It's all about rate of return.Nothing more nothing less.Currently India's Forex reserve which is nothing but a large amount of dollars isn't sitting idly in RBI's vaults.It's held in US treasury bonds.So for argument sake we 100 billion dollars of 10 year treasury bond with yield roughly around 4.7%.Now US govt reports that Inflation rate (ie rate of depreciation of currency ) is 3% annualized.But I live in US and it's pretty obvious that offcial inflation rate is far off the mark.The real inflation rate is close to 5% which is greater than 10 year yield of 4.75.So By holding that India is basically losing it's wealth.It's as simple as that.
Infact any other option that gives it a rate of return over 4.75% would be a return that's worth espousing.The catch is that 4.75 is theoretically risk free as we don't expect US treasury to default.But infrastructure projects certinly can give you a return well in the north of 5%.They have intangible return too as they aid economic development , not only the cash returns from such project.Also with the current pace of M3 growth Forex reserve in dollars will lose it's real value even more.So it's just a no brainer.I wonder why anyone would frown upon such an obvious idea.
RE:Endorsed
by Gadi Mama on Apr 16, 2007 11:10 PM Permalink
This is good idea. If we done some simple math it is coming like every person will have Rs 8333 ($200B for 1.08 Cr Indians). It is ending up like Rs 3666 Cr. for Pune city only. If this is true then this is huge money sitting in RBI custody. Needs to unlished its power.
RE:Endorsed
by ASHOK on Apr 17, 2007 12:48 AM Permalink
I dont think any body is frowning upon the idea. Why do you feel that.
Big question is what we are waiting for, this idea is in the news for more than 2 or 3 years now. Even now what we are listening is just 7 Billion dollar to be set aside. That much money will make just 1 power plant.
RE:Endorsed
by jagmohan swain on Apr 17, 2007 03:43 AM Permalink
"an array of facial expressions ranging from raised eye-brows, sardonic grins and puckered lips." What that tells you sucker?
RE:Endorsed
by proudind on Apr 16, 2007 11:23 PM Permalink
Giving money to people won't solve any problem, it will make poor, more poor. If you distribute, in one day, all money is gone, where do we go for development. Better build infrastructure, poor will get money & product for usage.
RE:Endorsed
by Sudeep M on Apr 16, 2007 11:40 PM Permalink
Distributing money to poor is not necessarily a bad idea. There has been unconditional and conditional cash transfer programs in Latin America and they have been proven to have decreased poverty in general. In unconditional cash transfers, people are just given money. This is the new trend of neo-liberalism
RE:Endorsed
by proudind on Apr 16, 2007 11:48 PM Permalink
I am talking in Asia, distributing money doesn't do any benefit other than making poor more poorer. Lot of example, where NO DISTRIBUTION, but invest in infra gained a lot, IN THE LONG RUN.
