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Re: Question for economists/policy makers



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You say that printing money would "possibly cause inflation"!  That's quite 
an understatement.

If the government printed money to finance investment in core 
infrastructure, the result would be hyper-inflation and a crumbling of the 
Rupee on a scale similar to what happened in Russia, and South American 
countries such as Brazil.

The current 8% rate of inflation could well become 8,000% !  In Russia, 
people went from paying something like 5 Rubles for bread to something like 
50,000 Rubles!
The impact on the Indian economy would be people would lose confidence in 
the Rupee, rendering it worthless, and the economy would go into a tailspin 
(negative growth in GDP), which would be extremely difficult to reverse.

For example, Brazil, was only able to suppress hyper-inflation after 
replacing its currency.

Raju



>From: Abhijeet Pradhan <perdi420@yahoo.com>
>Reply-To: debate@indiapolicy.org
>To: debate@indiapolicy.org
>Subject: Question for economists/policy makers
>Date: Thu, 22 Feb 2001 21:35:34 -0800 (PST)
>
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>Please help make the Manifesto better, or accept it, and propagate it!
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>Hi All,
>
>I have no knowledge of Govt finances so this may be a really stupid
>question
>to those who know why.  In the last few discussions, people have
>mentioned a
>"lack of capital" as a reason for not building roads, power plants etc
>etc.
>Why does the Govt need outside investment to build roads.  For example
>if
>building a network of highways connecting Maharashtra costs say 19000
>crores, why doesnt the govt print that money, and use local
>companies/labor.
>  Introducing all that money into the markets will have 2 effects, dilute
>the
>value of the rupee and possibly cause inflation.  However, isn't that
>better
>than paying dollar based interest amounts to foreign companies???
>
>Thanx
>AP
>
>
>
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This is the National Debate on System Reform.       debate@indiapolicy.org
Rules, Procedures, Archives:            http://www.indiapolicy.org/debate/
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