they are willing to inflict on us. Rajan was aiming for a rate of 4%, plus/minus 2%, setting the upper limit at 6%, whereas politicians want a rate of 5% which sets the upper limit at 7%. The Finance Minister cannot understand why people should expect high interest on their savings when inflation is running so high. That is because politicians get everything free on taxpayer money, including companion, while taxpayers get nothing in return for the taxes they pay. Low rates of interest encourage the rich to borrow heavily from banks. 8,167 people have defaulted on Rs 767 billion loans to banks. When you are masters you feel entitled. 

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