Raghuram Rajan | wealthymatters

Jitters About Jitters

January 26, 2016 Leave a comment

Read between the lines, especially on interest rates.

Not sure I agree with him on inflation. The labour component of many goods and service combos means higher prices(inflation),at least at a level that the RBI is missing. For example, check the prices that are trending upwards on street food. The likes of Vada Pav and Chinese Bhel are not my regular dinner, but is so for much of the labouring classes of Mumbai. One step above, at the cheapest eateries of the Irani and Udupi variety, the increase in prices is steeper and/or quantities are smaller or formerly free side-dishes are now absent. Check the substitution of urid dal with other cereals, coconut with besan and the emerging story is different. People at the margins now have clothes and shoes, maybe even mobile phones, but not everyone is able to afford a satisfying and nutritious meal. I’m struck by the similarity with a lot of the domestic cost cutting content on the internet originating from the US and Russia.

Thinking that the RBI needs some real agriculture experience.

https://www.youtube.com/watch?v=uVH987gCAsk

Filed under Tidbits Tagged with Davos, Inflation, interest rates, postaday, Raghuram Rajan

Thus Spoke Raghuram Rajan

December 13, 2014 Leave a comment

walthymatters I always read what Raghuram Rajan says with interest. He has often been dead right and remarkably prescient. Here is the full text of a speech he gave yesterday. It gives us a framework to think about economic matters for the next few years.

Make in India, Largely for India
(Talk delivered by Dr. Raghuram Rajan, Governor Reserve Bank of India at the Bharat Ram Memorial Lecture on December 12, 2014 in New Delhi)

The global economy is still weak, despite a strengthening recovery in the United States. The Euro area is veering close to recession, Japan has already experienced two quarters of negative growth after a tax hike, and many emerging markets are rethinking their export-led growth models as the industrial world stagnates. In the last couple of years, the IMF has repeatedly reduced its growth forecasts. After 6 years of a tepid post-crisis recovery, the IMF titled its most recent World Economic Outlook “Legacies, Clouds, Uncertainties”. Read more of this post

Filed under Theory, Tool Kit Tagged with Make for India, Make in India, postaday, Raghuram Rajan

Glad To Be Wrong!

September 21, 2013 Leave a comment

Our government might have had its problems with Duvvuri Subbarao refusing to pump money into the system on demand,but I personally felt he didn’t attack the inflation problem in the country vigorously enough.So when I heard of the government’s decision to appoint a new RBI governor to replace him,I was like…….hmmmm,new guy brought in to toe the government’s line,somebody who when told to jump would ask “How High?”…….The rock star like coverage of his appointment,in even the pink papers,made me even more cynical.”Stage-Managed”,”Command-Performance”were the sort of words that came to mind.And I tuned out whatever Raghuram Rajan had to say.

I am pleasantly surprised about his concern for savers,liquidity and inflation.And I am eagerly awaiting his Inflation Indexed Savings Certificate based on the CPI New Index.

In this case I am glad to be wrong!Here’s hoping Raghuram Rajan remains true to the anti-inflation tradition of the Chicago School of economics

Filed under Tidbits Tagged with anti-inflation, Chicago Tradition, Duvvuri Subbarao, Inflation Indexed Savings Certificate based on the CPI New Index, inflation problem, postaday, Raghuram Rajan, RBI Governor, savers, savings

A Little More Realism Please

September 6, 2013 Leave a comment

There is nothing good about pessimism.It merely saps initiative and energy.So the new RBI Governor’s strong start was welcome. However there is only so much that the RBI can do.So there is no sense in giving way to irrational exuberance.For too long our government has tried to orchestrate atmospherics and make loose policy statements.However the reality has been no concerted action to implement policies.So instead of believing that the capable hands of Raghuram Rajan will kick start the economy,we’d better push the government to act at the ground level. Talking ourselves into believing that all is right means we will not be doing the things we need to do to set things right.

Filed under Tidbits Tagged with postaday, Raghuram Rajan, solving India's economic problems

Anticipating The Asian Financial Crisis -II

August 29, 2013 2 Comments

wealthymatters Swaminathan S A Aiyar is always well worth listening to,This piece by him is superlative and well worth reading,Do pass it around.There are too many people pretending that everything is fine or will be so in the near future.Unless we accept that there is a problem and a serious one,we are unlikely to go looking for solutions.

Make no mistake, a second Asian Financial Crisis is on its way. This storm will not blow over soon. It originated in the US, when the Fed proposed to taper and end quantitative easing. The frightening thing is that this will happen in stages over the next 12-18 months, and each turn of the liquidity screw can cause a fresh financial storm. Nothing Chidambaram or Raghuram Rajan say can avert the storm.

Learning from the 1997-99 experience, all Asian countries (including India) have built up large forex reserves, reduced leverage compared with 1997, and shifted to floating exchange rates. This makes them far more resilient, so they should not collapse as in 1997-99. But they will suffer severe damage regardless. Depreciation raises the price of all items that can be exported or imported. Estimates differ, but a 10% depreciation probably sucks out 1-1.2% of purchasing power through inflation. At . 68 to the dollar, currency depreciation is around 25% since May, implying a loss of purchasing power of 2.5-3% of GDP. That is hugely recessionary. It will be reflected in much higher prices of petroleum products, fertilisers, most commodities, and knock-on transport and material costs. Read more of this post