Restricting Demand of Products to contain Inflation
The control over inflation by restricting demand of goods and services,
in itself is an intervention of central bank which affects adversely in long
run. Let’s take an example, suppose the government imposes more taxes in form
of Goods and Services Tax or other indirect taxes; definitely it will reduce
the inflation and also fill the basket of the government with a lot of revenue
but at the same time, due to higher cost being afforded by the consumers, the
overall demand of the goods and services will be reduced which will give indication
to the suppliers to produce less and employment opportunities will reduce
significantly.
What can be done for long-term appreciation in value of a currency?
The real secret of appreciating the currency is to provide a friendly
environment to the farmers, manufacturers, producers, and service providers by
reducing the taxes, appreciating their efforts both in monetary and
non-monetary incentives, attracting foreigners particularly the innovators to
come and live in country, and providing sufficient autonomy to grow the
businesses. The reservation in employment and education, the subsidies to poor
people, and benefits to a particular category of people also affect the economy
in negative sense because in order to get such benefits or in order to stay
with such benefits, the people become less productive which ultimately harm the
progress of nation. The high cost of living, high cost of setup business plays
a great role in discouraging the talented people for staying in the country. A
large number of Indians are being employed in rich countries and making them
richer due to high cost of living and high cost of setting up businesses in
India.
What does rising rate of Non Performing Assets indicate?
The Non Performing Assets of the banking sector are the result of
non-availability of friendly business environment and the rise in NPAs during
last one decade also indicates how India is going down and down in production,
manufacturing and providing services at reasonable cost. Higher the cost of
business, high the rate of NPAs will be. Instead of focusing upon making rules
strict, it is more important to focus upon providing credit facilities at less
rate of interest.
Why Indian Rupee is depreciated in last few years?
The value of dollar in terms of rupees in the year 2008 was only Rs.
39.42 while it is now almost near to Rs. 75 just in last one decade. Instead of
too much Foreign Direct Investment (FDI), the India lost the value of currency
because the Indians have become addicted to spend more money on products and
services being provided by the foreign companies. The Multinational Companies
(MNCs) are exploiting the resources of the country to a great extent and making
India poorer. It is time to think about a new strategy to restrict the
over-exploitation of resources by the MNCs and promoting the companies and
businesses being run by Indians.
*Copyright © 2018 Dr. Lalit Kumar. All rights
reserved.
