We are what we are !!

 "Negotiations over a shrinking pie are especially difficult, because they require an allocation of losses" The above is from Daniel Kahnemann's magnum opus "Thinking, Fast and Slow". India is facing a shrinking pie situation with steep GDP contraction. Fiscal stimulus is imperative and it is expected on a yesterday war footing. Early birds and head-starts enhance hope and confidence which feed favourably into demand and investment.They also act as countercyclical to shrinking pie despondency. Credit boost is a temporary remedy to manufacturing machinery to kick start and keep up the production capacity. But it can work only up to a point, where the productivity and earnings should become sufficient to keep up with the plan of repayment of loans and borrowings. If the people in general do not foresee sufficient future income and employment, they may not turn out to buy things and assets.They cannot evergreen their loans like some corporates feeding only on liqui...

 RBI's recent Monetary Policy announcement after MPC considered the latest economic factors, CPI etc , came out with no repo rate cut. Primarily because CPI is elevated and at an uncomfortable level as far as RBI is concerned.since the mandated and stated objective of RBI is now inflation control, RBI has decided to hold the rate this time despite the economic slowdown calling for a steep rate cut.RBI also mentioned that this year would see real GDP contraction after more than four decades, but still decided to save the powder for a more rainy day or for a day when the bang will be worth its buck. India is facing rising prices also esp. food prices, fuel prices and therefore is experiencing a cost push inflation. There is a school of economists who say the inflation is fueled by easy liquidity floating in the economy and the stock exchange boom , gold price rise all indicate to easy money into areas where some quick money can be made.Even RBI is predicting a rise in inflation level...

Sri. Krishnamurthy Subramanian, Chief Economic Advisor to Central Govt,yesterday, has gone on record saying that further demand stimulus measures will be announced after vaccine becomes available. Why should we link stimulus to vaccine availability is not clear. What kind of vaccine he is expecting and if the vaccine falls short of his expectations whether he would not allow roll out of stimulus? I t may become too late to wait till then.Why because, the common man has started saving his meagre earnings due to his fear about his future earnings and not due to Covid pandemic per se.In order to allay his fear about his employment and future earnings, Govt must sacrifice some near term revenue and announce some economic incentives  for kick starting the economy.What better place to start than with Indirect Tax cuts. Auto sector is the biggest in manufacturing in terms of GDP and reducing GST on it from 28% and converge it with Revenue Neutral Rate(RNR) of 18% will give a huge ...

RBI consumer confidence survey was done in May 2020, which came out a few days back paints a dark picture of consumer confidence. It has hit rock bottom so far. link . Whether it will hit another bottom is a moot point. According to RBI Consumer confidence collapsed in May with the Current Situation Index (CSI) touching a historic low of 63.7 dipping from 85.6 in March 20. One year ahead Future Expectations Index entered the zone of pessimism at 97.9 for the first time after Modi govt. took charge, falling from 115.2 just two months ago. These are all negative news, but as expected. However these are lag news and therefore markets looking for lead indicators ignored this. We all now know that Covid 19 has wreaked havoc on our economic health more than what it could do to people health. But there are several silver linings like not many people do not expect price levels to go up. If we discount the "recency bias" in their opinions and perceptions,I still find 14.4 % peo...