Prices and Jobs...

We must judge a regime by price stability and the level of unemployment or employment which directly affect the economic growth rate... Low and stable prices help achieve full employment or the potential growth rate... because it keeps interest rate and expectations low and stable.....

Low inflation and inflation expectations the key macroeconomic stability indicators have been quite encouraging which quashed the previous regime, but monetary policy and the legacy of NPAs and ineffective interest rate and expectations management did not let investment soar which is important for job creation, the private sector investment...

We need skill development to draw workforce from agriculture to other sectors and provide gainful employment... Employment is the best answer to poverty... INDIA has a plenty of demand, but not productive employment or jobs and income or money which are dependent on investment and supply which are dependent on interest rate and growth expectations... 

Low prices mean increased demand and supply and growth, otherthings remaining constant... however low interest rate incentivize demand, supply and growth and expectations... Nonetheless, lower interest rate expectations might delay recovery... is not good for the pace of recovery... 

It would add to the uncertainty as when ''coz people would wait for lower interest rate to lower cost... The RBI failed to manage interest rate expectations in a world of low real rates even though inflation remained under the target... 

The real dilemma for RBI is lack of the data on the unemployment rate... The goals of monetary policy are price stability and full employment... The economic growth rate is the result of trade-off between inflation and unemployment through interest rate and expectations management... The Phillips Curve theory... 

Lower unemployment than full employment increases prices and interest and expectations and higher unemployment reduce prices and interest rate and expectations which help manage business investment and growth and expectations....

Poor people, who earn wages, mainly consume food and fuel, and have higher weightage in the consumption basket, and little manufactured products than others; therefore, RBI has set CPI the official inflation index and not core-CPI... Lower food and fuel inflation also affect wage demand and prices of manufactured products therefore important for inflation, wages and interest rate and expectations...

UBI was basically proposed in the background of recession and low demand and deflation or slowdown to increase demand and growth... But, in a country like INDIA with inflation and inflation expectations is bound to generate some more inflation in the presence of supply side weakness, especially food and fuel... 

While doling out basic income the govt must work out the supply side... The economy is vulnerable to food and fuel supply shocks that could increase inflation and interest rate and expectations... and lower growth expectations...

Rs 8 lakh criterion for reservation is unthinkable or unimaginable 'coz people getting more than 3 lakhs cannot be termed as poor as they have sufficient means to invest in education and skills... And, all supported it for votes... Laughable... 

After 50% reservation to Scs/STs/OBCs plus 10% reservation for economically backward ie 60% reservation total... 30 to 40% seats are left for the rich whose income is above 8 lakhs which is only 2% of the population... how this fits into a democracy with equal rights to all... 2% will compete for 40% seats and 98% for 60% seats... it seems opposite the objective for reservation... more seats for reserved, the poor... actually it has reduced seats for the reserved...

The traditional source of inflation in the US has had been oil which has now a disinflationary effect on inflation and interest rate and expectations which would help keep borrowing cost low and increase productivity and competitiveness and demand and supply and growth..... Low prices and interest rate mean higher demand and supply and interest rate (and) expectations..... ie higher economies of scale...

Tightening, Prices, Domestic and Global Issues (Revised)...

The global environment for growth has been one of uncertainty for investors prescribed by higher inflation and interest and expectations due to full employment in the US that has also augured higher inflation and interest rate and expectations and outflows from the emerging markets due to depreciation and inflation and expectations.

However, lower oil prices have ebbed the expectations of a strong dollar which could prove to be a positive for emerging markets inflows and appreciation, but tightening in the US and strong dollar could increase uncertainty for growth inspite of lower inflation in the US and slowdown in the biggest trading partner China probably due to tariff and trade war which could be contractionary for demand and investment coupled with slowdown in the emerging markets, including INDIA, EVs have changed the dynamics in the oil market... Even INDIA''s low profile cities have now e-Ricksha....

The trade war has the potential to cloud indecision in investment which is evident in the weak stock markets across the world further aggravated by rate hikes in the US and uncertainty in the oil prices all have contributed to a benign demand and investment scene which has changed expectations about the future and delay in spending, 

Nonetheless, emerging markets have their own problems like NPAs in INDIA and higher dollar denominated debt like Turkey that could further add to instability in the domestic and global economy, but it is true that tightening in the US and emerging markets and expectations with inconcluding trade negotiations are bigger worries for the business and investment and employment and wage and demand and growth and expectations.

Higher prices or inflation and expectations signal rate hikes and expectations which lower and delay demand, but increase supply and expectations leading to lower prices and expectations, which again increase demand and price and expectations, when the interest rates are cut, as long as rate hike continues demand remains low and lowers prices and expectations, which eventually increase demand and price and expectations when the interest rates are cut, however prices or inflation and expectations could also affect demand and supply and expectations even without rate hikes and cuts.

Otherthings remaining constant, lower prices increase demand and lower or delay supply and expectations because real value of funds increase on higher returns expectations, and, higher prices reduce demand and increase supply and expectations the sameway… because the real value of funds reduce on lower returns expectations… even without an incentive or disincentive and inducement or reducement…

The idea of base year is to find a year in which leading macroeconomic indicators growth, inflation and unemployment and others behaved normal... Like after adopting inflation targeting and growth that followed....

INDIA desperately needs data on employment inorder to frame consistent policies... It has a large unorganised sector for which it has no data which could increase its GDP... Labour codes might help registration of the labourforce on a daily basis to know the unemployment rates... and... for course corrections...

Generally, WPI must be lower than CPI because traders buy from the wholesale market at lower rate, say lower prices to increase supply in the retail market after transport to selling points and unloading and storage cost... There is a margin of 10% from the wholesale market to the retail shops... normally...

True, CRR is a contingency part of the reserves which might be used to increase lending during rising NPAs and slowdown which is likely to underscore rate cuts transmissions... It is a rainy day fund to mitigate risks of defaults and low demand and growth....

The govt is a big player in the agricultural market... if it delays supply like oil companies that could contain loss... By delaying supply to the market the govt might nudge higher price expectations... when people expect higher prices they hold supply which further reinforces higher prices and expectations... Higher price expectations may delay supply and increase prices and expectations... Higher exports might also help lower domestic supply and increase price expectations... UBI could replace NREGA since both aim to supplement income... 

'The biggest benefit of demonetization was to bring black money to the banking which could help create loans since it would increase deposits or savings and lower interest rates... However, RBI did not let banks lower interest rate since the liquidity was not stable, but home loans rates were lowered... which could lead to long run effects on the behavior of people to save money in banks... It could be continued if people choose to cashless... without it... there is no guarantee that people would not again hoard money to avoid taxes...