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Old Monday, March 28, 2011
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shtanzeel shtanzeel is offline
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so you are not in favor of fine tuning the economy at the right time. You want that growth be stiumulated, at the cost of inflation. Only growth rate positivity is to be seen? then sir, when inflation will be above 20%, then your real rate of interest will be negative? dont you think it will discourage savings?

Secondly, although cost push inflation cannot be controlled by reducing AD. But by reducing i, thus KIBOR, and market i, we will accelerate inflation. so as it in the past accelerated above 20% and the yearly average was 20.8 in last one two years, and then we had to resort to increasing policy rate to 15%; this sir resulted that LSM got -8.3% growth and Manufacturing too got negative growth. it was major crops which made the growth rate +ive that year,
Unemployment rate below 6% is even allowed by US economists for US economy even. So its not a concern.

Its wise therefore, if cost push element is vital in producing inflation, we should not feul the fire by adding demand element in it.
Slowing the growth is better option, a stitch in time, rather than doing it after a year or so, when we have to make 9 stitches.
i at the same time am not saying that i be increased, as it can discourage investment.
so my considered opinion is, that we need not to hurry up to get growth. what i think we need is:
1. Keep i rate constant,
2. the government control its expenditure and stops borrowing.
3. as inflation wents single digit, we can lower i gradually so as to ensure that the resultant growth is sustained.
We should not repeat mistakes done in 2000-2008.

You are right that we need to boast growth, but for this we should not do haste.
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