RUPEE, GOLD, THE CURRENT ECONOMIC MESS AND POSSIBLE SOLUTIONS by DR. S. VAIDHYASUBRAMANIAM

DR. S. VAIDHYASUBRAMANIAM

TOPIC: RUPEE, GOLD, THE CURRENT ECONOMIC MESS AND POSSIBLE SOLUTIONS

Dr. S. Vaidhyasubramaniam began the colloquium by addressing himself as a ‘trespasser’ in the subject of economics but not an economist. His talk on the current economic situation covered the Indian story where he mentioned that India has a great future because of a greater past. There was a moment of deep thought when he said that – “We are facing a deep crisis today and the reasons are still fished for, leave the solution”. He proceeded by saying that the willingness to learn happens only at times of adversity and not during prosperity.

Few snippets from his talk and on the topic are mentioned below:

THE ECONOMIC MESS:

“There is no direct input-output relationship in economics and there are many factors influencing the crisis situations. Predicting the future in economics is difficult but the ‘Modern Economic Theory’ is trying to capture it to some extent. We cannot afford to be uncertain about the country’s past. Today the financial institutions sell toxic financial products which are only technically correct as per the predictions made.”

“The Indian NRI’s continuously say that HEALTH, EDUCATION AND SANITATION is a evolving problem in the country foregoing another emerging crisis of economy. The big names from different fields always had an interesting perception of the country. Economists like Karl Marx and Max Webber in 1853 wrote articles on ‘Economics functioning model of India’ without even visiting the country. They call India a primitive and semi-barbaric society. Max Webber made bold statements like Hindu- Buddhist society cannot handle capitalism because they believe in karma. Winston Churchill during the year of India’s independence said that only god can save this country. “

“India and China dominated the global GDP back in the till the 1750’s with 25% and 33% respectively while the major countries of America and UK were only at 0.2% and 0.8% of GDP respectively. This is a statement which justifies that the transformation of America as an economic superpower is not because of its inherent strength. The colonial exploitation was a reason for change in the economic scenario of the west. The west is currently the best but it is the time that the rest recognizes that the west is the best and follows the west.”

“Any growth has crisis. There have been cases of Long term management crisis, Crisis of dot com which shook the entire equity market and the challenging global financial crisis. Faced by all these circumstances, nobody asked the question of what caused the crisis but got together on how to overcome it alone. It is the subject of economics itself which is in crisis. The then Prime minister of India in the year 2008 decoupled from global economic crisis and said that the fundamentals of the country being strong, there is no crisis. The year 2013 saw a reverse thing happening.”

“The debate on whom to blame for crisis is still uncertain. Bodies like the bank, regulator, society and government are targeted without much arrival at a consensus for the reason”

“Good electoral politics leads to bad economic decisions.”

RUPEE:

“In the year 2007, rupee strengthened but after reaching the 40 mark rupee was not allowed to regain its strength. The strengthening of rupee would have led to imports getting cheaper and made the Indian manufacturing sector more competitive. Today, all the emerging economies are losing their currency strength. “

“The current account deficit is of 35 billion dollars between 1991 and 2001 and 22 billion dollars surplus between 2001 and 2004 alone”

GOLD:

“This is a subject of deep interest. It is an investment vehicle as well as a consumption index. The reasons for increasing purchase pattern of gold can be because of it being a liquid asset, the profitability it brings by holding onto it, divisibility, portability, ownership/possession of gold, trade collateral – economic benefit. The Indian wife proves to be an intelligent investor by heavily consuming gold and using it as an asset for times of urgency. After the 1962 Indo-China war, the leaders asked gold from Indian women to finance the deficit.”

The session concluded by a brief by the speaker on how the country needs to think beyond short term economic situations and that economic development can never happen at the cost of the nation’s strength.

The session proved to be an eye opener for the management students in terms of the seriousness it had in addressing the economic crisis which is a evolving problem and the speakers ideas on areas of currency and gold.

    SHRUTI KHAITAN

(Team Colloquia member)