Suppose there are no sell orders...

 Suppose there are no sell orders for a particular stock. In that case, it means there are currently no sellers willing to part with their shares, which could lead to the stock price increasing significantly as buyers compete for the limited available shares, potentially causing a situation where your sell order might not be executed and you could be stuck holding the stock until someone is willing to buy at your desired price; this is especially true for thinly traded stocks with low liquidity.

Key points about a situation with no sell orders:

Price Increase:

Without sellers, buyers will need to offer higher prices to entice anyone to sell, potentially causing a rapid price increase.

Order Not Filled:

If you place a sell order, it might not be executed as there are no buyers to match with your offer.

Low Liquidity:

This scenario is most likely to happen in stocks with low trading volume, where finding a willing seller can be challenging.

What can you do if there are no sell orders:

Adjust your price: Try lowering your selling price to attract potential buyers.

Use a market order: If you need to sell immediately, consider placing a market order, which will execute at the best available price (which might be significantly higher due to the lack of sellers).

Wait for market conditions to change: If the stock is not urgently needed to sell, you can wait for increased buying interest to create more selling opportunities.

This is AI...

"If everyone buys at the same higher price for an asset, the price of that asset would likely skyrocket due to a sudden surge in demand, creating a "bubble" effect where the price becomes significantly inflated beyond its actual value, potentially leading to a market crash when the bubble bursts as people try to sell at a profit, causing a sudden drop in price as sellers outnumber buyers.

 

Key points to consider:

Supply and Demand:

The fundamental principle of markets is that when demand exceeds supply, prices rise. If everyone is buying at a higher price simultaneously, it creates an extreme imbalance in favor of buyers, driving the price up rapidly.

Market Manipulation:

This scenario could be considered market manipulation, where coordinated buying activity artificially inflates the price of an asset.

Bubble Formation:

When a large number of people buy an asset at a significantly inflated price based on speculation rather than intrinsic value, a "bubble" forms.

Market Correction:

Once the bubble reaches its peak, sellers will likely start to outnumber buyers, causing a rapid decline in price as people try to sell their holdings to avoid further losses, leading to a market correction.

Example:

Stock Market Bubble: If everyone decides to buy the same stock at a much higher price due to hype or speculation, the stock price could rapidly rise, creating a bubble that eventually bursts when investors lose confidence and start selling."

 

If a large number of intraday traders set the same limit sell price for a stock, it would likely create a significant selling pressure at that price, potentially causing the stock price to rapidly drop as the market struggles to absorb all the sell orders at once, leading to a potential price drop and difficulty in executing all sell orders at the desired price; essentially creating a "sell wall" at that specific price level.

Key points to consider:

Market Liquidity:

If a large volume of sell orders is placed at the same price, it can quickly overwhelm the available buy orders, leading to a significant price drop as sellers compete to offload their shares.

Order Book Impact:

The order book will show a large concentration of sell orders at the set price, making it difficult for buyers to find willing sellers at a higher price, further pushing the price down.

Partial Execution:

Depending on the market conditions, not all sell orders may be executed at the desired price if there aren't enough buyers willing to take on that volume at that specific price level.

Market Volatility:

This scenario could create significant market volatility, especially if the stock is already experiencing high trading volume or is considered to be a "high-beta" stock.

Potential Strategies to Mitigate Risk:

Spread Out Sell Orders:

To avoid a large concentration of sell orders at one price, traders can place their sell orders at slightly different price levels to create a "price ladder."

Market Orders:

In extreme situations, traders might consider using market orders to ensure their sell orders are executed quickly, even if it means accepting a potentially lower price.

Monitoring Order Book:

Closely monitoring the order book to identify potential imbalances and adjust sell orders accordingly.

High Beta Stocks in Nifty - List of High Beta Shares in NSE (2025)A high beta stock is a stock that is highly volatile, meaning its value fluctuates more than the market. These stocks are riskier but can also be more profitable.

What are the characteristics of high beta stocks?

They have a beta coefficient greater than 1

They are more likely to experience large price swings

They are often associated with sectors like technology and biotech

They are often issued by small and mid-cap companies

Why are high beta stocks risky?

They can result in significant losses during market downturns

High risk does not guarantee high returns

Who invests in high beta stocks?

