Supply creates demand and demand creates supply, too... Demand side economists favour inflation to increase demand and supply and growth because higher inflation would mean higher demand and supply and price expectations and the supply side says that lower prices increase demand and supply and price expectations... Expectations could be reinforcing the prices as we see above... Economists says that in the longrun productivity is everything which means that business could produce more at lower cost and price... which increases demand and growth... Low prices are good for demand and supply, too, as high prices for spending... Low prices increase real wages and incomes and savings, too, though higher prices could increase nominal wages and incomes, and savings, too... It is not feasible to divide people to say that lower inflation increases debt burden and higher inflation lowers debt burden... because lower inflation also lowers cost and real wages and higher inflation also increase cost and prices and wages...
We know that the higher inflation is due to the low base during Covid because prices fell due to low demand, but they have bounced back quickly... Higher inflation in 21 could lead to the debase effect next year turning to lower inflation... Lower inflation or price expectations could increase supply that could be self-sustaining, since lower inflation expectations would make investors delay demand and/or increase supply which could reinforce lower prices.... It is true for both the stock market and the broader economy... Though savings could lead to higher investment later... savings and investments are an increasing function of time... People save more and more as the time pass and invest more, too...
Minor correction expectations are true for the short run only, but the long run trend of the stock markets across the world have shown a steady state growth, ie they are moving upwards despite corrections... People who invested for the long run have been benefitted from the investment even after corrections...
Moreover, any big correction is very unlikely in the short run... we have limited time period... Long run has more time to be uncertain and for deep corrections...
This isnt true that this is not the right time to put fuel and electricity in GST... which have heightened inflation expectations... There is a need to raise the productivity in these sectors to stabilise the price level and interest rate and expectations... which is important for the financial stability... Lower prices would increase real wages and exports too due to lower domestic exchange rate...
All countries want large markets for their produce at lower cost... A strong exchange rate would help attracting investors... If a country borrows in its own currency the risk of default goes nowhere... Settlelling exports/imports in own currency would also lower the exchange rate risk and demand for foreign currency and lower exchange rate expectation which could delay demand...
INDIA has a federal structure... Few years' back following the decentralisation tax devolution has moved in the favour of the States... More revenue has been deployed to the States, now...
INDIA is lucky that it has a low and stable inflation, business costs including the interest rate are low and relief from the lockdown... It increses the asymmetry in equality... The govt must help bring liquid equity saving deposits... The labour must have a share in the the top companies to reduce inequality...
Banks may introduce savings deposit linked with equities which may outdo inflation and and are liquid than bonds, bonds are safe heaven investment, but to gain from bonds one must hold on longer, but there are shorter term bonds available too... But, no such limit with stocks... They should be invested in the index funds... The risk is less... They are directly significant for the index... In the long run equities have shown consistent upward rise than other asset class more than inflation... Banks shall buy only significant corrections in the index funds...
A slowdown in China like the Global Financial Crisis 08 would benefit INDIA due to lower global commodity prices... especially oil prices... Bright growth prospects could attract higher foreign exchange inflows... INDIA would be fastest growing economy in 21 and low and stable inflation and adequate foreign exchange would help weather any crisis and bounce back quickly... INDIA has a lot of pent up demand due to higher unemployment and lower real wages due to skills and specialisation gap...
Cryptos are not substitute to fiat currencies, but alternative of investment assets... The meteoric rise of bitcoin has given space to hundred of coins now...
