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Showing posts with the label GDP growth

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Consumption-Investment Dynamics and the Budget

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  The Union Budget for the financial year 2021-22 is to be presented to Parliament in less than a month from now. The focus would be on the stimulus the government would give to different sectors as they seek to recover from the lockdown induced by the Chinese pandemic. The focus of the government in 2020 would have to be ensure the firms and households remain solvent during the pandemic lockdown but as the vaccinations are underway, there would be direction necessitated for revival of the economy. The economy must shed the past and look towards the future. An important indicator would be however the boost to the consumption. The economic revival in India has to pick either through a growth in consumption or growth in investment. The government expenditure has ensured the economy remains stable in turbulent times and has saved further blushes for the economy. it is time to revive the other components of aggregate demand.   Investment is sought to be increased through Atmanirbhar pr
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Macroeconomic Scenario in India: A Note

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  The year 2020 is about to end and perhaps looking back it would be a year that would be best forgotten for all the things. The Chinese virus induced pandemic does not seem to subside with new mutations being reported and countries going into lockdowns ahead of Christmas. This is despite the vaccines are getting administered albeit the baby steps in combating this disease. While experts do believe the end game for the pandemic has begun, one has to await for some more time before any concrete results are likely to be visible. As one looks forward to 2021, at this stage it seems the economic recovery is still some way off across the world. There would be a new President in the United States and it must remain to be seen how President Joseph Biden would deal with China, the country primarily responsible for the current global crisis, social, economic and health.   The macroeconomic projections for India have been less worse than anticipated. The second quarter of the financial year
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Indian Economic Growth 2020-21: Some Thoughts

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  The GDP data of the first quarter 2020-21 is out. India has experienced YOY decline of 23.4% in the Q1. It is hardly surprising. The period of the first quarter of the pandemic year 2020-21. It was a period where there was a lockdown through the country for most part of the period. In fact, the lockdown began to be eased only in the middle of May which of course triggered the migration back home of the thousands of migrant workers from Maharashtra, Gujarat etc. Therefore, even though the economy began taking baby steps once again, the paucity of labour added to the shortage. Hence there was a widespread expectation of rapid collapse in the economic growth rate. Therefore, prima facie, the quarter was an outlier. In fact, the quarter has seen decline in economic growth across the world. The US recorded a YOY decline of 30%+ while Singapore recorded a decline in excess of 40%.   There is no surprise anywhere about the direction of the global economy. As the world reels from the pan
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RBI, Onions and Monetary Policy

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The outcome of RBI’s sixth and final bimonthly monetary policy statement for the FY 2019-20 is unsurprising. Repo has been retained at 5.15% and therefore the other rates like MSF, reverse repo, bank rate etc. too remain unchanged. RBI projects a growth of 6% something in alignment with what the budget has projected. They anticipate higher uncertainty in inflation. The question however, is given the macroeconomic dynamics at the current instant, could RBI stance been bolder or was it cautious reiteration of its mandate. As one delves in to the RBI monetary policy statement (available here ) some interesting pointers emerge. Global headwinds continue to impact the Indian economy too. There is no respite for European economies like France and Italy on the continued downward growth trend. Britain will have to confront with post Brexit uncertainties. US Iran tensions may have eased down momentarily but the impact might take a time to ease out, US-China trade wars demonstrate ebbs an
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