Experienced investors who want to create wealth through stock market investments

Investors who are comfortable with volatility and are seeking potential higher returns

How to consider high beta stocks?

Consider your risk tolerance and financial goals

Weigh the potential for higher returns against the heightened risk of significant losses

Align your investment strategy with your risk tolerance and financial goals

“Nothing is permanent in Economics or, in Life, in the short-run, there is more upheaval, the effort is to make the long always bright... "

Nothing is permanent in Economics or, in Life, in the short run, there is more upheaval, and the effort is to make the long always bright... we move in cycles... Good and bad are repeatedly followed by each other... Low base increases expectations..."

 

“According to recent data, India ranks around 133rd globally in terms of GDP per working hour, indicating a relatively low labor productivity compared to other countries; with an estimated GDP per working hour of around $8.

Key points about India's GDP per working hour:

Low ranking:

Due to its low labor productivity, India is positioned near the bottom of the list when compared to other countries.

Source:

This information is based on data from the International Labour Organization (ILO).

Long working hours:

Despite long average working hours, India still has low productivity per hour worked.

High productivity means high supply...

In economics, "productivity" refers to the efficiency of production, measuring how much output is produced per unit of input (like labor or capital), while "supply side" refers to the policies and factors that influence the ability of an economy to produce goods and services, with the primary focus on increasing the productive capacity of an economy by enhancing productivity through measures like investment in technology, education, and deregulation; essentially, supply-side policies aim to boost economic growth by increasing the overall supply of goods and services in the market, often through improving productivity levels.

Key points about productivity and supply side:

Relationship:

Productivity is a key component of the supply side of an economy, as higher productivity means more output can be produced with the same amount of resources, leading to increased economic potential."

 

Masses are not conscious of their power ... if prices are high they shall exercise the choice of alternative... if they lower demand and price expectations... firms would increase supply... which would lower actual prices...

 

"Inflation expectations are the anticipated rate of inflation that people expect to occur in the future. These expectations are based on people's perceptions of how prices will change over time. They are important because they can influence current economic decisions that can affect actual inflation outcomes.

Here are some ways that inflation expectations can affect actual prices:

Firms

If firms expect inflation to be higher, they may raise prices of their goods and services faster.

Workers

If workers expect inflation to be higher, they may demand higher wages to make up for the expected loss of their purchasing power.

Consumers

When people expect inflation to increase, they may spend more and save less.

Inflation expectations are a crucial factor in monetary policy decisions. Central banks should consider both long-term and short-term inflation expectations."

 

Supply creates demand... Suppose supply has to be increased and demand is delayed during high inflation. In that case, RBI must lower inflation expectations which could be self-fulfilling while maintaining high interest rates which could result in actual low inflation and increased demand... Low prices increase demand and price expectations and vice versa... It is the nature of prices to be volatile due to changes in demand and supply... Nowadays inflation moves between a target as set by the central banks, they are responsible for creating price expectations by investors and outcomes. The problem arises when outcomes are not as per expectations due to uncertainty... People try to avoid loss and increase gain, and the central banks, too...

We should not forget that depreciation could increase imported inflation, especially oil prices, as it increases inflation expectations..." Depreciation is ok, but depreciation expectations may delay exports and increase imports... Depreciation and appreciation expectations might increase exports and delay imports..

Domestic inflation indeed increases depreciation and expectations... The mechanism keeps exports competitive in the face of higher domestic prices, to keep the relative exchange price of exports stable... Though the original goal is to lower domestic inflation wages and interest rates to make exports competitive... Inflation and depreciation mean an uncompetitive domestic economy...

Economic growth depends on the expectations that the available data creates. If the expectation is that there would be a rate-cut cycle in the short run, people could delay demand and increase supply -which could lower inflation expectations.." "In the long run, it would increase demand and inflation expectations...

 And, the internet information has been handled at lightning speed, too... 133 becomes 126 and 2.8 becomes 7.6 ... This productivity growth is not reflected in supply and prices or inflation... There is one more important thing ... These days they use RFID chips to harass honesty... This is a real experience... Beware telling the right..."

 

"Productivity and inflation have an inverse relationship, meaning that higher productivity is associated with lower inflation. This is because more productive workers produce more goods and services at a lower cost, which increases supply and decreases prices."

