Article;
Rupee battle Y V Reddy and D Subbarao were wrong as they tried to manipulate currency.
Comment;
We must weigh down the
gains and losses due to a depreciating currency. There are many positives, too,
and the most important are growth and employment creation with in the economy,
and, another could be the Indians holding the Dollars. There is a trade-off
between the gains and losses from depreciation in the exchange rate. On the
gain side we have growth and employment because exports increase, and, on the
loss side we have inflation and high interest rates. A high interest rate can
encourage, discourage savings. We need to see what is in the best interest of
the country... And, in the long–run we bat for higher income, everybody, poor
and rich, alike. So from this angle we need to score more for growth and
employment means more income (our target) by choosing a higher inflation target
and low interest rates in favor of a depreciating currency. And income will
rise in real when the rate of inflation is lower than the rate of growth of
income. That would mean a rise in “real income”. And, at best we can expect
that the rate of growth of wages/income equals the rate of growth of inflation.
Inflation erodes the value of income because prices may rise faster than income
and could affect the income’s real-value. But unluckily the RBI does not decide
the rate of growth of wages/income, directly…
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