^ what is this low wage - growth trap of japan and how it could take place in India? [Chapter 2, survey vol 1 pg 77]
Very low unemployment levels in japan coupled with labour shortage means that wage levels are stagnant, since firms cannot layoff the workers they are forced to pay minimum wages. also Japan is facing defaltion and they cannot grow without a certain level of inflation which requires disposable income or higher wages, this has formed a cycle of low wages and lower level of growth...This is what i can make from few articles online.
https://www.ft.com/content/0eaf2672-3eb9-11e7-9d56-25f963e998b2
^ what is this low wage - growth trap of japan and how it could take place in India? [Chapter 2, survey vol 1 pg 77]
Very low unemployment levels in japan coupled with labour shortage means that wage levels are stagnant, since firms cannot layoff the workers they are forced to pay minimum wages. also Japan is facing defaltion and they cannot grow without a certain level of inflation which requires disposable income or higher wages, this has formed a cycle of low wages and lower level of growth...This is what i can make from few articles online.
https://www.ft.com/content/0eaf2672-3eb9-11e7-9d56-25f963e998b2
found another good article;
^ what is this low wage - growth trap of japan and how it could take place in India? [Chapter 2, survey vol 1 pg 77]
Very low unemployment levels in japan coupled with labour shortage means that wage levels are stagnant, since firms cannot layoff the workers they are forced to pay minimum wages. also Japan is facing defaltion and they cannot grow without a certain level of inflation which requires disposable income or higher wages, this has formed a cycle of low wages and lower level of growth...This is what i can make from few articles online.
https://www.ft.com/content/0eaf2672-3eb9-11e7-9d56-25f963e998b2
found another good article;
Got the point. Thanks bro. But i still wonder, how this can also be the case in India as well! Given india's demographic dividend, supply bottlenecks ensure there is some inflation always, and also we are far from full employment case unlike japan! Also Min wages also not compulsory across all sectors, the one given is also is considerably low! India that's why is more of a stagflation kind of case.. isn't it?
agreed.. dont know the reference which the survey is alluding to... will read it once before commenting.
Should the government had loosened the strings more and let fiscal deficit slide further in hope of demand generation by income transfer or tax reduction for a year or it did the right thing?
My question arises as I thought some major Keynesian intervention would come along with infra financing.
Could have;
-50% OF INDIA GDP is based on consumption, focus on capital expenditure based on Keynesian economics would certainly have reinvigorated the animal spirits
-Keynes held thatwhen in slowdown build roads,therefore increasing capex by 35% along with NIP is welcome move .Hence one can argue that more could have been allocated
-Adding to it reinstitution of Development bank to finance slow housing market is also a prudent move; given 60% of indian household savings are in property, vicious cycle of slowdown in housing infra and lack of household investment can be tackled.
-Along with it risk averse pvt banks and npa ridden public banks themselves are not in a position to finance at pre 2015 levels; regular and secure debt by GOI will allow an alternative source of finance.
-Economic survey argues that capex allows for forward and backward linkages which in turn has ability to generate more income(upto 4 times over revenue exp)
Downturn of increasing deficit can be;
-There is no clarity whether increasing debt would be enough to act as a leverage to kickstart subdued consumption.
-There has been increase in revenue exp in india , with 1 rupee invested roi in revenue exp is 0.98 paisa. increasing deficit in this case will merely would lead to inflation without disposable income at hands of people.
-Routes of generating such deficit is also questionable.
-Along with it financing through cess eats away the space for state investment(remember 48% of total state finance comes from centre ) which in turn affects overall growth/investment
these are the only points i can think of right now, but 15 marks ke liye yeh points kaafi hai i guess :P
