Moreover, fuel prices, especially petrol and diesel were determined internationally. Once their increase might result hike in commodity prices including essential commodities which ultimately boost inflationary pressure in which there is no significance of interest rate’s role. Again, Indian capital market is now fully globalized so that Euro crisis as well as dollar crisis already affected Rupee dollar and Rupee Euro exchange rates where high interest rate may go against the target and there will be a pressure on foreign exchange reserves. Above all, both monetary and fiscal policy are needed and if necessary, counter-cyclical fiscal policy may be adopted. I would like to say that target rate of inflation is more attractive policy for a target growth rate of GDP. And for an agricultural country like ours, separate policy prescriptions are needed to check food inflationary pressure otherwise general policy would not give good result as observed during last one year.
Today The Reserve Bank of India (RBI) raised repo and reverse repo rates by 25 bps to 8.5% to arrest rising inflation. However, the bank kept cash reserve ratio (CRR) unchanged at 6%. RBI also deregulated savings bank deposit rate with immediate effect. This is the 13th rate rise since March 2010.As per Government data, Inflation ranged 9-10 percent and food inflation climbed to 10.60% and whole sale price index stood 9%. RBI expects this policy will come down inflation rate to less than 8% in next March. But, It may lower the GDP growth rate to 7%. due to monetary tightening. RBI reiterated that it is a short run phenomenon. The Reserve Bank of India (RBI) has deregulated the savings bank deposit interest rate with immediate effect; banks are free to determine their savings bank deposit interest rate. These have raised differential opinions among the RBI, FM and Economic Advisory Council of India regarding growth –inflation causality and inflation expectation. Not only that food inflation and fuel price hike were not controlled by these policies during last one year. The observation of RBI are that the industrial output growth rate has dropped to a single digit in the recent months. Industrial production for August rose by a weaker-than-expected 4.1 percent, continuing the slide from last year's double-digits. Manufacturing PMI slipped in September to its lowest since March 2009, while services PMI shrank for the first time in more than two years. The GDP growth has been revised downwards to around 8 percent for the current fiscal as against the earlier projected number of around 9 percent. The rupee dropped past 50 per dollar on Friday, a psychological mark it last tested in March 2009 when world markets were battling a financial meltdown. On a macro plane, a weaker currency will make the war against inflation tougher and affect sentiment as foreign investors fear their dollar returns to dip. However, capital inflows may come down and balance of trade deficit may increase. Tightening money supply with lower non plan expenditure and stepping down investment will surely dwindle the inflation. But, it is very much difficult to have lower fuel and food inflation. All are known that India’s food price hike depend on the supply bottlenecks, like middlemen buyers, transport cost, climate change ,hoarding of stock holders, creating excess demand and so on. Not only that there are no regulation on price control or monitoring on the part of the government, on the other hand, there is no scientific authority for collecting raw data on food articles on daily basis, so that, statistical outcome of data is not reliable .In rural area, the prices of various commodities are solely dependent on supply demand interaction wholly , rather other exogenous factors influence the price system.
Moreover, fuel prices, especially petrol and diesel were determined internationally. Once their increase might result hike in commodity prices including essential commodities which ultimately boost inflationary pressure in which there is no significance of interest rate’s role. Again, Indian capital market is now fully globalized so that Euro crisis as well as dollar crisis already affected Rupee dollar and Rupee Euro exchange rates where high interest rate may go against the target and there will be a pressure on foreign exchange reserves. Above all, both monetary and fiscal policy are needed and if necessary, counter-cyclical fiscal policy may be adopted. I would like to say that target rate of inflation is more attractive policy for a target growth rate of GDP. And for an agricultural country like ours, separate policy prescriptions are needed to check food inflationary pressure otherwise general policy would not give good result as observed during last one year.
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Let us first read and look at the diagram below, where we see that unemployment rates (mainly youth) are too high in most of the countries in Europe. The rates are less than 10% in Germany , Japan and other emerging Asian nations. This is the outcome of ineffectiveness of employment strategy of the countries lie shortfall of effective supply. Economic or financial crisis which broke out prior to 2008 showed the negative growth rates of GDP in EU and Japan as envisaged in the chart accompanied with high govt. debt as percent of GDP. This instability arising from the economic crisis shifted to occupy protest around the world that produced hue and cry on the existence of capitalism. Some spokesmen could not rely on capitalism and other critics became happy about its decaying. I would like to say that please think the period of before the first world war and the period of post second world war, you will find the synonymous results, but still the capitalism is marching on and on. USSR’s socialism failed to compete against capitalism and lastly collapsed. Chinese socialism is following market economy with globalization which is contradictory to someone but could not solve basic problem of poverty, unemployment and inequality. So, no one would be so happy about the crises of capitalism and its period of collapsing. Capitalism is the part of the society’s economies. The socialists will help to survive capitalism in their course of action.
Durga Puja is an important festival in Bengal. Bengalees prayed Goddess Durga on the basis of old ancient Hindu mythology.Goddess Durga is the power of destroying all evils and she killed the Asura during the great battle among Asura and all gods. During the three days, Durga came to her father’s home with two sons-Ganesh and Kartick with two daughters-Laxmi and Saraswati,then she came back to Himalaya-the abode of her husband ie Lord Shiva’s home in the day of Vijaya Dashami .On the day, the Hindu wives exchanges with “Sindur”(red lead or vermilion) in the chicks and foreheads. This convention continued since long. Goddess Durga is worshiped into the decorated pandels which were made through a few days and she is also worshiped by clubs and by rich families.Worshipping the Goddess is really costly because of minimum requirements of resources for puja. In WestBengal, at least ,600-900 crores of rupees have been spent during the festival through some economic exchanges in various activities in several sectors, like service, manufacturing and agriculture. Administration became restless and busy for the citizens. Kolkata turns into luminous pandels with various themes .Very recently, artists have been engaged for successive programme in the areas of arts and culture and even in the publications of literary journals and magazines. In this way, huge monetary flows happen in which most of them are unproductive and a few residuals are semi productive. The flows of income and expenditure in various fields have a little influence in increasing GDP or state domestic product. During the four days, the economy takes rest and loss of national income is unaccountable. Idealogically, the Hindu philosophy on the festival of Durga Puja, is an imaginary and it is assumed during the ancient age when the epics were written. However, the myths of the philosophy have been accepted by the Hindus. On the other hand, the people of the other religions of this society admire it and join in the festival. My query is that enjoying during the festival and discouraging the income generating sources in the national economy - both are reverse in basic properties because a negligible additions in capital occurs, many productive units remain closed, and some new additions in investment opportunities stop. On the contrary, excess demand generates in the economy which creates inflation. Sometimes, forced buying is highly paid by the individuals. During the festival, rich food takings produce dangers of lives, so that medical services remain alert for it and the people pay enough for it. Communications and other infrastructures sacrifice extra load from which no extra GDP is created. We are habitual in this economics of Durga Puja.
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AuthorDebesh Bhowmik Archives
January 2019
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