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Pl. vet Arvind's reply




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Postings not related to the writing of the Manifesto or policy chapters
are likely to be summarily rejected. Thanks for your understanding. IPI
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I am unable to respond. Much of what Arvind says makes sense. Would the
Profs. respond so that we can forward our "considered" opinions
simultaneously?

From: Arvind Kumar <nak_@hotmail.com>
Subject: [Fwd: Would anyone care to reply?]

> > 1. IMF Conditionality > > Our task is to decide whether the use of
> conditionality is the most > effective method of solving economic
> problems. If the idea of > conditionality is really efficient? How
> much power should the IMF have > over India? Will limiting the power
> of IMF conditionality also limit its > ability to aid India better
> through their economic troubles.... > How does India feel about the
> current measures of conditionality applied > by the IMF?

We should first understand that IMF does not seek to wield any power
over India. Such claims are just empty rhetoric. IMF gives loans and one
can safely assume that IMF wants to get back the money it has lent in
the first place. All that IMF asks is that the fiscal deficit be cut
down. There is nothing wrong in this. 

Today a large chunk of government expenditure is in unproductive ways.  
Capitalist theories are applied to a socialist system. What else
explains the government ordering 10000 cars and jeeps in the name of
'Keynesian Economics'. Will running more Ambassador cars and burning
petrol stimulate the economy? It is precisely this kind of wasteful
expenditure that must be avoided and IMF says so. 

IMF would not oppose any investment that brings returns. We should not
blindly take an anti IMF stance. IMF however has its drawbacks. Many of
their economists generalize everything. For example, they assumed that
Malaysia and Indonesia had the same problems. For them, they were the
same because both were part of ASEAN! The suggestions they made for the
two countries during crisis were carried out for some time. In one
country it failed. In the other, it resulted in riots. The suggestions
they make have also been inconsistent. While they suggested increasing
interest rates in Malaysia (apparently to sustain the interest of the
people in Ringgit), in a similar situation, they suggested lowering the
interest rates in USA (to stimulate the industry!).

What I would say is to take all their suggestions, look at them
objectively and implement what is good. You will find that most of
india's objections are to the opening up of the industry to 'foreign
powers' and not to specific details like interest rates or fiscal
deficit.

If I am not mistaken (Sanjeev, please clarify), IMF bases its Model on
some 1967(?) paper of Polak(?) after which many things have happened.
Firstly, there is more interaction between various economies, there were
the oil shocks (of course, the prices are back to '70 level now), there
was the delinking of Gold from the value of currencies and so on.

-Arvind


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