Archive for July 25th, 2011

Way to make real rates positive

July 25, 2011

RBI has been trying to make a point that interest rates are not really negative.

They were negative earlier but not anymore. In an earlier speech, RBI Dep Gov Subir Gokarn said one should be loosking at other interest rates as well. So apart from Repo, if you look at lending rates one gets positive real rates. So one gets a different picture using different interest rates. It depends on what you use and RBI is looking at all these issues.

RBI released Q1-2011 Macro and monetary report released before the monetary policy. One of the section in Monetary and Liquidity Conditions chapter has discussion on real rates. It says:


Minnesota govt shutdown — a superb case study/experiment to see whether govt useful or not

July 25, 2011

It did not cross my mind but the Minnesota Govt shutdown for 20 days is a superb case study. The shutdown was from Jul 1 2011 to Jul 20 2011. Here is a liveblog on the proceedings.

I came across this exciting article from Chuck Raasch. He says the shutdown points some government services are very useful. The shutdown points we need to bury certain thoughts about government being a necessary bad:


US Federal deficit issues to impact US states as well

July 25, 2011

It is unimaginable how far this debt ceiling issue has gone. The deadline of August 2, 2011 is just a week away and still nothing. It is just like Europeans really. American econs criticised Europe for reacting late on Greece in 2010 and now are facing the same music.

Moody and S&P had raisd concerns that US could be downgraded if these debt ceiling/deficit issues continue. Just to further the problems, Moody’s has released this list of 5 states which are going to be adverself effected by this issue of US Federal deficit and debt.

The five states are:


20th anniversary of India’s economic reforms — half full or half empty?

July 25, 2011

If we assume India’s reforms started in 1991, we just completed twenty years of economic reforms. On 24 Jul 2011, then Finance Minister Manmohan Singh ushered landmark reforms and liberalised the economy.

At the end of the speech FM said:

Sir, I do not minimise the difficulties that lie ahead on the long and arduous journey on which we have embarked. But as Victor Hugo once said, “no power on earth can stop an idea whose time has come.” I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome.

There is little doubt that India did wake up and even woke up the world with some impressive growth numbers and creation of wealth. The perception of India being a country of snake-charmers and elephants changed dramatically to a country having software and amazing potential. Based on this, current FM Pranab Mukherjee says – Glass is indeed half full if not full.

However, in terms of absolute numbers barring growth much looks the same.  Niranjan of Mint did point this out in a Feb-11 article. Final inflation numbers might actually be higher than those seen in 1991.

I was just reading the Budget Speech by FM in 1991. He explains the background and what made such a budget necessary. One could just use 1991 speech to explain today’s times as well (except that it is not a crisis background):


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