Interest-rate and Competitiveness...

If inflation has picked up in August which means supply might has gone down and/or demand has gone up, but lower growth indicate lower demand and supply and inflation, too... However, it increases rate cut expectations... Lower economic-activity point to rate cut expectations because growth is the underlying objective of the monetary policy... When the policy rate is 6% and inflation is 3.3, and the real effective rate of interest is above 3% that still increases space for rate cuts when the developed countries rates are lower than 1%... Otherwise it would decrease competitiveness and demand and growth... The real interest story is already well known which might negatively affect domestic competitiveness and demand and growth might go down... Lower interest rate increases competitiveness and demand and growth during a recovery...

                                              

Higher wages or income expectations because of progressive policies could increase demand, but if investment and supply do not increase we would be unlikely to break the vicious inflation cycle... Interest rate cut and expectations same as expectation of lower prices could delay investment spending if there are lower inflation and expectations or at least contained, below the inflation target, but it is a little uncertain to expect what would happen... Therefore, businesses must start accumulating inventories or use their capacity to produce more to lower average cost and prices and increase competitiveness and demand... The government and the RBI might try to incentivize investment and employment by the private sector through every possible means when they are hit by loss due to low demand and growth...