Big players use the common man's fixed deposits to generate profits by investing in equity and debt that hardly reaches the creditor and inflation benefits the borrower, real interest goes down and investors invest more. Money in the broader economy creates inflation but money in the stock and debt market creates returns and savings that could beat inflation.
The govt has done right to allow small savings in debt but the maturity period is long which shall be followed by incentivizing short-run debt and equity investment... though not by hiking LTCG but by rationalizing the definition. 1 year is in no way a long run. We do not die in one year...
Investment is akin to business that also generates returns and demand and expansion... It is easier to invest 5, 00, 000 in stocks wisely than in stalls that depend on the other's income and demand conditions which entails a lot of uncertainty. In the short run, fundamentals change little and cost less.
We need more investment to increase supply, India is supply constrained... Prices might go up, but supply would follow too... it's a dynamic cycle... Where necessary RBI may provide interest rate subvention... tailor according to needs, but increase income... bargain individually...
Stock market investors shall buy at the lowest price and sell at the highest price for the day in other words buy at the lower circuit and sell at the upper circuit using the limit price in order to maximize return for the day.
The stock market has the capacity to reduce poverty in 5 years and better allocation of labor and income. Buy and sell daily. Do not be a price taker be a price setter. Buy the lowest and sell at the highest price for the day. Stock market investors shall pose unity of buying and selling decisions. Higher prices would also help promoters.
INDIA is exporting more oil than it imports after processing to earn foreign exchange, though if it imposes a disincentive supply to the domestic supply might increase and contain prices. It has a high oil export content.
INDIA's inflation mainly comes from food and fuel which get translated into wages and other prices. INDIA is supply constrained as far as the above reasons are concerned which also needs better management of stock and exchange rate.
We could easily spot a cyclical movement every year and quite predictable, but little could be done since the interests of different groups collide. When the government tried to resolve the problem in the farm sector a lot of friction started and the govt backed off. Reforms are very tough here due to opposition to even the right policies. Obstructionism has blocked the reform process.
Wages are consumed and profits are saved any default on real wages or deduction due to inflation would hurt the labor most because of the high propensity to consume and save by labor and capital, respectively.
Any increase in capital income with a reduction in real wages could backfire because it could reduce demand, both consumption and savings of the working class would go down and could result in higher interest rates and increased inflation.
Other things remaining constant it is a zero-sum game on an aggregate level unless the money supply is affected. It is a myth that one could grow at the expanse of the other, resources are scarce, and money too though they could be printed.
We live in an interdependent environment and our well-being depends upon others' income and well-being. Higher inflation also reduces returns on investment due to higher inflation and wage demand.
