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Re: Next Topic - Economy
Week's Agenda: Economy
Most of the policies you propose below are either ones I would agree with, or
ones I would not be too enthusiastic about but not negatively disposed to
However, there are a few to which I am at present opposed because of current
market conditions and because of Indian cultural factors:
1. <Setting up of derivative markets. Constarints on hedging of exposure on
international markets to be phased out.> Given the way in which derivatives
have worked recently in international markets, this is not the best time to set
up one anyway. In the medium term, I would HESITATE to set these (I AM NOT
SAYING THAT THERE IS CAST IRON CASE AGAINST IT IN THE MEDIUM TERM) because of
our national propensity to gambling. Of course, we should not attempt to limit
the choice of people to gamble if they wish, but there is a difference between
gambling up to the extent of the money you put down and gambling to a multiple
of what you put down. Even hedge funds run by Nobel Prize winners have come a
cropper due to the current volatility of markets. I don't expect market
volatility to subside at least till the middle of 2000. Of course, one could
argue that THAT is the time when we intend to launch our policy. But we are
forming it NOW and I am not sure that this will draw much support at present, or
even that this ought to be a priority. Let us go for those policies which
affect the vast mass of the country, and where we are on much more sure ground.
In the long run as the economy matures, and as hedging techniques themselves
mature, and as we enter a more settled phase in the world economy, I would have
nothing against it. But we have enough to do at the moment, let us stick to the
things which everyone understands and agrees with, and not dilute our energies
on things regarding which even Nobel Prize winners have recently come acropper
with their own money as well as that of others.
2. <keep inflation in check (by) using interest rates as a policy instrument.
...only goal of RBI will be to check inflaton> There are many different ways to
achieve control of inflation. I prefer pegging the value of the currency to the
price of gold on the international market. This is the only genuinely objective
and unarguable way. Of course one can look at other ways, and my preferred
option has certainly not been "flavour of the decade" but in current market
conditions it will come back into favour, especially if the EU adopts it (though
it will still be a hard job persuading them of the value of this, sentiment is
beginning to surface in favour of this solution).
Professor Prabhu Guptara
Director, Organisational and Executive Development
Wolfsberg Executive Development Centre
(a subsidiary of UBS AG)
Tel: + 41.71.663.5605
______________________________ Reply Separator _________________________________
Subject: Next Topic - Economy
Author: Arvind (Arvind@simexmail.com.sg)
This week's topic is Economy. Next week we will take up
Defence & Foreign Affairs. That will be followed by Healthcare.
Following are the points already brought up.
Privatization of nationalized and other public sector industries -
Telecom, Media, Metal & Associated industries, Power generation,
Electricity Boards, Automobile, Cement, Banking, Insurance,
Fertilizer and City Waste Management to be privatised.
Private Ownership of land property and intellectual output. Sound
inheritance Law to be passed. Lapse of ownership with either death
Patent machinary to be strengthened and enforced.
No price regulation
Collective bargaining by labour will be encouraged but attempts to
influence bargaining nationwide will be discouraged.
Regulation of profiteering and monopoly
Restore confidence in the capital market - Measures to bring back
small investors to the capital market by raising transparency and
accountability of listed companies as well as that of capital market
Setting up of derivative markets. Constarints on hedging of exposure
on international markets to be phased out.
Following prudent fiscal and monetary policies. Bring central and state
budgets into balance.
Keeping inflation in check and using interest rates as a policy instrument.
Keeping real interest rates low to boost investment.
Scrapping of Planning Commission.
Freeing RBI from control of executive. Allow it to research and implement
best policies. Only goal of RBI will be to check inflaton.
Banking and Transport sector to be deregulated.
Internal deregulation before foreign deregulation.
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