We must judge a regime by price stability and the level of unemployment or employment which directly affect the economic growth rate... Low and stable prices help achieve full employment or the potential growth rate... because it keeps interest rate and expectations low and stable.....
Low inflation and inflation expectations the key macroeconomic stability indicators have been quite encouraging which quashed the previous regime, but monetary policy and the legacy of NPAs and ineffective interest rate and expectations management did not let investment soar which is important for job creation, the private sector investment...
We need skill development to draw workforce from agriculture to other sectors and provide gainful employment... Employment is the best answer to poverty... INDIA has a plenty of demand, but not productive employment or jobs and income or money which are dependent on investment and supply which are dependent on interest rate and growth expectations...
Low prices mean increased demand and supply and growth, otherthings remaining constant... however low interest rate incentivize demand, supply and growth and expectations... Nonetheless, lower interest rate expectations might delay recovery... is not good for the pace of recovery...
It would add to the uncertainty as when ''coz people would wait for lower interest rate to lower cost... The RBI failed to manage interest rate expectations in a world of low real rates even though inflation remained under the target...
The real dilemma for RBI is lack of the data on the unemployment rate... The goals of monetary policy are price stability and full employment... The economic growth rate is the result of trade-off between inflation and unemployment through interest rate and expectations management... The Phillips Curve theory...
Lower unemployment than full employment increases prices and interest and expectations and higher unemployment reduce prices and interest rate and expectations which help manage business investment and growth and expectations....
Poor people, who earn wages, mainly consume food and fuel, and have higher weightage in the consumption basket, and little manufactured products than others; therefore, RBI has set CPI the official inflation index and not core-CPI... Lower food and fuel inflation also affect wage demand and prices of manufactured products therefore important for inflation, wages and interest rate and expectations...
UBI was basically proposed in the background of recession and low demand and deflation or slowdown to increase demand and growth... But, in a country like INDIA with inflation and inflation expectations is bound to generate some more inflation in the presence of supply side weakness, especially food and fuel...
While doling out basic income the govt must work out the supply side... The economy is vulnerable to food and fuel supply shocks that could increase inflation and interest rate and expectations... and lower growth expectations...
Rs 8 lakh criterion for reservation is unthinkable or unimaginable 'coz people getting more than 3 lakhs cannot be termed as poor as they have sufficient means to invest in education and skills... And, all supported it for votes... Laughable...
After 50% reservation to Scs/STs/OBCs plus 10% reservation for economically backward ie 60% reservation total... 30 to 40% seats are left for the rich whose income is above 8 lakhs which is only 2% of the population... how this fits into a democracy with equal rights to all... 2% will compete for 40% seats and 98% for 60% seats... it seems opposite the objective for reservation... more seats for reserved, the poor... actually it has reduced seats for the reserved...
The traditional source of inflation in the US has had been oil which has now a disinflationary effect on inflation and interest rate and expectations which would help keep borrowing cost low and increase productivity and competitiveness and demand and supply and growth..... Low prices and interest rate mean higher demand and supply and interest rate (and) expectations..... ie higher economies of scale...
No comments:
Post a Comment