 

In 2016 when Raghuram Rajan left the productivity growth rate fell from 9.5% to 2.8% in 2023 continuously... I do not know if he supported demon-etisation...? Probably not... he left inSep...2016..."

Education and knowledge lead to innovation... INDIA's capital productivity also stands at the bottom... It simply means lower prices and higher demand... The argument is that we are a labor-surplus economy therefore we need to specialize in labor-intensive lines of production, but capital-intensive investment means technology-rich and lower cost of production and prices which could increase demand and price expectations... Saved labor could be further used to increase production and lower prices using scale economies... Education, technology, and skills could also be imported... which are necessary for innovation and higher productivity, supply and higher demand more profits... The budget should promise completely free education for the poor with food... with only one Board with a uniform education code... If necessary attract foreign investment...

This is one of the reasons for high inflation 10% and 15% inflation tells nothing if it is on a low base... It is the relative experience of prices vs wages and real wages or savings ... We invest what we save at the micro level... If growth is not happening for the unit or subject what we could expect at the aggregate level... The economy needs excess supply and more savings... more investment and demand... and more investment in innovation...

 

"After 2014, however, real wages stagnated or declined. In rural areas, agricultural labourers' wages dropped by -1.3 per cent annually, and non-farm rural wages fell by -1.4 per cent annually during the second term of the Modi government.13 Jan 2025"

 

"India's GDP per capita at PPP is $10,233, and Rs 8,50,000 doesn't show the actual case."

 

"जिसमे देश में महंगाई 5% की दर से बढ़ रही हो 10 साल में 50% सफाई हो रही हो मुद्रा के मूल्य में तो यह सप्लाई साइड प्रॉब्लम है... सही है... क्यों की उत्पादकता दर के मालमे में भारत बहुत निचले पायदान पर है l विकसित देश की बराबरी करने में भारत को 150 साल लगेंगे l वैसे भी जहाँ तक बचत का सवाल है उसे दुगना होने में 14 साल लग रहे हैं, FD में l रियल इंटरेस्ट रेट 5% के हिसाब से l""भारत के स्टॉक मार्किट की स्तिथी और धरातल पर अर्थव्यवस्था की स्थिति वस्तुस्तिथि से कोसों दूर है ऐसा होता रहे गा l लोगोंको तैयार रहना पड़ेगा l"

 

"Hame ye samjna padega ki sarkar business karne ke liye nahin hoti... kalyan ke liye hoti hain... Profit is not the motive of Govt... Govt is extracting dividends from RBI... Never heard this news in comparison... High taxes tell the real story... Dosare ke mehnat ke paise par ham ammeer horahe hain, vo garib ho rahe hain..."

 

"When there are expectations of higher prices in the future, it typically leads to a decrease in current supply on the supply side, as producers tend to withhold some of their product to sell at a potentially higher price later on, causing a shift leftward on the supply curve; essentially, meaning less product is available in the market currently."

 

"We want a budget that lowers inflation expectations and increases supply or we can say that one increases supply that lowers inflation expectations and increases savings... We do not want a budget that spends more we need a budget that lowers prices relative to income... and investment and more supply and get the expectations and feel of becoming rich overtime and spending... Lower inflation also increases savings..."

"Everybody is worried about rate cuts and nobody for lower interest rates on savings, when all save and few borrow..."

Growth is sacrificed when the value of the money is sacrificed because spending goes down due to inflation, and people buy less due to high prices. However, inflation expectations may increase spending which further increases inflation. Normally, people expect inflation to go up in the long run because they assume that the population would increase, but experience from Japan shows that advanced stages of growth increase supply, and demand goes down due to a lower population growth rate, US, Europe too... However, if the central banks increase the value of money by increasing interest rates it may help create low inflation and expectations people could delay spending and actual inflation would be low which means higher demand... Lower prices are more expansionary, it is the law of demand...

 

This age monetary policy has missed the goal of increasing savings and, then, investment... The people whose savings are invested are poorer than the people who are using their resources... This is a partiality... Wealth is being destroyed by using inflation as a policy... Central banks must target low prices by higher interest rate, it is the only way to create real wealth..."

