Seafood For Thought

Trishna is a very popular seafood joint in Mumbai. It attracts all types of foodies -- from model Helen Brodie to artist M F Hussain to cricketer Sunil Gavaskar.

Earlier this week, an old friend who had come down from Delhi insisted that I take her to Trishna. We had hardly finished looking at the menu, when I heard fam- iliar voices.

It turned out that Dr Y V Reddy, deputy governor of the RBI and Dr Shankar Acharya, chief economic adviser (CEA) to the finance ministry were having an eye-ball confrontation with a live crab which was going to be part of their lunch. I couldn't hear all that they were saying, but with a bit of lip-reading and a peripheral knowledge of their concerns, it is fairly safe to reconstruct what might have been the essence of their conversation.

 

Even though a certain amount of overflow from the meeting of the High-Level Committee on Capital Markets -- for which Dr Shankar Acharya was in Mumbai -- was inevitable, it didn't appear to be a business lunch. So, strictly speaking, no talking shop. The distinguished economic administrators were, for a change, engaged in some light-hearted conversation.

Amidst mouthfuls of jumbo-sized Butter Garlic Pepper Prawn (incidentally, a specialty of the house), they were discussing, the state of the capital markets. This cannot be misconstrued to be a business discussion because the conversation seemed to be a continuation of the deliberations of the "informal group" set up under the chairmanship of the CEA to understand the behaviour of the market. It had nothing, whatsoever, to do with the deliberations of the High-Level Committee on Capital Markets which, mind you, is a formal forum. With a trained civil service officer you can be sure that there will be no breach of protocol.

Additionally, of course, capital markets is neither official's business. And to be sure, doesn't even fall within the purview of economic policy-making, if Dr Acharya's previous boss is to be believed. But then to be in Mumbai and not talk about the markets is like being in Delhi and not talking about deficits.

Thanks to the informal group's deliberation -- held in the serene climes some thousand kilometers away from the action and the agents -- the CEA's solution to the problem was as clear as the shark fin soup that he was eating: make adequate credit available to the market makers. But that can at best perk up the primary markets, seemed to be Dr Reddy's response, thereby clearing the confusion as methodically as he deboned his ravas. True, but if the primary market was revived, the ministry always thought that the secondary market would take care of itself. Reddy's expression revealed that he thought it was the other way round.

The issue of causality, which has engaged great minds like that of J R Hicks, was resolved by a knowledgeable waiter who served the same crab which half-an-hour back was as alive and kicking as the Indian economy was two years ago. Any implied suggestion that the present state of the economy is pretty much like that of the crab is not intentional.

The problem of the ongoing recession was cracked as swiftly as the shell of the crab. Reddy's solution was as crisp as the fried pomfret on his plate: increase government spending even at the expense of incurring a higher deficit but don't depend on the RBI. Not that Dr Acharya was very keen to depend on the RBI, especially for resolving the recessionary conditions. For even as the two were having lunch, the rupee had dipped to an all-time low of 43.35 against the dollar. While Dr Reddy seemed unperturbed, Dr Acharya was wondering about the cost-push that this round would give to already high level of inflation. But sudd-enly he looked pleased -- here was another blame to be put on the RBI's doorstep; the other one being the unbridled increase in money supply.

It is the Reddy dharma not to increase money supply, so plastic mon-ey was used to settle the accounts. He can afford to do this only till his report on the computation and analytics of money supply is accepted. Anyway, while the lunch wasn't exactly monetised, it seemed to remind the deputy governor that the CEA's and his team had still kept them in the dark about the extent of monetisation planned this year. He broached this sensitive subject, only to get a satisfied burp from the well-fed CEA.