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My Notes 24-July-2017 24-07-2017

Dear Students,

Please Follow My Notes and My Video 24-July-2017.

Taming inflationary expectations

Inflation refers to a general level of raise in prices. It happens when more money chases less number of goods and services. So,Money supply determines the level of inflation. Money supply in an economy is determined by the RBI thorough its monetary policy. When monetary policy is tightened, money supply decreases and if it is loosened it increases. Monetary policy committee operates this policy.  On front of growth and inflation trade off, tighter monetary policy can reduce growth to control prices.

Previously, RBI had multiple goals like enhancing growth, reducing unemployment along with price stability. Today, under inflation targeting RBI is expected to function to stabilize the prices. Government will determine its inflation target and monetary policy committee shall operate in such a way that inflation target is not breached. If for three consecutive quarters if inflation levels have breached the said target, it will be assumed that MPC failed in its responsibility.

Today, in India the inflation target is 4+/-2%. As per the last week data, inflation has fallen to less than 2%. It is a breach on lower side. The factors responsible for this are tight monetary policy stance taken by monetary policy committee, fall in real value of food prices due to excessive production and low crude oil prices.

On the other side, decision related to inflation control shall look in to future. There are many factors in Indian economy  that can push prices.

  1. GST in short run can be inflationary.
  2. Rise in salaries of public employees after implementation of 7th pay commission recommendations.
  3. Many state goats are also announcing loan waivers for farmers.
  4. Inflation expectation is very high among Indian citizens.

The above conditions make decisions of MPC very difficult. On the other side, committee faces many criticisms for stippling growth through tighter monetary policy. It is a tough walk.



The Boycott ban

In india, informal village councils imposing social boycott (ostracism) as a punishment is a regular feature. It is imposed for making people to confirm to social norms. It worst effects Dalits and women.

Maharashtra has passed a law – Maharashtra protection of people from social boycott ( prevention, prohibition and Redressal) act 2016 to ban the above practice. It has taken a human rights perspective to the ban and made social boycott a criminal offense with an imprisonment up to 3years or a fine of a lakh rupees or both. It is a step in the right direction for protection of civil rights.


The Vice President’s mien –

Politics are not just a power play. They shall be a right mix of morality, pragmatism and symbolism. It gives politics a Superior quality. Indian National movement is guided by the above virtues and was able to take up against mighty British.

Office of the president and Vice President shall guide the conscience of the nation. They have to provide a wise advice and direction to their Government. Elections to these offices becomes a power play, chances for consensus decreases in Indian politics.


All for one, one for all

One of the great mistakes is to judge policies and programs by their intentions rather than their results. – Milton Friedman.



Ordinance should be last resort – President Pranab

  1. Parliament as an institution is for debate, discussion and dissent. Disruptions take away the opportunities to raise people concerns.
  2. Ordinances shall not be resorted in matters considered for parliamentary discussion. If an ordinance is to be passed on a matter pending before a committee, it is better to consult with it and request it for an early decision.






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