Inflation is referred to as a rise in the general level of prices or a sustained rise in the general level of price. In case, general price level rises, each unit of money buys fewer goods and services. Consequently, Inflation ...
The reality is that businessmen perceive their own interests that are, many a time, at variance with the legal structure laid down by elected representatives. Powerful business groups make every effort to win over the public policymakers for the protection and promotion of their own business interesRead more
The reality is that businessmen perceive their own interests that are, many a time, at variance with the legal structure laid down by elected representatives. Powerful business groups make every effort to win over the public policymakers for the protection and promotion of their own business interests. If politics wants to control and regulate economic activity with a view to promote public good, business too wants to influence and control the government in every democracy for its own personal advantage. Hence, every modern democracy has engaged itself in evolving mechanisms to keep political decision-makers insulated from the attempts of businessmen to influence the making of public policies.
Prime Minister Manmohan Singh is seized of the problem of keeping ‘politics at a distance from business’ and, on February 3, the media reported that the ministers have been asked ‘to sever all ties with business in which they have a stake’ . The PM rightly felt that there is a likely conflict of interest if ministers are associated with business and, hence, they are advised to distance themselves from the conduct of any business they might have been interested in before appointment. While the PM set the cat among the pigeons, company affairs minister Salman Khurshid on February 4 suggested a way out and advised the ministers that, like the US President, ‘politicians in power should get trusts to handle their business interests.’ inter-relationship and illicit liaison between politics and business does not end with ministers managing their own businesses or the possibility of inter-penetration of politics and business on the basis of funds provided by businessmen for elections to political parties or individual influential political leaders. Every democratic country including India has laws for the regulation of corporate funding of elections.
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Rising inflation can have both positive and negative effects on India's GDP. Here's a nuanced explanation: *Positive effects:* 1. Increased aggregate demand: Moderate inflation can stimulate consumption and investment, boosting aggregate demand. 2. Economic growth: Higher demand can lead to increaseRead more
Rising inflation can have both positive and negative effects on India’s GDP. Here’s a nuanced explanation:
*Positive effects:*
1. Increased aggregate demand: Moderate inflation can stimulate consumption and investment, boosting aggregate demand.
2. Economic growth: Higher demand can lead to increased production, employment, and economic growth.
3. Monetary policy: Inflation can prompt the central bank to maintain low interest rates, encouraging borrowing and investment.
4. Fiscal policy: Government spending and tax reforms can be tailored to mitigate inflation’s impact on vulnerable populations.
*Negative effects:*
1. Reduced purchasing power: High inflation erodes consumers’ purchasing power, potentially reducing demand.
2. Uncertainty: Volatile inflation can create uncertainty, deterring investment and consumption.
3. Inequality: Inflation disproportionately affects the poor and fixed-income households.
4. Currency depreciation: High inflation can lead to currency depreciation, making imports costlier.
*India-specific factors:*
1. Demand-driven growth: India’s consumption-driven economy benefits from moderate inflation.
2. Investment-led growth: Inflation can stimulate investment in infrastructure and industry.
3. Rural demand: Inflation can boost rural incomes and demand, supporting agricultural growth.
4. Government initiatives: Policies like Make in India, Digital India, and infrastructure development can mitigate inflation’s negative effects.
*Conditions for inflation to boost GDP:*
1. Moderate inflation (4-6%): Avoids stifling economic growth.
2. Supply-side measures: Improving productivity and efficiency can offset inflationary pressures.
3. Monetary policy management: Calibrated interest rate adjustments can balance growth and inflation.
4. Fiscal prudence: Targeted government spending and tax reforms can support growth.
*Data and projections:*
1. RBI’s inflation target: 4% (+/- 2%) CPI inflation.
2. India’s GDP growth projections: 7-8% (FY2024-25).
3. Inflation projections: 5-6% (FY2024-25).
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