Friday, November 02, 2007

Jamal Mecklai makes monetary policy interesting

In Business Standard today, Jamal Mecklai makes monetary policy fun:

In the four weeks to October 12, the RBI bought over $24 billion — that’s more than the forex reserves of the Netherlands, Saudi Arabia or Kuwait! This enabled them to cage the rupee at about 39.30, with liquidity splashing around everywhere. With inflows unabated — indeed, accelerating — and the half-hearted (old, uncommitted and terrified) efforts to stimulate outflows completely ineffective, the RBI’s nightmarish screams were finally heard in Delhi and the ministry of finance pushed Sebi to try and raise the barricades.

Of course, the market tanked and the government backed down — welcome to Thailand. While markets have recovered much of their composure, it seems that the government continues to turn a deaf ear to the real issues — at least to judge from the politics-as-usual sentiment that prevails. This means that while markets will get back to business as usual soon enough — after all, this is India and it is going to grow at 10% a year for some time come — there will certainly be another, and then another, wobble, each one larger than the last.

The good news, however, is that, if you leave the political establishment out, change is in the air. Indeed, almost everyone would agree that there is a complete disconnect between the essence of the country today and that of the government, and, in this day and age of market determination, this means that sooner rather than later we will see substantial change in the nature of our government.

And here's the Indian improvement upon `google' as a verb:

Indeed, there are several straws in the wind. Note, for instance, the continuing impact of the Right to Information Act — in a few short years, it has become a part of life; indeed, my wife points out that “RTI” has become a verb as in “just RTI it.”

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