Monday, October 5, 2009

Where does the money go?

I just heard an interview of Montek Singh Ahluwalia (Dy. Chairman of the Planning Commission currently) on NDTV. I was startled on hearing something. Montek informed the viewers that we are not borrowing from the World Bank anymore. Good. We are also not borrowing from IMF either. VERY good, you would say?
On the contrary, we have actually LENT 10 billion dollars to the IMF. On first glance, this seems like something we Indians should be mighty proud of. After all, when the first reform budget of 1991 was announced, our reserves had dropped to an alarming 1 billion dollars, while today our reserves stand at 270 billion dollars. (Figures quoted by Montek himself.) So the reform budget and the ensuing 18 years have probably pulled India out of the economic doldrums . We all should be justifiably proud of it, right.
The question is, who is 'WE'? A minuscule population of urban Indians who can afford a car, an AC, a Blackberry and an iPod?
If we as a country can lend 10 billion dollars to the IMF, then the questions that haunt me are

- Why do millions of Indians still have to starve?
- Why do millions of Indian do not have access to basic medical services?
- Why does one farmer in Vidarbha have to commit suicide every day?
- It seems there is foodgrain surplus now. Then why are food prices going up all the time?
- Why are there frustrating power cuts? (In Pune, there is power cut from 9 to 5 on all Thursdays.)

I hasten to add that my rant is not against Montek at all. I have huge regard for him. I am sure he is bothered by the same questions himself. I wish someday I hear him give possible answers to them.
The money that we have lent to IMF surely has come from the taxpayers. (If it came from the black money that is generated, we could possibly lend 10 Trillion dollars. Not billion.) Is that why we pay taxes? So that the development in India can wait, while we lend money to the IMF?
I am not an economist by any stretch of imagination. I hope someone from the readers who are more enlightened on these matters can provide me the answers to these questions. Till then, I will keep hoping that Montek and Co. are taking India on the right path ahead.

7 comments:

Sumita Kale said...

hey, did he really say we arent borrowing anymore from the World Bank?Then why does the WB say it is lending?
http://www.ft.com/cms/s/0/bfcd904a-a85a-11de-9242-00144feabdc0.html

http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:20158985~menuPK:295589~pagePK:1497618~piPK:217854~theSitePK:295584,00.html

hope these links work..
anycase, your questions are all valid...

I guess the IMF funding is to get us more power in these institutions..

Pushkaraj said...

@ Sumita Kale - Thanks for the comment. Am surprised at what the WB is saying because Montek certainly said so - you can hear it from the horse's mouth at

http://www.ndtv.com/news/videos/video_player.php?id=1158923

I had guessed a bit of the answer that you have provided - about gaining some clout in these institutions. But I was trying to apply common economic sense by simply comparing the situation with personal finance. I mean, if I had to do some urgent repairs in my own home, would I lend money to someone else?

Sumita Kale said...

If only common sense worked in governments!:( the 'advantage' of being a country! But I think politics is another angle..lets say you had urgent repairs AND you had to pay the CII or Rotary or somebody a subscription that would ensure more orders for your work in the months ahead from grateful members...then what?!just an example of how priorities can flip easily, for what its worth.:)

Pushkaraj said...

@ Sumita Kale - Common sense is, unfortunately, a very uncommon thing!
But that's a nice analogy that you have given. Yes, I will probably do only part of the repairs (which are most urgent) and use the remaining money to subscribe to CII. Hoping that the more money that I earn from the subscription will enable me to do the other repairs later.
I think I understand this business a little better. Thanks!
Further, can you recommend some reading which can enlighten me more about WB and IMF and the 'clout'.

निशांत मिश्र - Nishant Mishra said...

These questions haunt me a lot, too.

Rest... economy, politics, IMF, WB, FII, CII... I don't know much about and don't give a damn.

I liked your blog a lot. Just a suggestion, could you please choose garamond or verdana as your text font? I hate arial for reasons I am not sure of.

The MRI scan of your blog is not revealing anything.

You play flute? I have so many classical flutes in my native home but I haven't kissed them for years:(

Pushkaraj said...

@ Nishant - Thanks for the comment. I am glad you like my blog. Will seriously consider using Verdana. But Garamond, ummmm, no. Just like you don't like Arial for unknown reasons, I don't like serif fonts for unknown reasons. But Verdana should be ok.
I play the flute once in a blue moon. Once in ten blue moons, actually.
As for the MRI scan, are you using any Linux OS? I don't know the reason for this too, but it works well when I use MS, but it doesn't in Ubuntu (which I use). Anyway, it is just a tag cloud, so don't bother about it too much. But on second thoughts, if you are a techie and can help me make it work in Linux, that would be great.

truehorizon said...

@Pushkaraj

Though I usually don't like talking like this, it seems to me that investing money on setting up infrastructure and poverty reduction is a function very distinct from the money lent to the World Bank itself. In the sense that, money has been allocated for poverty reduction in substantial amounts, and what needs to follow that of course is implementation.

Lending to the WB seems to be a nice political way of announcing where we stand today as a nation, especially in these times of economic downturns. Common sense aside,a feel good, maybe?

I'm still not too sure that money must not be invested abroad simply because we have still have a sizeable proportion of poor people in our country itself, essentially..


@Sumita Kale - The clout thingy makes sense to me too. But I really like the Rotary example!