The article “Worrying trends in monetary policy” (Business Line, August 10) evaluated the current world economic scenario and its impact on Indian economy. The author also expressed concern over the “creation of money” — printing of currency — by central banks.
The article predicts an economic “global storm” a result of, perhaps, unwise central bank decisions to print more money to tide over the respective financial crisis. The economy is also facing an economic slowdown and negative real interest rate which may affect domestic savings which could, in return, dry the sources for investment and resultant industrial growth. The present growth slowdown may worsen in coming months on account of the weak monsoon.
The economy remained distinctly different from many world economies due to various factors. However, growth, which was touching double-digits, has since slowed down to 6 per cent and may decline further, if industrial demand and output do not improve industrial production.
It may be interesting to note that Bank of England has not stopped minting pence though, arguably, the value of the pence has come down in terms of purchasing power. India has, in contrast, stopped minting one, two, five, ten, 20 and, recently, twenty 25 paise coins, which are no longer legal tenders.
Indian economists could work on a theory that is applicable only to our economy, that is unique in many ways. Perhaps, the recent bank crisis in the Western economies may also affect banks in India since many foreign exchange transactions could come under the scanners of regulators abroad.
Mathew Abraham
Thiruvananthapuram
Keywords: world economic scenario
Comments:
The thought about Indian economists working on India-specific solutions for the country's economic development has to be taken forward. For the purpose, if GOI or RBI have policy reservations about thinking for the country in isolation, social groups or academics or economic analysts should make an independent assessment of the country's reserves strength, potential for domestic growth independent of external assistance, if policy support come from government and the present leakages of our precious forex resources. Ideally, GOI should commission a national survey for the purpose. The survey should map all resources including gold, minerals, coal, water and oil in public and private domain and suggest modalities for their preservation and optimum prudent use. Our temptation to mimick whatever is happening outside or how developed countries plunder their resources and borrowed funds is doing harm to the countries move forward.
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