The Dilemma

People beam in so many things into your drawing rooms.So do they in my drawing room.And when it comes to business channel even the viewer feels he is part of corporate India.But the fun is does anyone on those channels or we in our drawing room really understand what we talk about economics.Jury and opinions both are open about this and so every one is entitled to have his opinion.
Coming to the the point, India is facing a problem of inflation and when it is inflation governments have goose bums.The problem is we hardly understand the problem. The problem started way back in in 2009. And at the same time the FII's were pulling out of our stock markets. So the noise was markets are crashing and we will have current account deficit. Then came May 16 UPA 2 voted back in historic verdict and FII's started pouring out whatever they had into Indian equities and boom we started a party on Dalal Street. But "Rain Gods" ( i call them La Nina and El Nino cousins) weren't that amused and we had below normal monsoons. And then started the problem of spiraling inflation in agri-commodities.The problem got a nomenclature from pseudo business pundits on channels as "Food Inflation".Anyways everybody is entitled to do so after all its your Fundamental Right under Article.20.
Well the fun wasn't ending there we started having a big baggage of export deficit. Again we had this problem of current account deficit so we knew we needed help somebody has to pour in money. And we(all emerging markets or third world countries of yester-years) have a very good friend sitting at FED Reserve Big Ben. Actually it amuses me whether printing money is a passion for him or just a compulsion.Recorded economics of last few hundred years just seems to make to impression on him. What on earth makes him think that people get out of economic crisis by printing money. But Mr.Ben Bernake just feels that we can print his way out of any economic problems. If that was the case Bangladesh would be richest country in the world because they print lots of money.But it seems that the just wants to defy any economic theory of past and create a new one.So back to point, our friend start printing money and FII's started pumping it into India. The party started and Dalal Street bull got steroids to run. Estimated 14 billion dollars made it to Indian markets and we hot 20000.So we should thank Ben for doing this but then we all should have problems with him.
This money that is flowing into India was basically meant to ease the recession in US and fix problems in there but instead it is flowing in markets like ours. Add to it it is creating large amounts of liquidity in domestic markets and again helping inflation. The RBI governor was right when he seemed concerned about the inflows and there impact on inflation.Because irrespective of what monetary tightening he does here he cannot do anything substantial to curb inflation if this FII money keeps coming.
The dilemma is we have a completely integrated capital market with the western world so whatever happens there ripples are felt here.And we are a capital thirsty economy so we have to dance to FII's tunes and allow them to pump money infact welcome it.The western world is exporting its recession via inflation to us. They have a problem of deflation and that is creating inflation here. At least we have found our friends "Rain Gods" who have taken care of us this year and we have good monsoons. and since US & Europe are still fighting recession so we don't have problem of spiraling industrial commodity prices.
But the real problem is , somebody in New York was irresponsible and he contributed for this big recession and poor man working under NREGA in India has to bear the repercussions of his irresponsible spending. Its so unfair for my Indian countrymen but that is a sorry state of today's economic world ."Like it or hate it we have to live with it".