Money, Productivity, Expectations and Spending...

If productivity increases and lower prices, lower cost of the factors of production, that would increase demand and supply and prices and expectations which reinforce each other and if productivity decreases and increases prices or inflation, higher cost of factors of production, demand and supply and prices and expectations decrease which also reinforce each other... Unemployment and lower interest rate and lower prices increase productivity and competitiveness and demand and supply and prices and full employment and higher interest rate and higher inflation decrease productivity and competitiveness and demand and supply and prices...

Spending is productive like skills impartment which increases productivity and competitiveness... China has used competitive devaluation of its currency which cuts domestic real wages with inflation and demand, but internal devaluation like Germany would make the whole economy competitive, lower prices increase competitiveness and demand... Productivity increasing spending is always warranted... "Productivity is not everything, but in the longrun it is almost everything" (Paul Krugman)... Increasing competitiveness through innovation and reforms could also increase supply even after the full-employment.... Enhancing competitiveness could help INDIA make resilient and self-reliant in its bid to achieve the "Atmnirbhar-Bharat"...

If real wages increase i.e. income increases more than inflation that is positive or if the price-level goes down... Lower prices buoyed by the lower borrowing cost and more unemployment and lower wages could increase demand and price level or inflation expectations and spending, interest rate, wages and exchange rate expectations would go up, and investment and consumption...

The stock prices depend upon price expectations depending upon earnings, net profit mainly... If agents expect prices would go up, demand would further increase the price, because people would also hold supply and if they expect price to go down they supply more and hold the demand which again lowers the prices ... Nonetheless, expectations are self fulfilling... Competitiveness and productivity also matter in the stock market, it is an investment good, lower prices increase demand and price and expectations, of higher growth and earning companies…

NPAs are normal during slowdown, demand slowdown and supply slowdown... Growth and demand could turn NPAs into performing assets... Credit supply would help... Firms must be given time...

Lower real interest rate could increase investment in debt and equities linked saving schemes... In this poor people suffer more than others because the income on their savings goes down... They save less in equity, gold and debt... The RBI must bring schemes that could help shore up investment of poor people in asset class other than fixed deposits...

Supply-side must be given due diligence, when unemployment is higher than the target and there is space to increase productivity ie higher supply and lower prices and higher demand and price expectations and spending... When both demand and supply increase it is difficult to assume that prices would increase or fall.. Inflation within the target means expansion could be pursued...