INDIA and Full-Employment...

Article;
Fall of Rupee Does Not Benefit Much for exports

Comment;

Higher interest is affecting the export sector in the same way it is affecting the whole economy. Both CAD and Fiscal deficit has turned inflationary... which the RBI is alone managing and which the government is literally scoffing by saying it will push growth itself. The RBI is under pressure from different groups to lower interest-rates so that businesses can employ more, produce more and earn more (higher income). The government through its fiscal policy has depressed wages and income. The private sector is paying more per labor…The government has put a restrain on wages and the fund with which the wages are being paid competes with the same private sector. It means if private sector in spending more and increasing more employment and wages, more relative to the public sector then why the government should enter the scene. The governments cost is high. To cut short, the government is simply less efficient, although is it efficient. Another problem is that this is funded out off taxes. The government taxes and spends. It reduces private demand somewhere. People will demand less and spend less, less employment will be created and our goal is full employment. In the long run we need to achieve full employment. By exports, too.

The unemployment rate in INDIA was recorded 2.2 % in 2011-12, almost full employment and since our wages and per-capita income should converge to the wages in the developed economies, they should go-up; in real terms upto level of full-employment and after full-employment they will increase in nominal terms. As I said wages should converge to the developed levels. But, the central bank’s job is to make this transition smooth by making inflation grow less than the rise in income. Best assumption will be a constant and same figure…