Dated 28.02.2015

There is a reason for using an acronym heading.

The budget is simple and straightforward:
– Big spending by the government and not much incentives to the industry with strict control on black money, so those who were looking for a low interest rates, expansionist economy regime can now sell their stocks and go to sleep for atleast an year.
– And new acronyms: JAM, FAME, MUDRA, GIFT, NIIF, CMLV, AIM, SETU, etc — a caveat: these acronymns are only to make the budget document look sexy; anybody buying luxury condoms in anticipation of good sex shall do it at his or her own risk.

P.S.
All Jan Suraksha Schemes are bogus. Accidental Death insurance is hardly any social security: first one has to die in an accident, and then his or her family will be supported! In the pension scheme, the government contribution is limited to Rs. 1000 per annum for the first five years; no details have been given of actual payoffs. Is it any different from NPS Lite? And, the third one of accidental and natural death insurance of Rs. 200,000/- for an annual premium of Rs. 300/- is an improvement over the LIC’s Aam Aadmi Bima Yogna, but then there is life cover under the Jan Dhan Scheme too. Why so many life insurance schemes and not a single health insurance or employment insurance or accident insurance or theft insurance or other general insurance scheme? As far as I understand, social security is required more while being alive than after death. Or, are they going “Peepli Live

Comment dt. 04.03.2015
When the government do high spending, it has to borrow more squeezing out liquidity from the market, which obviously the budget clearly seems to be doing. The ramifications are crowding out of private investment and higher fiscal deficit. The government spending can also have a multiplier effect leading to increased private spending, but it is not as effective as the one by decrease in interest rates or CRR cut by the RBI; however, the decrease in interest rates also leads to high inflation. In the year 2008-2009, the RBI decreased repo rate from almost 8% to 4.5%, which led to very high infaltion in subsequent years but still no private spending, which means the money multiplier failed badly — simply speaking, the money was transferred from the public to the business. The Congress, under whose regime the RBI cut repo rates, was in disarray in its last two years because of this recessionary trend of high inflation and no investments. However, eventually, the temporary controls on capital flows and high interest rates created a situation where the NDA 2 immediately benefitted from falling crude prices. In the present budget, it looked like that the government chose government spending over money multiplier, which is a saner thing to do in the present scenario. However, now, when I see the RBI is cutting interest rates and calling it an event in tandem with the union budget and the finance ministry is endorsing it, I am forced to believe that the government+RBI are playing fraud on the public yet again. These kinds of interest rate cuts by RBI, if continued, will definitely increase inflation to very high levels, even more so when the inflationary pressure will also come from the government spending. I fail to understand how each and every custodian of people’s trust fails in its duty in favour of a few corporates.
Note: Those who wanna understand how government spending causes inflation can visit this link