 

The inflation expectations have been stable around five percent, but the RBI wants lower inflation expectations for low inflation and continued expansionary policy... The central bank shall target value for money by maintaining prices/inflation to increase/decrease demand/supply to achieve full employment, and growth, and expectations... Our ultimate object is price stability with full employment...

 

"Household savings had touched a peak of Rs 23.29 lakh crore in 2020-21 -- the year which saw the second wave of the Covid pandemic. Following that it has been on a decline. It then fell to Rs 17.12 lakh crore in 2021-22 and further to Rs 14.16 lakh crore in 2022-23.9 May 2024. According to the National Account Statistics 2024 from the Ministry of Statistics and Programme Implementation (MoSPI), net household savings dropped a massive ₹9 trillion over the three years leading to FY23, now standing at ₹14.16 trillion.30 Oct 2024"

 

In the US, Fed wants investors to expect no rate cut in hindsight and continue to invest, a rate cut is not expected until an exception arises that it wants them to not delay spending in the expectation of a rate cut and lower cost... A strong dollar makes imports competitive and could boost domestic demand for imports... A strong dollar increases exports uncompetitiveness... Probably others are not imposing higher tariffs on US exports... Dollar is very costly..."

 

RBI is now more concerned about inflation expectations due to investment demand and spending and rate cuts, while consumption demand is lagging due to higher inflation and also due to higher interest rates... If interest rates are maintained or increased a little it could help lower inflation and lower prices increase demand and spending... A lot of consumption demand would increase... It would also help the capitalists who save more than common people... Interest rates have lost the lustre as wealth creators... Real interest rates are 2% pa and if we calculate the speed to double investment it will take 72/2% years is 36 years all because of inflation, same for debtor... People have moved to more risky assets... Lower interest rates are an important concern for risky investment... Inflation and expectations to increase spending is rejected by the law of demand which says lower prices increase demand (and growth) and higher prices actually lower demand... Its a mirage...

 

If the RBI increases interest rate to 15%pa prices would definitely go down to 3%... Business is done by rich.. it would not matter much. It would make people rich real incomes and wealth would go up... demand and growth could increase if people understand this... Good old days of double money after five years... Higher demand would also create employment...

 

Industry must reduce consumers' prices and cutting rates is just an artificial remedy, high interest rate expectations could lower price expectations which means more supply and actual low prices... Low prices would increase demand and growth...

 

The only way to increase profits is to increase scale or sell more and more without increasing prices and reducing demand... Without innovation, a firm could increase investment to lower average cost due to cost inflation and prices... Lower average costs and prices would increase demand for exports... one could sell more... The ability to invest more is quite an advantage in business...

 

Low price expectations could increase supply and lower actual prices... Low prices increase demand... and growth expectations... also due to a low base... This is done by every business... During inflation when demand is low low prices could help increase demand... also if due to high interest rates...

 

INDIA is not demand deficient which makes the fundamentals strong but supply-side is weak, inflation tells... High inflation expectations have also reduced supply...

 

Demand is low due to high inflation... higher prices low demand... When demand is high we need a high supply which could be carved out with low price expectations, high inflation expectations would not let supply materialise, people may hold or spend less or save more for the future... High inflation reduces expenditure/spending... Year over year demand would go down or have a very low real income or growth rate... Like real interest rates... With 2% real interest rates rates it would take 36 yrs to double deposits... Poor people would work their whole lives to double their wealth... INDIA needs a 2% inflation target to increase the real growth rate and high interest rates to lower price expectations and increase supply... Capitalists save more than common people... Even if the RBI maintains the status quo it could lower demand and price expectations and increase supply which actually could reinforce low prices...

 

Lower prices increase demand and growth... Interest rate cuts do not increase consumption spending, though demand for loans might increase... Increasing consumption spending may require low prices or inflation... People could also delay spending in expectation of lower rates which could lower demand and growth in the short run...

 

Rate cuts are literally possible when we have inflation and expectations between 2-4%... Savings are down too by Rs 9 trillion which could lower the credit multiplier and demand also due to higher interest rates... Higher interest rates and savings are important for lower prices and higher demand and economic growth...

