dear professor vaidya
i am taking the liberty of posting this reply to your mail to my blog, as i think it demonstrates a startling fact: the enormous capital generation that goes on in india. you have shown how this is based on the thrift of the humble housewife, rather than some white guys sending money here.
i have been thinking of this from a different angle, namely the concept that india has *always* been an incredible generator of capital. of course this is why every barbarian from alexander the macedonian onwards to the europeans invaded india -- there was enormous wealth there.
it was only during the interregnum of 1757 to 1991 -- a very long 250 years, admittedly -- that this economic engine was brought to its knees. First, by thieving europeans, who simply stole the wealth through a variety of means. Second, by idiotic stalinist economists, who thought they could second-guess the million micro-decisions made by economically rational human beings.
once this straight-jacket was thrown off, there is enough capital generation to sustain double-digit growth. in other words, FDI is immaterial to india, unlike china, which i suggest subsists on large amounts of FDI, which may not be sustainable. (of course, they have built up a trillion dollars of reserves, but i also suspect the americans will do something to devalue the worth of this fairly soon, which suggests that it is time to exit the dollar. do you accept this hypothesis?).
anyway, you're absolutely right: the indian government has shown its utter incompetence at economics, it should confine itself to guarding the borders. alas, it has shown utter incompetence there as well. in fact, it may be the case that whatever the indian government touches, it destroys -- the 'bhasmasura syndrome', perhaps?
On 11/20/06, Vaidyanathan R wrote:
For your information
Why the Indian housewife deserves paeans of praise