India's Planning Commission deputy chairman Montek Singh Ahluwalia confused about cause and effect of inflation
Babu Ghanta
Jul. 3, 2008

It was interesting to find India's Planning Commission deputy chairman Montek Singh Ahluwalia promise the world that the government would bring inflation down. That was good but what he said after that is scary for every Indian.

''We will bring inflation down, but speculating on what is happening in international oil market is very difficult,'' Ahluwalia told media reporters on Wednesday.

What scared many analysts is that he put the blame for inflation totally on oil speculation. As matter of fact it is India and China that are 80% responsible for oil inflation, which spilled into food inflation.

Subsidized petroleum products in India have made the middle class families buy two or three cars with borrowed money. Now Indian industrialist Tata is after delivering the $2000 car called Nano. Nano will be the root cause of macro inflation. If every Indian can buy a Micro or Nano on credit and drive the same with subsidized petrol (gasoline), crude oil price will easily quadruple to $550 a barrel.

India is bleeding its state owned and operated Petroleum companies. The deficit or loss of these Government companies is being covered up with budget deficit – simply put printing hard cash. Mr. Montek knows this very well but is in a state of self-denial. The Prime Minister Singh and Finance Minster Chidambaram has tried to copy American supply side economics and George Bush’s spend and expand budget deficit policies.

At the end India faces hyperinflation which will eventually halt the growth and plunge Indian economy into depression.

Montek Singh Ahluwalia is a very educated person but his education on inflation may be backdated. India is proud of his M.A. and M. Phil. degrees as a Rhodes scholar from the University of Oxford. In 2007 he became a member of the influential Washington-based financial advisory body, the Group of Thirty. The membership consists of : The current members of the Group of Thirty are: · Paul Volcker - Chairman of the Board of Trustees; former Chairman of the Federal Reserve
· Jacob A. Frenkel - Chairman; Vice Chairman, American International Group
· Geoffrey L. Bell - Executive Secretary; President Geoffrey Bell and Company
· Leszek Balcerowicz - Former President, National Bank of Poland
· Jaime Caruana - Counselor and Director, MCM Department, International Monetary Fund
· Roger W. Ferguson, Jr. - Chief Executive, TIAA-CREF
· Stanley Fischer - Governor, Bank of Israel
· Mervyn Allister King - Governor of the Bank of England
· Guillermo Ortiz Martinez - Governor, Banco de México
· Jean-Claude Trichet - President, European Central Bank
· Tommaso Padoa-Schioppa - Minister of Economy and Finance, Italy
· Zhou Xiaochuan - Governor, People's Bank of China
· Yutaka Yamaguchi - Former Deputy Governor, Bank of Japan
· E. Gerald Corrigan - Managing Director, Goldman Sachs
· Andrew Crockett - President, JP Morgan Chase
· David Walker - Senior Advisor Morgan Stanley
· Guillermo de la Dehesa - Director and Member of the Executive Committee, Grupo Santander
· Arminio Fraga Neto - Partner, Gávea Investimentos
· Domingo Cavallo - Chairman and CEO, DFC Associates, LLC
· Martin Feldstein - President, National Bureau of Economic Research
· Paul Krugman - Professor of Economics, Woodrow Wilson School, Princeton University
· Lawrence Summers - Charles W. Eliot University Professor, Harvard University
· Ernesto Zedillo, Director, Yale Center for the Study of Globalization, Yale University, and former President of Mexico
· Gerd Häusler - Vice-Chairman Lazard International
· Abdulatif Al-Hamad - Chairman, Arab Fund for Economic and Social Development
· Montek Singh Ahluwalia - Deputy Chairman, Planning Commission, India
· Mario Draghi - Governor, Bank of Italy
· Timothy F. Geithner - President, Federal Reserve Bank of New York
The biggest question for this man of wisdom and knowledge is – why he cannot understand the cause and effect of the global inflation in the present time and context? Why is India creating its own problem by subsidizing oil for political purpose and blaming vodoo oil speculation?

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