The wrong face of capitalism
I met Dr Kaushik Basu a quarter century ago in the living room of an old bungalow in an elite area of Kolkata with a senior colleague of mine to understand the implications of the first stirrings of economic liberalisation started by Rajiv Gandhi. Dr Basu was then a young brilliant economist and regarded as one of the brightest minds in economics; his mentor was none other than Amartya Sen under whom he did his PhD at the London School of Economics. Dr Sen’s concern—economics with equity—has been the concern of Dr Basu as well.
Economists for equity have fought a hard battle for almost 30 years since the early 1980s when Ronald Reagan became the US president, Margaret Thatcher became the prime minister in UK, the Berlin Wall fell and the whole world, including China, turned right. The politics of a period influence which economic orthodoxy would dominate. After the demise of Soviet Union and capitulation of China, what prevailed was the ‘Invisible Hand’ of the market, under which individual self-interest of exchanging goods and services supposedly leads to greater social good. While this is somewhat correct, there are many situations where the invisible hand fails to move; or even if it does, it does not deal a fair hand. After the ugly market crash in 2008, brought about by the captains of capitalism, there need not be any doubt about it. But if you are still a believer in market economics, this book would be a scholarly antidote. However, as you can guess, Dr Basu’s arguments are not new—not as refreshing as Raghuram Rajan’s original idea that capitalism is rarely given a fair chance by corrupt and self-serving businessmen, politicians and officials.
In any case, what use is all this scholarship in real life ? For instance, while arguing against the theory of the Invisible Hand, Dr Basu points out how one-sided contracts can deprive large swathes of humanity of the gains of capitalism. Well, Dr Basu is now an economic advisor to the government of India, a government that is possibly the most corrupt ever. He has a ringside view of it. The 2G scam is a template of how capitalism is easily undermined by power and greed. Besides, the tens of thousand crores of giveaways under social schemes are another example of how not to help the poor. All this is happening right under Dr Basu’s nose. One wonders what influence he has. If he does not, what role is he serving in Delhi? Collecting material for another scholarly book? Is that too different from the self-interest of a much-maligned investment banker?
The Nifty came within a whisker of the weekly stop loss of 5,295 points which has made the bulls’ condition precarious. One should utilize rallies if any to liquidate longs as further selling pressure is expected
S&P Nifty close: 5317.90
1. The Nifty closed above the first resistance level of 5,455 points only for a day, however, it failed to take out the crucial resistance level of 5,516 points.
2. Despite the price being above the weekly averages for six weeks, they still continue to be negatively phased.
3. After the elections results the budgets as well as the RBI policy proved to be damn squibs as was envisaged in last week's piece.
The Nifty came within a whisker of the weekly stop loss of 5,295 points which has made the bulls' condition precarious. A close below this level would result in further bull liquidation taking the Nifty towards the 61.8% retracement level (4,986 points) of the rise from 4,588-5,629 points. Resistance levels in rallies are pegged at 5,374 and 5,463 points. One should utilize rallies if any to liquidate longs as further selling pressure is expected especially if the above mentioned stop loss is hit as well as the "gap area" between 5,243-5,291 points gets closed.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist, at trend4casting.com)
RBI deputy governor Subir Gokarn said the focus on increasing revenue through higher indirect tax mop up and the move to cap subsidies under 2% of the gross domestic product (GDP), are a very reliable way to contain chances of fiscal slippages
Mumbai: The Reserve Bank of India (RBI) on Friday welcomed the Budget proposal to bring down fiscal deficit to 5.1% saying the strategy of increasing indirect taxes and capping subsidies are reliable measures to control deficit, reports PTI.
It, however, said this will not have any immediate bearing on the central bank’s monetary policy stance.
“Budget proposals are an important consideration, and positive development, but the monetary stance is not going to be influenced by only one factor”, deputy governor Subir Gokarn said.
He said the focus on increasing revenue through higher indirect tax mop up and the move to cap subsidies under 2% of the gross domestic product (GDP), are a very reliable way to contain chances of fiscal slippages.
“It (fiscal deficit target) is a reasonable reduction in the deficit which is what we wanted to see from our standpoint. Also the fact that it is coming from the revenue side which is more controllable in terms of realisations, which also suggests that the risk of slippages are that much low,” Mr Gokarn told reporters at the RBI headquarters here.
He also welcomed finance minister Pranab Mukherjee’s move to cap subsidies under 2% of GDP next fiscal, saying it will give a fillip to the process of fiscal consolidation.
Mr Gokarn, who handles monetary policy at the Mint Road, said exceeding this cap will result in fertiliser, diesel and food prices going up. The monetary policy will take into account the inflationary pressures which would come out through such increases, he added.
Mr Gokarn listed the movement of crude prices along with GDP data and other factors like monsoon to be a key determinant of the way the monetary policy will move.
He also said pegging GDP growth at 7.6% for the next fiscal and average inflation at 6.4% are also not ‘unrealistic’.
In his Budget speech, Mr Mukherjee pegged FY12-13 fiscal deficit at 5.1% of GDP, lower than the revised figure of 5.9% for FY11-12. He also said the government will have to borrow a net of Rs4.79 lakh crore to bridge this gap.
Deputy governor HR Khan who was also present at the review, admitted the government borrowing programme is a ‘challenge’ and said RBI will meet the finance ministry officials before 31st March 31 to draw up the borrowing calendar for the next fiscal.
Mr Khan further said other announcements like opening the corporate bond market to qualified investors and relaxations on the external commercial borrowings front for aviation and power sectors will reduce pressure on the external sector.
On the tight liquidity in the system, Mr Gokarn said it would ease from the first week of April onwards.