Higher borrowing cost
is making the INDIAn industry uncompetitive... New private domestic investment
is not picking up...
Despite its cheap pool
of labour INDIA has failed due to higher real rates compared to competitors...
FDI is flowing in, but
the RBI has kept domestic demand under-check due to higher inflation
expectations...
If foreign investment
is allowed why higher real rates should bind domestic investment which could lose
market share to foreign investment due to increased costs...
Higher rates have
discouraged domestic private investment and growth and fresh demand for loans
and business for banks...
The real fight is to
invest more and more in education, skills and innovation to increase
productivity, lower the price-level and increase competitiveness and demand...
However, inflation and
depreciation may be short-term measures to increase investment, employment and
growth by increasing external demand, but lowering domestic demand and
imports'' demand, which in a way is contractionary by increasing interest rate
and wage expectations.
Nonetheless, higher
productivity and lower prices increase domestic demand and demand for exports
and imports too because it would increase real wages and lower interest rate
and expectations because it would also increase savings and investment and
employment and growth...
Recently automation has
aroused much curiosity and put as a dampener to employment, but it could
increase labour supply which could require skill development to boost
employment and growth...
Moreover, real wages
would also increase due to increase in skills and productivity and lower prices
and increase demand and growth...
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