rate debate
Today’s editorial page of Business Line carries an article by Mr S Venkitaramanan “Achieving growth and stability” where he talks about the rope pulling between the Central Banker and the Finance Minister all over the world. The root cause of the strain in relations between the two offices is the autonomy of the Central Banker on manipulating interest rates to reign in inflation. While the central banker will like to raise the interest rates in times of increasing inflation, the FM may not like this to happen for fear of stoking industrial growth as the cost of funds may increase. I was wondering how about if the FM goes on to liberate raising money overseas even further. The Indian corporate can raise money outside at lower rates while RBI can go ahead with increasing the rate in domestic market. This however will affect the exchange rate of the Rupee thereby affecting the export competitiveness of the country. On the other hand RBI’s attempt to reduce the liquidity will also be aided by increased demand for Rupee in addition to the increase in foreign exchange reserves to the comfort of the central bank. I know, it is a debate that never ends and can lead one to reach the point where one started but it is nevertheless interesting.
Another note that I’d like to make of is about the liberal education as propounded by John Stuart Mill (a British philosopher and political economist was an advocate of utilitarianism) and referred to by Mr T R Rajan (my namesake!) in his article “Shaping a business dynasty”. T R Rajan gives the 7 lessons from Mill’s analysis of liberal education:
1. Liberal education aims to liberate the mind by furnishing it with literary, historical, scientific and philosophical knowledge and by cultivating its capacity to question and answer on its own;
2. A liberal education must, in significant measure, provide not a smorgasbord of offerings, but a shared content because knowledge is cumulative and ideas have a history;
3. Such an education must adapt to local realities, providing the elementary instruction, the stepping stones to higher stages of understanding where grade school and high school education fail to perform their jobs;
4. The aim of liberal education is not to achieve mastery in any one subject, but an understanding of what mastery entails in several main fields of human learning and an appreciation of the interconnections among the fields;
5. Liberal education is not an alternative to specialization, but rather a sound preparation for it;
6. Liberal education culminates in the study of ethics, politics and religion, studies which naturally begin with the near and familiar, extend to include the faraway and foreign and reach their peak in the exploration, simultaneously sympathetic and critical of the history of great debates about justice, faith and reason;
7. All of the above will be a naught if teaching is guided by partisan of dogmatic spirit, so professors must be cultivated who will bring to the classroom the spirit of free and informed enquiry. I really liked the idea of knowledge being cumulative and ideas have a history! I need to ruminate on this.
Today’s paper also carries the speech by R Gopalakrishnan, Executive Director of Tata Sons Ltd. On “The entropy of markets” where in he talks about Indian consumer and the initial preference that the indi-consumer will prefer anything foreign and local brands would not be able to fight the foreign brands which was belied as domestic brands are giving good competition to foreign brands. This to some extent is more on account of Indian consumer being lenient on quality as compared to his/her western counterpart than the strength of domestic brands. I know this thought is arguable and may even be refutable.
