Wednesday, January 29, 2025

“Nothing is permanent in Economics or, in Life, in the short-run, there is more upheaval, the effort is to make the long always bright... "

Nothing is permanent in Economics or, in Life, in the short run, there is more upheaval, and the effort is to make the long always bright... we move in cycles... Good and bad are repeatedly followed by each other... Low base increases expectations..."

 

“According to recent data, India ranks around 133rd globally in terms of GDP per working hour, indicating a relatively low labor productivity compared to other countries; with an estimated GDP per working hour of around $8.

Key points about India's GDP per working hour:

Low ranking:

Due to its low labor productivity, India is positioned near the bottom of the list when compared to other countries.

Source:

This information is based on data from the International Labour Organization (ILO).

Long working hours:

Despite long average working hours, India still has low productivity per hour worked.

High productivity means high supply...

In economics, "productivity" refers to the efficiency of production, measuring how much output is produced per unit of input (like labor or capital), while "supply side" refers to the policies and factors that influence the ability of an economy to produce goods and services, with the primary focus on increasing the productive capacity of an economy by enhancing productivity through measures like investment in technology, education, and deregulation; essentially, supply-side policies aim to boost economic growth by increasing the overall supply of goods and services in the market, often through improving productivity levels.

Key points about productivity and supply side:

Relationship:

Productivity is a key component of the supply side of an economy, as higher productivity means more output can be produced with the same amount of resources, leading to increased economic potential."

 

Masses are not conscious of their power ... if prices are high they shall exercise the choice of alternative... if they lower demand and price expectations... firms would increase supply... which would lower actual prices...

 

"Inflation expectations are the anticipated rate of inflation that people expect to occur in the future. These expectations are based on people's perceptions of how prices will change over time. They are important because they can influence current economic decisions that can affect actual inflation outcomes.

Here are some ways that inflation expectations can affect actual prices:

Firms

If firms expect inflation to be higher, they may raise prices of their goods and services faster.

Workers

If workers expect inflation to be higher, they may demand higher wages to make up for the expected loss of their purchasing power.

Consumers

When people expect inflation to increase, they may spend more and save less.

Inflation expectations are a crucial factor in monetary policy decisions. Central banks should consider both long-term and short-term inflation expectations."

 

Supply creates demand... Suppose supply has to be increased and demand is delayed during high inflation. In that case, RBI must lower inflation expectations which could be self-fulfilling while maintaining high interest rates which could result in actual low inflation and increased demand... Low prices increase demand and price expectations and vice versa... It is the nature of prices to be volatile due to changes in demand and supply... Nowadays inflation moves between a target as set by the central banks, they are responsible for creating price expectations by investors and outcomes. The problem arises when outcomes are not as per expectations due to uncertainty... People try to avoid loss and increase gain, and the central banks, too...

We should not forget that depreciation could increase imported inflation, especially oil prices, as it increases inflation expectations..." Depreciation is ok, but depreciation expectations may delay exports and increase imports... Depreciation and appreciation expectations might increase exports and delay imports..

Domestic inflation indeed increases depreciation and expectations... The mechanism keeps exports competitive in the face of higher domestic prices, to keep the relative exchange price of exports stable... Though the original goal is to lower domestic inflation wages and interest rates to make exports competitive... Inflation and depreciation mean an uncompetitive domestic economy...

Economic growth depends on the expectations that the available data creates. If the expectation is that there would be a rate-cut cycle in the short run, people could delay demand and increase supply -which could lower inflation expectations.." "In the long run, it would increase demand and inflation expectations...

 And, the internet information has been handled at lightning speed, too... 133 becomes 126 and 2.8 becomes 7.6 ... This productivity growth is not reflected in supply and prices or inflation... There is one more important thing ... These days they use RFID chips to harass honesty... This is a real experience... Beware telling the right..."

 

"Productivity and inflation have an inverse relationship, meaning that higher productivity is associated with lower inflation. This is because more productive workers produce more goods and services at a lower cost, which increases supply and decreases prices."

 

In 2016 when Raghuram Rajan left the productivity growth rate fell from 9.5% to 2.8% in 2023 continuously... I do not know if he supported demon-etisation...? Probably not... he left inSep...2016..."

Education and knowledge lead to innovation... INDIA's capital productivity also stands at the bottom... It simply means lower prices and higher demand... The argument is that we are a labor-surplus economy therefore we need to specialize in labor-intensive lines of production, but capital-intensive investment means technology-rich and lower cost of production and prices which could increase demand and price expectations... Saved labor could be further used to increase production and lower prices using scale economies... Education, technology, and skills could also be imported... which are necessary for innovation and higher productivity, supply and higher demand more profits... The budget should promise completely free education for the poor with food... with only one Board with a uniform education code... If necessary attract foreign investment...

This is one of the reasons for high inflation 10% and 15% inflation tells nothing if it is on a low base... It is the relative experience of prices vs wages and real wages or savings ... We invest what we save at the micro level... If growth is not happening for the unit or subject what we could expect at the aggregate level... The economy needs excess supply and more savings... more investment and demand... and more investment in innovation...

 

"After 2014, however, real wages stagnated or declined. In rural areas, agricultural labourers' wages dropped by -1.3 per cent annually, and non-farm rural wages fell by -1.4 per cent annually during the second term of the Modi government.13 Jan 2025"

 

"India's GDP per capita at PPP is $10,233, and Rs 8,50,000 doesn't show the actual case."

 

"जिसमे देश में महंगाई 5% की दर से बढ़ रही हो 10 साल में 50% सफाई हो रही हो मुद्रा के मूल्य में तो यह सप्लाई साइड प्रॉब्लम है... सही है... क्यों की उत्पादकता दर के मालमे में भारत बहुत निचले पायदान पर है l विकसित देश की बराबरी करने में भारत को 150 साल लगेंगे l वैसे भी जहाँ तक बचत का सवाल है उसे दुगना होने में 14 साल लग रहे हैं, FD में l रियल इंटरेस्ट रेट 5% के हिसाब से l""भारत के स्टॉक मार्किट की स्तिथी और धरातल पर अर्थव्यवस्था की स्थिति वस्तुस्तिथि से कोसों दूर है ऐसा होता रहे गा l लोगोंको तैयार रहना पड़ेगा l"

 

"Hame ye samjna padega ki sarkar business karne ke liye nahin hoti... kalyan ke liye hoti hain... Profit is not the motive of Govt... Govt is extracting dividends from RBI... Never heard this news in comparison... High taxes tell the real story... Dosare ke mehnat ke paise par ham ammeer horahe hain, vo garib ho rahe hain..."

 

"When there are expectations of higher prices in the future, it typically leads to a decrease in current supply on the supply side, as producers tend to withhold some of their product to sell at a potentially higher price later on, causing a shift leftward on the supply curve; essentially, meaning less product is available in the market currently."

 

"We want a budget that lowers inflation expectations and increases supply or we can say that one increases supply that lowers inflation expectations and increases savings... We do not want a budget that spends more we need a budget that lowers prices relative to income... and investment and more supply and get the expectations and feel of becoming rich overtime and spending... Lower inflation also increases savings..."

No comments:

Post a Comment

“Nothing is permanent in Economics or, in Life, in the short-run, there is more upheaval, the effort is to make the long always bright... "

Nothing is permanent in Economics or, in Life, in the short run, there is more upheaval, and the effort is to make the long always bright......