The RBI has lowered GDP expectations despite an accommodative policy which should be revised upwards to improve expectations... GDP expectations are used for investment decisions..
Raghuram Rajan promised a real interest rate of 1.25 - 0.50 in a world of negative real interest rates.......
In the latest Modern Monetary Theory money is not a problem ''coz the Central Bank can print currency if the money supply is increased through the right channels like monetary policy that increase productivity, even through fiscal policy, and reduce inflation...
The RBI might think of recapitalisation of PSBs through the new money or buy recap bonds from the stressed public banks... Banks failure should be tackled by the RBI ''coz it is responsible for bank regulation and risks... It would help increase investment, employment, supply, demand and growth and expectations and help contain prices or price-level...
Periods of slowdown or low growth are accompanied by lower prices and periods of high growth by high prices... INDIA\'s low inflation shows that INDIA might be going through a slowdown, but there is no such thing as deflation and a broader slowdown...
Both, food and fuel inflation have higher weight -age in CPI which are low leading to lower inflation and interest rate expectations which may boost growth expectations... Lower growth support lower inflation and high growth high inflation... If the claim is that growth is slow, then we cannot conclude that inflation would be high or vice versa...
Economy would recover... People have only delayed spending, especially the investors and consumers that have lowered inflation and interest rate expectation... A good budget and monsoon could further boost investment... INDIA''s long-run fundamentals remain intact...
The government may use school and college scores for giving jobs and not screening tests so that students work hard all along not just dependent on passing one exam... We now have semester system which is justified on the same line on thought that student should study all the year and also to lower syllabus load...
INDIA is largely unorganised or informal due to lack of information or data to extrapolate estimates... There has been full transparency as far as changes in the methodology and base years are concerned... The World Bank has appreciated the methodology as latest...
Investors have delayed spending after the yield curve inversion and looming recessions and tariff and trade wars discussions in the expectations of lower real interest rates ahead, in the US... now, it could further delay spending with delay in rate cuts...
The Fed has already increased interest rate in the name of normalisation evenwhen inflation and expectations have been low and quite stable which has increased real interest rate... The Fed is aware that it needs higher prices and interest rate and expectations to justify normalisation... Lower inflation and interest rate expectations may have delayed spending...
Neutral means zero real interest rate and lower inflation and higher real interest rate mean low demand and growth which requires cut in the nominal interest rate to achieve neutral... 2.25 nominal rate and 1.6 inflation which means a real interest rate of 0.65, higher than zero or neutral which could mean higher saving and low or delayed spending...
A rate cut or a patient approach could end lower interest rate expectations and increase spending also through higher real wages... The Fed could also wait for real wages or Real Balance or Pigou-Effects to increase demand, but lower price expectations could delay spending...
Rate cuts could increase demand and spending and prices and expectations, but rate cut expectations would delay recovery from lower prices and expectations and could also possibly reinforce lower prices and expectations... The Fed should take stock of the situation and deliver a rate cut soon....
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