What can we say about economic policy and long-run growth? To keep matters simple, let us assume that the government can—by proper fiscal and monetary policies—set and keep the economy’s
savings-investment rate s at whatever level it wishes. What level should the government choose for the economy’s savings rate?
It seems reasonable to assume that the government’s objective is to maximize the well-being of the individuals who make up the society by maximizing the amount of goods and services that they can
consume. Let us, for the moment, simplify things further and say that consumption C is equal to total production Y minus investment I:
C = Y-I
I =sY
Higher savings rate so not mean Higher Prosperity always/ The best savings rate is that which maximises the consumption for the economy. Let us assume that the change in capital /worker is given by Delta(k)
Then Delta(k) = Investment - Depreciation (of the capital)
Delta(k) = (Savings Rate)(Production/worker)- (Depreciation Rate)(capital/worker)
At steady state left hand side term is zero
Consumption/worker = (Production/worker) – Depreciation.
So to maximize consumption we have
Marginal Production = Depreciation Rate
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Saturday, February 20, 2010
Thursday, February 18, 2010
Why Inflation is of major concern for Indian Economy?
Inflation is a measure of increase in overall prices of goods and commodities. Inflation in india is being measured using Wholesale Price Index (WPI). In India, inflation is calculated on a weekly basis.but lag of 2 weeks in calculation is there. Indian statistician uses 1970 as the base year in the calculation of WPI.
The wholesale food prices in India touched a 10 year high with food inflation coming at 19.95% for the week ended December 5, 2009. This article looks back into the spiraling food inflation in 2009, its implications, reasons and solutions. Significant price increase has been observed in commodities like arhar dal, sugar, potatoes and onions.The key reason cited for the spiraling food price inflation is the bad monsoon in India. There are few other reasons which resulted in boosting of prices such as :
In 2008, it was estimated that India loses INR 58,000 crore worth of agricultural food items due to lack of post harvesting infrastructure such as storage, transportation. Moreover due to hoarding and several other reasons.
Due to spiralling rise in the inflation the real value of money depreciates futrther leading to a reduction in purchasing power. Thus inflation adversely effects the consumers. Due to high prices of essential food products and commodities consumer has to cut down its expenses on non essential items. As GDP consists of consumption as an element in its caculation it depreciates indian GDP.
There are several costs attached to the increasing expected inflation such as:
One cost is the distortion of the inflation tax on the amount of money people hold. Higher inflation rate leads to a higher nominal interest rate, which in turn leads to lower real money balances. If people are to hold lower money balances on average, they must make more frequent trips to the bank to withdraw money—for example, they might withdraw $50 twice a week rather than $100 once a week.The inconvenience of reducing money holding is metaphorically called the shoe leather cost of inflation, because walking to the bank more often causes one’s shoes to wear out more quickly.
A second cost of inflation arises because high inflation induces firms to change their posted prices more often. This costs are known as Menu costs.
A third cost of inflation results from the tax laws. Many provisions of the tax code do not take into account the effects of inflation. Inflation can alter individuals’ tax liability, often in ways that lawmakers did not intend.
A fourth cost of inflation is the inconvenience of living in a world with a changing price level. Money is the yardstick with which we measure economic transactions. When there is inflation, that yardstick is changing in length.
Inflation is far more pernicious when it is unexpected because it arbitrarily redistributes wealth among individuals and also it effects people's pensions and several other things. So goverment should take serious look on the issues of inflation to have a sustained growth in India.
Weblink : Market Research Data Analytics Solutions Provider Bangalore
The wholesale food prices in India touched a 10 year high with food inflation coming at 19.95% for the week ended December 5, 2009. This article looks back into the spiraling food inflation in 2009, its implications, reasons and solutions. Significant price increase has been observed in commodities like arhar dal, sugar, potatoes and onions.The key reason cited for the spiraling food price inflation is the bad monsoon in India. There are few other reasons which resulted in boosting of prices such as :
In 2008, it was estimated that India loses INR 58,000 crore worth of agricultural food items due to lack of post harvesting infrastructure such as storage, transportation. Moreover due to hoarding and several other reasons.
Due to spiralling rise in the inflation the real value of money depreciates futrther leading to a reduction in purchasing power. Thus inflation adversely effects the consumers. Due to high prices of essential food products and commodities consumer has to cut down its expenses on non essential items. As GDP consists of consumption as an element in its caculation it depreciates indian GDP.
