Open letter to Chidambaram & Dr.Subbarao - Part 1

Respected Sirs,

This letter is addressed to you because you have the authority to take decisions on many issues of serious nature facing our country. We all know our economy is in deeper troubles than what we are seeing in the media. 

• We are dependent on FII money (money comes in to share market for trading - I do not want to tell this is investment) to pay our daily bills. 
• Our industrial output is in -negatve zone for the past few months
• The car sales (leading indicator for money flow) is in -ve zone for the past few months
• Regarding current account deficit the lesser said is better. Good economists say the situation is similar to 1991(Good economists not like Ahluwalia type)
• The inflation is in double digit - I consider CPI as the true indicator and anybody who talkes about WPI is a cheat in my opinion as WPI is not considering common man like CPI. I do not have slightest of respect to a man who disagrees with this view. I hope you agree
• We are desperately raising tax bills to companies like shell and nokia and thus scaring away the investors from abroad on one hand and on other hand we are talking about FDI.
• Banks are bleeding and at this rate our banks will run out of capital in 2 years time.  The novel methodology of CDR nowhere in the world is eating our banking system and the PSU chief just to save their skin are endlessly postponing the loan collection which the basic of banking.
•  Last heard bankers realise that kingfisher is gone  case. Atleast this will be eye opener for them.king fisher also was a case of CDR, conversion to dept to equity, etc
• The findings about jobless growth witnessed in the country in nothing but a shame to the decision makers.
• The habit of shooting the messenger ( CSO) will not help. It looks very childish.
• The gold bill shows our monetary policy fails terribly.

I can write 100 more issues like this where we are terribly going wrong. But in spite of all this, we are busy cutting interest rates which is opposite to common wisdom. I just do not understand the logic behind this step.

Do you think Zimbabwe like situation will never come to India?  Are we such a blessed country?

Don't you see a possibility of a civil war in our country if couple of things goes against us. It can be some natural events like a prolonged monsoon failure.

My solution

Dr.Subbarao,

When I say our monetary policy failed, you think I refer to the 'high interest rate policy' as shouted by media and corporates. No. My view is that we haven't raised the interest rates enough to make the policy effective. From the moment you started raising the interest rates back, the corporate mafia ( I do not want to refer them as lobby) raised hue and cry and you are not allowed to raise rates freely. You raised rates at 0.25 percent per quarter and the system happily accepted and digested and it did not provide the expected cooling effect to the overheated economy.

In the process you have done a terrible injustice to the real savers of the economy and now you are paying the price in high import bill for gold and very low savings rates in GDP. Remember we scuttled all the global economic crisis only because we were savings based economy.

We convinced ourselves by attributing different reasons for high inflation on which some are laughable and inhuman.

When we talk about supply side constraints continuously that is laughable. Because we had those 'supply side' constraints even when our inflation was at 3-5% also.

When we talk about 'rural folks eating more' that is cruel because of obvious reasons.

When reserve bank talks about the speculation in gold, I really wonder what is the RBI's view on speculation on land?