June 18, 2008


There are two things that I need clarity on and I am sure there are a lot many people like me, confused.
1. Inflation: Not a day passes without any of us Indians hearing the word ‘inflation’. Newspapers, TV channels, magazines vie with each other to capture our attention with screaming headlines on this topic. And then I hear a financial expert being interviewed on CNBC the other day and she said with conviction, “Inflation is actually good”. Now I was taken aback. Since I was passing by the room when this statement was made, it made absolutely no sense to me. But this lady is some financial expert which is why she is being interviewed on prime time, so while I cannot dismiss her statement I would like somebody to explain this to me.
2. Dollar vs Rupee: A couple of months back, the dollar weakened against the rupee and the papers were full of all kinds of apprehensions about the economy getting hit and profit margins of IT sector getting affected. But my point was always that our exports are negligible in terms of our imports. Our crude imports are so high that a weak dollar should be good for the country!! (we will be paying less for the same quantity of crude) Do I make sense?
But the economists and so called knowledgeable community think otherwise. So much so, that finally, RBI intervened and stabilized the $ at levels they thought were good for the country. Can somebody please explain this mystery to me?? Why should a strong dollar be good for India??

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