 

As far as, inequality will always be there because people who are poor today take time to become rich and by that time, the rich will be a lot richer... The only way to reduce inequality is to increase interest rates on savings and investment. This would be reaped from the capitalists and given to the masses, though capitalists would also gain by interest income on savings... Higher interest rates would also lower inflation and expectations and low prices increase demand and growth, poor people would also save a lot... While other things remain constant, low prices with sufficient employment would increase the real value of money and demand and supply and growth and expectations... This could be a better way of income distribution... Not only, taxing the rich, but timely distributing it to the poor makes the goal complete, the outcome would be lower equality and poverty... Higher interest rates could definitely help create long-run wealth and lower prices and expectations could make the process self-fulfilling...

 

The economy is finely divided into producers and consumers, and a rate cut would benefit the former, while a higher rate would benefit consumers in the form of lower prices and higher interest on savings which would also increase demand and employment. Politically mathematics supports consumers, though capitalism is a part of the economy, but governments are run by numbers and money... Political favorism and donation are common... Favoring the rich is unjustified on political and economic grounds... It is simply not feasible...

 

 

Economists believe inflation cuts real variables...

Economists believe inflation cuts real variables like real wages, interest rates, and exchange rates in order to gain competitiveness, but it is against the law of demand that lower prices increase demand and higher prices lower demand... Nonetheless, inflation expectations are self-fulfilling... Moreover, a country where the value of money is losing 5% every quarter shows a weak supply side or high demand... Higher interest rates can control food and fuel inflation through higher unemployment and lower economic activity... Inflation means food and fuel inflation because they reduce poor people's real wages and savings... and investment in the economy... and lower supply means further higher prices... If Inflation is 5.4%, nominal growth is 10% and real GDP is much low due to high inflation... unemployment rate is 8%... The rate cut is justified to increase the 5% growth rate...

 

We are losing competitiveness fast due to food and fuel inflation because they add to inflation and higher wage, and interest rate expectations... Other things constant, inflation and a stable currency would not let exports grow because prices would increase relative to the rupee exchange rate, which would lower export demand... If we really want to increase demand and growth in real terms we should improve productivity and competitiveness where we are weak, in INDIA's case food and fuel inflation... If we had a good supply in INDIA we could expect that lower borrowing costs could increase supply and lower prices and increase demand and growth and expectations... But, India is both demand-dominated and/or supply constrained, inflation tells the story...

 

INDIA is demand-dominated and supply-constrained because of higher prices and interest rate expectations even though we have an 8% unemployment rate and the economy is overheating when there is excess labor supply, we could imagine inflation at full employment which is directly not achievable since full employment would further increase demand and prices... RBI Guv’s never helped include the unemployment rate in the RBI commentary since growth results from trade-offs between inflation and unemployment... What is INDIA's full employment? It is important for inflation, interest rate, spending, growth, and expectations.

 

The Government may bring instruments that could prove attractive to delay consumption, small sacrifices, paid fast and higher, could help lower inflation. During inflation, spending could be reduced by aiding savings... poor people's savings... Saving ideas must be attractive to beat inflation...

 

Due to poor supply and high inflation, India is losing its competitiveness fast. High inflation means that money is losing value fast, and spending will go down. Due to high borrowing costs and further lower supply, prices will increase again. It is cyclical...

 

Inflation is a loss in competitiveness and demand, it makes people poor... The argument is that inflation cuts the value of real variables like real wages, interest rate, and exchange rate and increases competitiveness to increase investment demand at the cost of devaluing savings and since the capitalists save themselves... the trade-off involves the choice of lowering the value of money to increase investment and employment... which lower real wages and demand... IS FLAWED... Inflation creates inflation expectations means the trend of losing the value of money would continue... A simple hospitality worker gets a $ 200 tip a day in Germany, but Indians are struggling to earn the same in a month... There is no end to lowering the value of money... The trend we have observed is that in rich countries the value of money has increased over time with a lower population growth rate and good supply side... Poor people lose savings faster than rich due to inflation and expectations...

 

INDIA is losing its competitiveness fast since the exchange rate is relatively stable. Other things equal, higher inflation means a loss in productivity, competitiveness, and demand. The rupee is stable, but inflation is increasing, which means a loss in comparative advantage and market share. Simply, higher inflation means lower demand, but higher inflation expectations mean further higher prices because people would prepone demand and push prices further. If people expect that domestic inflation is going to increase but the exchange rate would be stable they would consider it a loss in purchasing power in future if the rupee does not depreciate...

