Unlock and Stimuli...

 Compared to the US and other major economies the INDIAn policy makers have been little conservative in bolstering the economic growth that is a key variable for the investment decisions…

 

INDIA has a supply side induced inflation, lower borrowing rate could help reinforce lower prices due to lower demand... Higher supply, productivity, competitiveness and lower prices could increase demand and price expectations... Demand is low due to unemployment which could be increased through lower borrowing cost and higher investment... Economy is past the lockdown mostly both demand and supply would increase which could help maintain financial stability...

 

Unlike the inventory market, in the stock market people's average costs and prices vary significantly, they buy and sell continuously at different costs and prices, they buy low and sell high. in this if they are able to maintain the average cost lowest during their time horizon or frame they would be winners... Lowest average cost help you sell when you need; it is true for short-medium and long runs...

 

INDIA further needs to liberalise FDIs and FPIs or its capital account and protect (full)-employment by allowing only raw materials instead of finished goods... Especially in PSBs which are sitting on loads of NPAs and interest rate transmission and on their own growth, lower market interest rates could boost credit growth... During booms they (banks) hike which lowers demand and price expectations ... during bust they lower borrowing cost which increases price expectations and recovery... Low stable interest rates are simple and easy rule for financial stability... How INDIA could compete with nations that have low interest rates which negatively affect its productivity...

 

Protecting jobs for the domestic economy is important, by liberalising the capital account and allowing imports that increase competitiveness and productivity of the economy and increase real wages and real domestic exchange rate...

 

Without a good unemployment insurance system that is important for social security INDIA could not afford flexible labour laws, it would be a hit to demand... A major reform would be setup INDIAN Labour Organisation to protect employment and demand and real wages in the economy, it could ensure higher real wages and demand in the Economy... If the Govt provides security from inflation, in the form of higher dearness allowance and real wages and incomes and shares the goal of price level and Financial Stability with the RBI to achieve low and stable interest rates would help achieve full employment and growth...

 

Higher money supply means more interest rate cut transmission which could mean lower market interest rates... LTRO by the RBI of 1 lkh Cr is an equivalent of the quantitative easing in the US, but not in the magnitude...

 

If the industry pass on the lower borrowing cost, wages and taxes to the consumers they would be able to gain margins once again the growth bounce back they may adjust prices according the demand, during low demand lower price may help increase the scale and profits and during higher demand they could increase prices again... This time we need to increase demand by lowering the prices... Lower prices would help increase demand and price expectations...

 

In this unprecedented situation deficit monetisation seems plausible and feasible if it improves the supply side and lowers unemployment, it would have the stabilising effect on prices (interest rate, wages and exchange rate) and finance and investment and expectations and growth...

 

Lack of irrigation and farmers’ plight, Congress owe a lot answering... Farmers of Punjab and Haryana are rich compared to the other regions like UP and Bihar where the majority hold less than 1.5 hectare there is so much inequality in the Farmer fraternity... Poor farmers must be united inorder to gain some bargaining power when livelihood dependent on agriculture are slowly losing... The Govt may help set up Farm Unions...

 

Still more than 60% population lives in rural areas and about the same are dependent on agriculture and MGNREA which has received most of the stimuli, and has been devoid of lockdown and gained on higher prices and more activity... Congress won back to back elections riding the employment guarantee in rural areas... and BJP lost seats in rural areas during past elections...