Targeting economic-variables has had been popular...

Targeting economic-variables has had been popular though targeting the economic-growth-rate is more common than others like wage-rate, interest-rate and the exchange-rate… These variables do have a significant effect on growth by the way of manipulating supply/demand or in common the economic-activity after accounting for inflation and inflation expectation in the nominal terms… Nominal rates include the real-rates plus inflation… Similarly, we have a corresponding real-rate after subtracting inflation for every nominal-variable… Inflation decides the future expectation about the real-wages, the real-interest-rate and the real-exchange-rate…Like nominal-wages and real-wages, nominal- interest-rate and real-interest-rate and the nominal-exchange-rate and the real-exchange-rate… By targeting these variables we try form an impression or expectations about the health of the economy by managing supply/demand and inflation and the economic-growth-rate… The counter-cycle economic-policy makes the transition between boom and busts, in a controlled way so that that the trade-off between unemployment and inflation during trade-cycles for the underlying objective of growth becomes smooth… Expansionary-policy during slowdowns and tight budgets during inflation to control demand and expectation by the way of targeting variables has been the role of economic-policies for the past three decades… Targeting variables has been a popular practice also through forming expectations… Inflation or the general-price-level and expectations about the same determine the expectations about the real-variables – real-wage-rate, real-interest-rate and real-exchange-rate - and demand/supply/growth… The economic-growth and expectations about it would increase spending and demand in INDIA, if expectations about the economic-growth are bright, people would demand more and it could help achieve the full-employment and full-growth and investment to help the economy innovate could increase productivity and wages and incomes… In the West, the developed-world is cutting real-wages with inflation to make exports competitive, is also not uncommon, too… Every developed-country has a higher weight-age of exports in its trade-account… Depreciation or the efforts to increase exports during slowdown has pulled economies out of depression because when a country compares it’s domestic-demand vis-à-vis the export-sector it is more vast and also because of foreign exchange earnings… In the past three-years the low import of gold due to higher-tariffs has saved INDIA much of its exchange-reserves and foreign-money, too, through higher debt and equity inflows in the form of FPI’s, FII’s, and FDI’s… have all shot-up… Nonetheless, the export sector in INDIA is under-penetrated… The government might try to increase depreciation to give exports a kick in-terms of higher nominal-exchange rate, it is short-term fix, but, in the longer-run lowering the general-price-level or prices would save the domestic demand with the foreign-demand… lower-prices too can make exports competitive and also increase domestic demand because of increase in the real-wages… Expectations about higher real-wages increase spending… Likewise, interest-rate and interest-rate expectations affect investment and spending decisions… An interest-rate cut cycle may increase investment… the RBI has maintained that it would target a neutral or natural-rate of 1.25% which means lower real-rates than in the past which would increase real interest-rate-cut expectations... A lower real-rate would increase risk-taking because investors would move to higher-yielding asset classes… Bonds are safe but equities have higher yield, but more liquid… Lower-interest-rate-expectations could give a push to spending, higher demand through higher real wages and real-wage expectations could also increase spending… INDIA is going through expansion… but, NPA’s and impediments to rate cut-transmission by the commercial-banks is a drag on the economic-growth-rate, but, delay in action could further pull the growth-rate expectations down… Expect our governor to bring innovative ideas to the board to curb bad-loans… It is more a matter for the government because the majority of bad assets are in the Public-Sector banks…. Lowering cash-reserve-requirements during a bad-turns may help banks pass-on the rate-cut by the RBI… In the last rate-cut-cycle the nominal interest-rate was just above the 4%... Committing a higher real-wage, a higher real-interest-rate and a higher  real-exchange-rate and expectations would increase consumption and investment and foreign demand, too, in the economy through more spending and higher supply/demand/growth… and, more jobs, too…