 

As far as Chinese competition is concerned, most notably Indian products might not be a cheap and better substitute for Chinese products... We are a cheap currency, and we have an advantage in the Chinese territory, too... But investment is not there, especially in terms of scale. If we produce at lower prices, the same products, then only we have a scope to increase market share... Even when Chinese products involve transport costs and import tariffs... INDIA's 4% inflation tells that we could expect the INR to depreciate 4 % to keep exports competitive but only inflation has made exports uncompetitive but currency is stable... Inflation and higher prices mean that we have lost competitiveness... Higher prices mean a loss in demand and growth and expectations...

 

Supply is increasing and population growth is going down, a phenomenon observed in advanced economies that points to a special quantity theory of money where supply increases and prices fall due to lower borrowing costs..., which means low price expectations... To lower inflation it is important to create low price expectations for the future... Higher interest rates/borrowing costs might increase cost lower supply and increase prices... INDIA is food and fuel supply constrained... Prices are too volatile creating uncertainty for growth... Both, are in the hands of the govt... Provide DBT for ration and reduce taxes on fuel which is also a kind of spending... Without savings and without printing money same investment is not possible, printing money means more inflation, lower investment, and supply further increased prices... The special quantity theory is a long-run trend...

 

The divergence in the share of wages, profits, and taxes provides evidence of the growing monopolisation of the economy. 4-to 5 companies are dominating the whole credit, though business is done by way of loans only, it is the central bank's money... Savings of the poor are either taken away by profits or taxes... The government is too a big monopoly... Businesses instead of increasing productivity find excuses for raising prices and the same with the government and taxes... People are supporting an uncompetitive business and government... With time production and supply shall increase and control prices when population growth is decreasing, but profiteering and taxes have spoiled the demand... Greed is also self-fulfilling because it makes people poor, poor men will be greedy...

 

INDIAN cannot benefit from low interest rates abroad as the banking sector is protected from foreign money... At this nascent progress, this could be a boon for foreign investment... INDIA is 80 times in terms of currency and wages... which could solve the unemployment problem... INDIA should follow the model of a strong currency and cheap imports...

 

INDIA's not even in the top 50 of the top real per capita income countries, though it has the largest labour pool and youngest population... Without investment, we cannot cash on the country's comparative advantage...""India ranks 158th in the world for its investments in education and health care as measurements of its commitment to economic growth, according to the first-ever scientific study ranking countries for their levels of human capital. Why give tax?

 

Low growth and expectations give space to low inflation expectations due to lower economic activity and a slowdown ahead. Lower actual growth than the projected growth rate would lower expected growth, and low investment could be self-fulfilling. Low inflation expectations due to a high base and low growth could be verified by the RBI before cutting interest rates."

 

There are enough poor people's votes and space to work for their betterment... Caste politics for votes is an outdated idea, reservation should only be given to poor people... There is a great divergence between the number of educated people and spending in INDIA and abroad... INDIA has mastered the art of providing unproductive jobs for unskilled labor in agriculture and construction which lies in the unorganized sector... More than 50% of the labor market is unorganized and informal where the minimum wage is too low...

Food inflation has been a headache for governments since 2010...

Every year, floods, limited irrigation resources, bad food distribution and procurement policies, and missing storage facilities threaten financial stability, leading to higher wage demand and higher price and interest rate expectations... Food inflation is the main cause of inflation expectations in the economy... People say higher interest rates would not control inflation, though higher unemployment might reduce demand and inflation expectations...

Interest rate controls unemployment and demand, therefore it is wrong to say that it would not control food inflation... Lower interest rates and higher employment would increase demand for food and vice versa... Nonetheless, food and fuel inflation directly adds to prices and wage demand, though inflation expectations are also self-fulfilling through a wage-price spiral... We need to break this because inflation means a loss in competitiveness, demand, and growth... Inflation and expectations reduce demand - people spend less and also save more for the future- though low prices and expectations increase spending and also reduce future savings... Inflation lowers spending and lower prices increase spending... A loss in the value of money lowers spending and savings, and a higher interest rate is compensation, inflation also lowers exports...

