INDIA's relative growth rate vis a vis other countries matter to investment decisions... It would bounce back sooner than other countries on the basis of low inflation and interest rate and wages and domestic exchange rate and lower cad... Higher fiscal deficit would stimulate demand and higher prices and expectations... and spending... Lower oil prices is a big plus for our economy... Both, the fiscal and monetary policy are likely to increase money supply and demand and spending, both, consumption and investment... and supply, too... and help stabilise prices and expectations...
Companies should invest in production, stocks and inventories during low demand and cost-prices and increase supply during high demand and prices... Any business shall invest when the cost is low and increase supply when prices are high... Then only prices would stabilise with demand and supply...
This is an unprecedented situation, monetisation could first increase demand and then prices and supply, more money would increase wages incomes and demand... Higher price level or inflation is good for investment spending, too, it increases earnings... Lower borrowing cost could help recovery... Fiscal policy would increase demand first then supply which would contain the prices... though monetary policy could lower interest rate to zero to increase supply, employment and demand... Lockdown has been relaxed, stimulus could work...
Dollar demand is high 'coz the Fed could print currency and also because the US borrows in its own currency that is why it is safe... These both are the main reasons... Rupee denominated debt is not that a big risk especially for the Gov... Borrowing in INDIAN currency abroad may have more buyers for the economy and could increase foreign capital inflows.... Stable exchange rate also makes the dollar bet safe....
The Gov must incentvise to increase productivity that would increase wages, lower cost would help increase profits... Higher productivity and lower cost and prices would also increase real wages and profits... growth....
Any stimulus would only work when the economy resumes and the economic activity starts... We do not need any massive demand side stimulus when the supply side is weak during corona... People forget that fiscal deficit would also be stimulating... P Chidambaram has favoured relaxing of fiscal deficit to 5.8% from 3.8% due to corona... which is around 5 lkh cr spending....
Until the lockdown is over nothing could stimulate economic activity and markets, except food and stocks 'coz only these have been freedup... Employment and demand and investment and supply have gone down which needed to improve... demand and supply and prices and growth must go up to create employment and investment (spending)...
This Cov19 budget is aimed at boosting supply and demand both instead of distributing money directly that could be inflationary... Opposition must tell how much money did the UPA gov hand out during the 08 recession, because that was impossible barring the bank accounts...
Lower prices and more spending ''WILL'' increase prices and expectations... Stimulus would increase the real balances with the public... Lower inflation plus higher income would increase demand and spending... It is about expectations and spending - investment and consumption spending...
Recovery is just awaiting a vaccine or a drug for cov19... Luckily we already have a few of them... Cure rate is more than the death rate...
There are already alot of companies moving out of China, but INDIA has only recently trying to make it competitive for companies to invest in INDIA through reforms, some relocation has already happened, i-phone is one of them... Lower wages in INDIA are already an advantage...
Recently some analysts claimed that the GDP growth may go negative… How growth could go negative? on what base... Growth rate could be lower than qoq and yoy, but not the growth, there must be some economic activity... Share of agriculture in the GDP is 16%, though employs 50% of the total workforce... Agriculturist has been provided leeway... The food sector is itself has a growth rate of 3-4%...
Lower prices increase demand-supply or quantity and price expectations and higher prices decrease demand-supply or quantity and price expectations...At lower prices people demand more and supply more which increase price expectations and at higher prices people demand less and supply less which lower price expectations... Expectations play an important role in consumption and investment spending and demand and growth... Higher price EXPECTATIONS increase spending which reinforce higher prices and lower prices 'exp..' delay spending which reinforce lower prices, though lower prices mean more demand-supply and higher prices mean less demand and supply... People wait for bottom out and top out for demand and supply and consumption and investment spending decisions.... Lower prices are followed by higher prices and higher prices are followed by lower prices, and expectations about prices play is crucial... Spending depends upon what would (WILL) happen to the prices... Observed in the stock market....
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