Narendra Modi is suggesting that India should make itself richer at zero cost by making simple cash payments to farmers instead of the multiple and varied subsidies available. Of course, it would be better if there were no such payments, no such subsidies at all, so that India would get on with the job of having fewer farmers altogether, but this is still a step in the right direction and something that will make India richer as a whole.…See More
We can, if we wish, tut and mutter about how India’s government is lashing out spending and tax reliefs as the election approaches but this is just how politics is done – spend other peoples’ money on other people. That’s rather the point of the process. Further, the political incentive is always to promise such in order to gain the votes of those select constituencies whose support is being bought with that other peoples’ money. Finally, of course, the bill is going to land in the lap of whoever is in government after the election, not the necessarily the one hoping to win it.…See More
India’s Prime Minister, Narendra Modi, has hit out at the practice of granting farm loan waivers calling them lollypops (for English readers, lollipops). This is incorrect and Modi would do well to call them what they really are, electoral bribes. They are, of course, very popular with politicians around election time but then that just shows how political they are.
The basic problem here being that some 50% of Indians still are peasant farmers, working small plots of land of a hectare or three and reliant upon the mortgaging of that asset, the land, to provide the working capital for planting and so on.…See More
Narendra Modi suddenly upped and announced that all Indian banknotes worth above a pittance were invalid. New notes would be issued at some point, all the old notes well, the only way for them to retain their value would be to deposit them in a bank. Chaos ensued – not that chaos is a rarity in the Indian economy. There was some thought that all that black money floating around would not be processed through the banks and that this would produce a dividend for the government.…See More
It appears that all of the notes made worthless by India’s demonetisation experiment have made it back into the banking system. Therefore, it is said, the whole experiment was a failure, even should not have been tried. This is to be incorrect about such things. But then the critique is from a piece in The Guardian and we all know about them and matters economic. Never met a theorem they’ve not picked up the mucky end of.…See More
The Indian press is getting the implications of the Indian interest rate rise wrong here. They’re saying that it poses a danger to Narendra Modi’s budget plans. That’s really not the way to think of an independent central bank raising the nation’s short term interest rates, not the way at all. India’s budget deficit is 3.3% at present, not something that it will have difficulty financing. Quite the opposite in fact, rising interest rates means the technocrats think the economy is booming.…See More