There are several costs attached to the increasing expected inflation such as:
One cost is the distortion of the inflation tax on the amount of money people hold. Higher inflation rate leads to a higher nominal interest rate, which in turn leads to lower real money balances. If people are to hold lower money balances on average, they must make more frequent trips to the bank to withdraw money—for example, they might withdraw $50 twice a week rather than $100 once a week.The inconvenience of reducing money holding is metaphorically called the shoe leather cost of inflation, because walking to the bank more often causes one’s shoes to wear out more quickly.
A second cost of inflation arises because high inflation induces firms to change their posted prices more often. This costs are known as Menu costs.
A third cost of inflation results from the tax laws. Many provisions of the tax code do not take into account the effects of inflation. Inflation can alter individuals’ tax liability, often in ways that lawmakers did not intend.
A fourth cost of inflation is the inconvenience of living in a world with a changing price level. Money is the yardstick with which we measure economic transactions. When there is inflation, that yardstick is changing in length.
Inflation is far more pernicious when it is unexpected because it arbitrarily redistributes wealth among individuals and also it effects people's pensions and several other things. So goverment should take serious look on the issues of inflation to have a sustained growth in India.
Weblink : Market Research Data Analytics Solutions Provider Bangalore
Supporting Analytics with Statistics - Introduction
Meltdata Used Various kinds of Statistical Techniques for analysis of data.
The Most Important of these are techniques are :
Factor Analysis
Cluster Analysis
Linear and Multiple Regression
Logistic Regression
Multiple Logistic Regression
Logit , Probit
CHAID
CART
Conjoint
Canonical Correlation
Bayesian Modelling
Survial Analysis
Cox Regression
Tests
T test (Paired and Independent/Dependent Samples)
Z test
Kruskal Wallis
Mann Whitney U Test
ANOVA
MANOVA
Commonly Used Forecasting Techniques
Weighted Average
Moving Average
Regressive Techniques
Trend and Ratio Methods
Advacnced Techniques like Fourier and Wavelet Techniques
We will explain the Application of these techniques in the subsequent blogs.
For more techniques visit:
Weblink : Market Research Data Analytics Solutions Provider Bangalore
The Most Important of these are techniques are :
Factor Analysis
Cluster Analysis
Linear and Multiple Regression
Logistic Regression
Multiple Logistic Regression
Logit , Probit
CHAID
CART
Conjoint
Canonical Correlation
Bayesian Modelling
Survial Analysis
Cox Regression
Tests
T test (Paired and Independent/Dependent Samples)
Z test
Kruskal Wallis
Mann Whitney U Test
ANOVA
MANOVA
Commonly Used Forecasting Techniques
Weighted Average
Moving Average
Regressive Techniques
Trend and Ratio Methods
Advacnced Techniques like Fourier and Wavelet Techniques
We will explain the Application of these techniques in the subsequent blogs.
For more techniques visit:
Weblink : Market Research Data Analytics Solutions Provider Bangalore
Tuesday, February 16, 2010
India: A Bright Spot Amidst The Global Recession?
Nouriel Roubini, of the infamous (and silly) Dr Doom moniker, says India might just do OK.
Despite slowing from highs of 8% to 9% growth, India’s economy will grow close to 6% in 2009. Amid domestic and global liquidity crunch, large domestic savings and corporate retained earnings are financing investment. Sluggish labor market and wealth effects have hit urban consumption. But low export dependence, a large consumption base and the high share of employment (two-thirds) and income (one-half) coming from rural areas has helped sustain consumption. Pre-election spending, especially in rural areas, and high government expenditure, are also pluses. Timely monetary and credit measures have played a key role in improving private demand, liquidity and short-term rates and reducing the risk of loan losses. Credit is largely channeled by domestic banks, especially state-controlled ones, which have low loan-to-deposit ratios and little exposure to toxic assets….link
Given Roubini’s track record over the last three years, he’s certainly built some cred. Do you agree with his assessment on India, though?
Weblink : Market Research Data Analytics Solutions Provider Bangalore
Despite slowing from highs of 8% to 9% growth, India’s economy will grow close to 6% in 2009. Amid domestic and global liquidity crunch, large domestic savings and corporate retained earnings are financing investment. Sluggish labor market and wealth effects have hit urban consumption. But low export dependence, a large consumption base and the high share of employment (two-thirds) and income (one-half) coming from rural areas has helped sustain consumption. Pre-election spending, especially in rural areas, and high government expenditure, are also pluses. Timely monetary and credit measures have played a key role in improving private demand, liquidity and short-term rates and reducing the risk of loan losses. Credit is largely channeled by domestic banks, especially state-controlled ones, which have low loan-to-deposit ratios and little exposure to toxic assets….link
Given Roubini’s track record over the last three years, he’s certainly built some cred. Do you agree with his assessment on India, though?
Weblink : Market Research Data Analytics Solutions Provider Bangalore
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