Saturday, November 30, 2013

Chidambaram on inflation

Chidambaram has ridiculed Narendra Modi for "giving his first lesson in economy (sic)".

Chidambaram has quoted Modi as saying, "I am not as educated as him... but I know inflation is not because of buying gold but due to corruption".

The Finance Minister adds, "I recall having said on many occasions that buying gold, which is almost entirely imported, worsens current account deficit. I don't recall saying that buying gold causes inflation".

PC is delinking CAD from inflation. Aggravation in CAD leads to lower external value for a currency. Therefore imports become costlier in rupee terms. This leads to price rise within the country. This is explained as "imported inflation".

There is no necessity, political or otherwise, for Chidambaram to deny an economic truth simply because Modi had falsely attributed the truth to him (Chidambaram).

It is noteworthy that PC has confined his response to CAD and has forgotten / omitted to comment on the link between corruption and inflation. Oftentimes what is left unsaid conveys more than what is said.

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