Food inflation and high imports, especially edible oil and pulses tell the real story... INDIA has a deficit in food supply and pledges to be a food surplus country by 2047... False comments could not sway people who read and access the internet... It is more important to make people conscious and aware of the facts... it is the duty of a citizen... We are in an age which could spell trouble for liars, though the information could be changed too by people in power, it is a personal experience... If you raise you voice against those your survival would be in question...

India's food inflation is seasonal; it happens every year. The government of India demands too much for its public distribution, which increases the cost of supply and storage problems, which should actually be done through DBT."

After Covid all countries experienced inflation, but food inflation continued to remain high in INDIA even after years... All countries including China and the US controlled food inflation...

INDIA's inflation is not on a glide path it is sticky at 5% and given the 6.5% policy rate, the real rate is 1.5% which does not make room for big rate cuts... INDIA's supply side is not up to mark therefore we cannot assume that lower borrowing costs would increase supply and disinflation expectations which would increase demand and inflation expectations and could further increase inflation...

What an idea if inflation is high due to food inflation, reduce food weightage in the CPI... excellent to drive monetary policy with an agenda, and reduce interest rates when inflation is still 5%... If income is increasing 10% a year, 5% of inflation would be would be like a 50% tax... The inflation target should be 2%... Higher interest income is just for higher inflation and could help reduce spending and inflation... If the RBI reduces interest rates, it is a different matter...

In August 2024, without the base effect, the situation becomes even worse, 3.54% is on the 5.08% base and if we replace the 5.08% base with the 0, the base effect would gone and the inflation would be 8%...Probably if we calculate inflation on the same base year as the last print inflation would be 8%... We see not inflation but rate of growth of inflation...

Inflation is low given the base effect as the base on which the inflation was calculated was higher than normal. However, if we calculate inflation on the same base year on which the second last month's inflation was calculated we get a higher inflation print that may be double what we get now... Food inflation and taxes on fuel are hurting the (real) wages and demand and productivity... When inflation is high the central bank must compensate through higher interest rates... There is no other way of protecting financial stability... and loss in demand...

When we have high inflation and interest rates, how the economy would behave? The media and some people think everything is hunky dory, election season is over let us face the reality now... Inflation and unemployment, the twin objectives of the economic policy are on board negative...

RBI often considers base period as potent justification for low or high future inflation or expectations... it just got it right this time that September inflation would be high when it explained the cause of too low inflation in August which generated higher inflation and interest rate expectations... which underlies the RBI's understanding of prices/inflation and expectations.. If RBI could rightly predict inflation, it could bring a lot of certainty to the business group investment decisions... and most importantly interest rate decisions and expectations... it directly adds to spending and growth, though information about prices affects everybody... when have money... profit from a price move or motive... We do not always want higher prices buyers need low prices and sellers need higher prices, but the actual outcome would be only in favor of one this time either buyers or sellers... Time chooses the winner between sellers or buyers... in the short run...

Demand and Supply are Intertwined...

 Like recession, periods of high growth are also self-reinforcing due to EXPECTATIONS. This time inflation expectations, in the US were that it would subside soon, therefore people did not cut spending. The memory of the last decade's lower than 2% inflation reinforced those expectations.

If we know the expectations we could avert a negative outcome or even reinforce a positive outcome by the way of some economic stimuli.

This time people believed that inflation would come back soon so they did not cut spending and it did not cut the supply by lowering employment which kept reinforcing lower price expectations.

Prices are the oldest most reliable indicator of recessions and low prices could soon turn into a full-fledged recession, and the Fed thinks that may help avert a recession by cutting the interest rates.

Nonetheless, price expectations could help manage demand, supply growth, and expectations. It is a dichotomy that high price expectations are managed by high interest and lower price expectations by lower interest rates due to stress on the demand side and could reinforce expectations.

However, from a supply-side perspective, high price expectations must be dealt with by lowering interest rates and lowering price expectations by increasing interest rates, which could diminish expectations by affecting the productivity of capital, demand, supply, and growth.

The work of central banks is to reinforce positive expectations and diminish negative expectations though it is a time consistency problem since at times it wants high inflation and sometimes low inflation because prices are variable.

Nevertheless, it is a long debate whether we are managing demand or supply, but both are intertwined. During low growth, demand, supply, and price expectations we cut interest rates and during high growth, demand, supply, and price expectations we hike which could be self-fulfilling and could be avoided by maintaining stability in the interest rates.