Agriculture and Skills, and, Stocks and Monetary Policy...

Skill development to diversify agriculture into other industries and services could help increase productivity or production and lower prices and increase real wages and incomes... 


Higher productivity and lower and stable prices would increase demand and supply, exports too, due to lower inflation cost and prices, on a much larger scale means higher economies of scale and profits, including real wages and incomes...

Lower cost of agriculture is also important to double farm incomes… Less people in agriculture would increase share per person which could mean higher product... Govt may help bring private skill training institutions at low cost... Paid by the trainee... but, sure jobs according to industry demand...

There are not enough jobs for graduates except in few big centers ... there is oversupply of engineers and doctors ... the others have less scope for direct jobs, simple graduates... unless they opt for a low skilled and wage job which is a loss of product... and demand and growth...

People should buy low and sell high, the market points that large cap may see correction because they have done good during the past one year and people should book profits, but down beaten small and midcap might see revival in earnings...

A big correction due to domestic factors is improbable and FII could flow in due to uncertainty of trade war outcomes and oil prices are unlikely to go 90 anytime soon which should help contain CAD and inflation....


Fixed deposits pay nothing compared to other asset class... money should be invested not saved in passive funds which are generally robbed by inflation...

There should be some rule of thumbs to invest in the stock market like never sell in a falling market, but buying more and never buy an overpriced stock, but use for booking profits, invest slowly for atleast a quarter... Buy stocks that are consistent in performance... During good times even average stocks do well....

The rally could continue because we do not have a broad based recovery... We have money waiting on the sidelines to increase investment spending after lower real interest rate expectations bottom out which could increase demand/supply/prices and growth and expectations....

The trend in the market is that the market increases 1000-1500 points and then a correction of 500- 1000 points, but could correct 1500-2000 points in case of bad news, then again could increase 3000 points, the market goes through short cycles of buy and selling...

The Sensex has increased 15 000 points since 2016... a staggering increase of 40% in 3 years even when we are recovering from a slowdown... In this scenario the Sensex is yet to see its best days in terms of expectations...

The interest rate cycle is still to bottom out to increase demand and price expectations... Lower interest rate could increase supply and reduce unemployment and increase production that could lower price expectations below full employment and also because of lower borrowing cost...

The NPAs hangover and, then, the NBFCs or shadow banks crisis demand recapitalization and liquidity assurance by the Govt and RBI... Moreover, interest rate cut transmission is also dependent on the same...

Otherwise demand and growth could take long to materialise or might delay... Fiscal assistance to banks for recapitalization may increase productivity of capital by lowering the borrowing cost and expansion in banks capacity to lend more...

The RBI may allow banks to float the Rupee denominated foreign bonds which could also help maintain stability in the exchange rate offering higher interest rate than Japan, US, Europe.. Interest rates in the developed countries are lower than INDIA...

Nonetheless, higher fiscal spending could become more probable when even lower real interest doesn’t increase the private investment to increase growth expectations, but that is a far outcome because INDIA is not demand deficient, but lower investment and supply are reasons for higher inflation and interest rate expectations which are also the reasons for lower supply...

The evidence we have from the developed countries that price level in these countries has gone down with lower interest rate and higher supply, we have examples of Japan, US, Europe and, now, China... 


These countries have used more money supply and inflation and depreciation in the past to increase exports that have reduced real wages and demand in the domestic economy and further increased supply lowering inflation and interest rate and expectations...

Germany which has used internal depreciation to increase competitiveness which has also helped increase real wages... 

Lower competition among banks for the market share could be responsible for the problem of interest rate cut transmission further crippled by NPAs of banks... INDIA, in this situation, needs FDI in banking to cover loss in bank credit due to above reasons...

With real rates at 3%, inflation at 2.9% and unemployment above the natural rate, the RBI may reduce interest rate more than standard cuts, change to accommodative stance and increase liquidity through CRR, SLR and reverse repo cuts and OMOs...

Since growth has suffered due to higher inflation expectations which has changed to a much benign level as far as demand and food and fuel prices are concerned... The days of oil at $ 100 are behind us...

Contrary to the popular belief that debt funds work during slowdown is only half the truth... We know a bond has both, a bond yield and a bond price... During higher prices or inflation and growth, yield increases, but bond prices go down and bond prices increase during slowdown and yield go down, during low prices and growth... Bonds are less volatile than equities... Many people do not understand bonds...