Tuesday, July 1, 2014

Why to mix Oil and Water

A well analysed presentation. Oil and Water never mix and better to avoid any temptation to mix. Water is purely a domestic problem and oil is an international issue.  However, both water and oil can unfortunately  add miseries to our economy  particularly in combating the already  persisting high inflation. Monsoon failure can affect the agricultural production and food supplies and fuel the inflation but this calls for an exceptional solution by way of effective administrative meaures coupled with prudent management of the imports of esssential food products.Our economy unfortunately is also driven by black money, hoarding, mal distribution, corruption and exploitation of any crisis situation to make fast backs by anti social elements. Herein lies effective administartive measures and management of finance. Banks have a tendency to support hoarding activities and good old days they were strictly monitored and regulated. With the liberalisation, some of the regulatory measures have been removed but banks' involvement in financing such activities are not ruled out as RBI does not micro manage things under liberalised environment. A strict vigilance if kept on these activities and the government can act on black money and initiate other administrative and economic measures,inflation impact because of monsoon shortage if any can be minimised.On oil prices we have no control as such but here again  if efforts can be made to enhance exports,remittance of all export proceeds on time, contain non essential imports and maitain the value of rupee at some stable level, the situation can be managed reasonably well. Now the new Government is in power and the confidence level in the economy seems to be fast improving, the concern on account of water and oil can to a great extent be mitigated. Upside  Risk is  very high, but once it is identified and measured reasonably well, it can also be managed with  equally reasonable comfort.This article is timely and has provided sufficient warning to the Government.

Dr.T.V.Gopalakrishnan

(This comment is given to Business Standard in response to the article Oil and Water )

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