Archive for December 18th, 2013

Economic Cost of Global Fuel Subsidies

December 18, 2013

Prof. Lucas Davis of UN Berkeley has this nice paper where he estimates the cost of global fuel subsidies. It is a nice paper which can be used to explain the concepts of social costs, external costs. private costs to students with some real world analysis.

He estimates the global subsidy bill at $11o bn:

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Great move Dr. Rajan and is playing bogey your favorite game?

December 18, 2013

Another RBI monetary policy under Dr Rajan (third policy) and yet again he plays bogey with markets. When most expected a rate cut he hiked rates and now when most expect rate hike, he chooses to pause. Markets have obviously rejoiced.

This is a great policy by Dr Rajan. I mean CPI inflation has just touched its highest at 11.24% and WPI at 7.5% is highest in last 14 months. Core CPI has been around 8% and rose from sub-8% to above 8% in Nov-13. Only worry is core WPI which is so low at 3% as per Nov-13 reading. So what else can RBI do then rejoice and pause. I mean India is shining after all and it indicates in our record inflation levels. We have the highest inflation in G-20 countries which is a matter of pride. Infact it should have cut rates to boost the market sentiment further..

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