388.THE SUPREME COURT OF INDIA: DOES IT LOOK AT THIS WORK?

388

THE SUPREME COURT OF INDIA:

DOES IT LOOK AT THIS WORK?

The Union Government, all on a sudden, announced Minimum Support Prize (MSP) for pulses by Re.200 per quintal.

A housing scheme and a few social sector schemes were also announced.

The media reported the above on 18 June 2015.

The trade deficit of India was $ 10.4 billion in May 2015. This was the lowest in three months. The media reported this on 18 June 2015.

The Reserve Bank India (RBI) must bring the trade deficit to nil.

It is its duty.

It can seek the support of the government for this.

This can be achieved through a combination of:

1.     Devaluation

2.     Increasing the import duty on some items.

3.     Decreasing the import duty on some items like petrol

4.     Support price or monetary compensation.

5.     Other conscious efforts to augment production

The remittances by the working population and export of services should not be treated as export earnings.

Imagine the following scenario.

1.     Trade deficit is nil.

The money circulation depends on the remittances by the workers and the earnings through the export of services.

When the remittances increase, the foreign exchange increases.

Then the money circulation also increases.

This causes inflation.

It is said that inflation is good for the economy.

          2.   Assume that there is a trade surplus of $10 billion.

Then money circulation depends on remittances plus $10 billion.

The exports reinforce the remittances.

The foreign exchange reserves swell.

The money circulation grows steadily.

Hyper inflationary pressure appears.

There is rapid increase in economic activity.

It is good for the economy but the government will be attacked.

3.          Assume that there is a trade deficit of $10 billion.

Further, assume that the government does not allow the RBI to remove the foreign exchange obtained through remittances.

The importers suck money from the system.

They pay currency equivalent to $10 billion to the RBI.

The RBI buys gold from within India and gives it to the foreign countries.

Thus the money comes back into the system although the gold holding in India decreases.

     4.    Assume that there is a trade deficit of $10 billion.

Further assume that the government allows the RBI to remove the foreign exchange for imports.

The importers suck money from the system.

They pay currency equivalent to $10 billion to the RBI.

The RBI uses the foreign exchange for payment.

It hands over currency equivalent to $10 billion to the government.

The government uses the money for public investments.

It is evident that the government must have got $10.4 in May 2015.

But it did not get any.

This causes depletion of money circulation.

The government now sucks the money from the system. Production falls down. Economic activity also falls down. Workers lose job. The people lose their assured income. No money in their hand. Some kill others. Some steal. Some starve. The condition is reminiscent of that existed in December 2001.

What happened to the money sucked from the economy?

Does the Supreme Court of India look at this work?

The court must be capable of speaking the truth.

This is letter No.388.

 This email is being submitted to His Excellency the President of India, Supreme Court of India, Chief Vigilance Commissioner, Indian Army and the Indian Air Force, and posted in the blog: www.howeverythinghappenedinindia.blogspot.com  on 19 June 2015

19-6-2015.

V. Sabarimuthu,

26-3 Thattamkonam, Vellicode, Mulagumoodu PIN: 629167, India.