In the current expansion of the trade cycle in INDIA, mostly the result of foreign investment and only a little far the result of domestic private sector, which has been saddled with NPAs in construction and real estate and banks, the drivers of growth, mainly, which are also the creator of jobs in an economy with skills and productivity gaps, which has depressed demand and investment, even though a slow implementation of pay commission has further delayed recovery in consumption and demand and growth, moreover, higher real interest rate in the past compared to other countries has cut domestic supply investment employment demand and prices and expectations due to inflation targeting, nonetheless oil prices and inflation has cut down the real interest rate, now.
The global growth is also in doldrums due to trade wars and higher interest rate and expectations in the US that has led to the outflow of investment from the emerging markets because of depreciation and expectations which has further resulted in higher interest rate and expectations in the outer economies and a strong dollar which would also reduce global demand due to costly dollar, which is one of our SDR currencies, when oil prices are again increasing interest rate and expectations and strong dollar and expectations leading to lower countries’ demand and growth and global growth, higher oil prices would also lower investment, stocks too, and increase supply expectations, we have recently witnessed oil stocks gaining on lower prices which increase demand, oil has been a traditional source of inflation.
Lower interest rate and expectations are as important to the US economy as to the emerging markets and global growth and more when the domestic competitiveness is hurt by higher tariffs and retaliation which increase price and reduce demand and expectations, also because of higher interest rate and expectations, moreover, a cheap dollar would also reduce price of oil relative to the increase nominal exchange rate or depreciation in the dollar which would also help other economies and global growth, which should also stabilize depreciation in the outer world and could also help increase US exports, in addition lower relative oil prices and inflation would increase real wages and domestic demand in the US and globally, since it is a net exporter of oil, now.
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