Session Review: "Public Finance – US v/s India" on at Brickwork Finance Academy
BANGALORE, September 20, 2012 /PRNewswire/ --
Brickwork Finance Academy (BFA) conducted a session on Public Finance - Fiscal and Monetary Policies in India & US - Part II, at its campus at Bannerghatta Road, at 9:30 am on Saturday, September 8, 2012.
The session chaired by Prof. Vivek Kulkarni, looked at the fiscal and monetary policies of both India and US with reference to the present economic conditions. A few highlights of the session are enumerated below:
Public finance is the study of fiscal and monetary policies. Brickwork Finance Academy always strives to compare the US and India in terms of polices. The government of India is struggling to maintain the 9% GDP growth rate that the country had seen in the recent past. The Central government's finances are strained with high budget deficit, continued subsidies and coalition compulsions. In the US, the fiscal deficit and debt are ballooning and debate of intergenerational storm has started. The gridlock between Republicans and Democrats and Indian coalition compulsions, shows how similar the politicians can be all over the world.
The primary job of the Reserve Bank of India is to preserve the value of money and control inflation within limits. The Indian economy is slowing down, the real economy has not been liberalised and banks' non-performing loans going up. The RBI has to control inflation, yet, keep up the velocity of money circulation and enhance bank loans. The RBI is constrained by supply side bottlenecks, high budget deficit and subsidies.
The US is however facing low inflation, high unemployment and has been trying to kick-start the economy. The Fed's balance sheet has tripled since 2007 and the Fed has been printing money by aggressive bond buying, both mortgage and treasuries. In spite of increase in monetary base the banks have not been lending. Instead, they are keeping the money with the Fed. While the bank's reserves have gone up from just $21 billion to over $1.5 trillion, most of increases are just excess reserves with Fed. That shows that quantitative easing has not increased any bank lending and jobs are not being created at the required pace.
However, the US dollar continues to show its inherent strength in spite of economy. While comparing RBI's and US Fed's balance sheet, one can notice the forex assets make up almost 50% of RBI assets. The US Fed holds just 1% forex assets since the dollar has enormous value. In spite of budget deficits, and mushrooming debt, the US dollar retains value, primarily due to strong democratic institutions. The Indian rupee can go up as we see more reforms, transparency in Governance of both central and state governments along with better non-corrupt institutions.
The session was a part of BFA's initiative in promoting financial literacy and was well received by the audience. The charts used to compare the US Fed and the Indian RBI are available at http://www.bfa-india.org/events.html.
About Brickwork Finance Academy:
Brickwork Finance Academy (BFA), a non-profit organization, offers 9 months post graduate programs in finance. The coursework includes 19 modules in basic finance, investments, credit and risk management. The course uses international popular text books and covers course material relevant for both the US and Indian stock markets, mutual funds, insurance firms and commercial banks. The program is intended for students aspiring in careers in domestic and international BFSI sector. Those already in the outsourcing industry could take the program to change their career to finance or develop client facing skills via advanced finance domain expertise. For more information please visit http://www.bfa-india.org.
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