Saturday, May 25, 2019

Growth could bounce back...



The main reasons for slow growth has had been the election outcomes and lower inflation and interest rate and expectations on the back of lower food and fuel prices... People have delayed spending, especially investors and the borrowers…


Because of uncertainty about the aforesaid three factors which has slowed down growth, but from a medium to long run perspective INDIA story remains intact due to its huge human capital and other factors like low and stable inflation...


Economic policies create more disruption in the economy thorough price and price or inflation expectations, nevertheless it is important to stabilize prices near FULL-EMPLOYMENT by maintaining real interest rates neutral or zero...


They (economic policies) are similar to an untrained swimmer who can save himself by not doing anything than by doing something... If the policy makers try to tighten money it would lead to higher prices which further increase prices by higher borrowing cost and vice-versa...


Real interest rate in INDIA is too high which has made people delay demand, consumption and investment and increase savings and lower spending which might again increase real rates by lowering prices...


Everybody is pretending that the govt should increase spending to boost growth, but only few to point out that it must spend to increase production in the economy by increasing investment and employment... Lower prices are good for demand, but lower price expectations delay demand and spending...


The policy makers should work to stabilise prices and price expectations to continue growth through effective govt spending to increase productivity...


Lower prices mean that productivity has increased which increases demand and at lower prices supply could be increased to earn more or increase profits... Nonetheless, govt spending could increase demand and prices or inflation and inflation expectations, but lower supply which might reinforce inflation...


Therefore, it is important to increase demand and supply, both, and employment and investment for price stability and growth...


Low productivity and wages and demand, supply, investment, employment and growth are problems for the economy... Frankly speaking less use of technology in the face of lack of a vibrant technology sector may be behind lower innovation and productivity...


The Indian stock market has no meaningful tech sector or industry...


The UPA regime had overheated the economy which increased employment, but lowered real wages which did not work, employment should mean higher real wages and incomes and expectations...


INDIA''s huge demographic dividend could go waste if people are not skilled in consonance with market demand and are unproductively employed which is likely to depress wages/incomes, demand and supply and growth...


INDIA could impose export duty to increase domestic supply and lower oil prices and interest rate expectations... The UPA government let increase exports of cereals when domestic prices of cereals touched 20% inflation...



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"Everybody is worried about rate cuts and nobody for lower interest rates on savings, when all save and few borrow..."

Growth is sacrificed when the value of the money is sacrificed because spending goes down due to inflation, and people buy less due to high ...