There
was a time, say half a decade back, when inflation was the biggest worry in the
particular context of infusing cash in the rural economy through MGNREGS. Oh,
Rs. 30,000 crores! Look what it is going to do to the nation! Wage-cost spiral!
Hyperinflation! Did you say 100%? Make it twice that! We are doomed!
Never
mind, that the infusion of whatever amount (which anyway was never realized)
was over a year. The main concern then was, though unstated, agricultural
laborers will demand increase in wages and this would hit land owners in their
pocketbooks.
Look
at the situation now. Multiples of Rs. 30,000 crores will be infused into the
economy over the next month or so. Yes, “do-it-today” type of bleaching black
money is nothing short of printing new money by the government. If corruption had
been allowed to continue, no doubt it would be a festering wound, but the short
term consequences must be manageable - some leaking out here, some there, in
the process helping the economy to keep itself on track. But, this sudden
bonanza to the economy? No wonder banks, awash in liquidity, have reduced rates
for term deposits.
But,
the inflation dogs did not bark. No mention of inflation. Why so?
Raghuram
Ekambaram
P.S.
I failed in Econ 101. I think it shows in the above post!
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