Nations are grouping in Conglomerate to let their economy accelerate with New Gen MSME. Corporate fashion innovation RD to get global.
Wars within developed countries are on decline, wages are on rise in developing economy China, India and Asian region demand in house enhance, Infra on rise, Global growth upsurge from deflation.
Global Leaders talks peace.
New avenue of trade surge.
US Prez Trump talk fiscal prudence.
India has collosal demand for defence order to Russia,France Israel etc.
China OBOR on Move, FTA with in region getting active vibrant.
Political leaders assuming office are well versed with business acumen,US Trump,France Macron.
Alternate Intelligence gets activated move faster pace with nanotechnology to reduce input cost and gross profit surge. Tax benefit and GST, Free Trade order of day.
Where is fiscal risk.?
Naresh Kumar Sagar
Nikie Asian Revie
December 28, 2017 3:30 pm JST
Looking ahead 2018 Prepare for
India’s Rajan the
Former central banker says policy normalization will be ‘very slow’
Raghuram Rajan, former governor of the Reserve Bank of India, warns that the world still needs to be vigilant against risks to the financial system.
Raghuram Rajan, the former governor of the Reserve Bank of India, sees a 2018 global economy in fairly good shape but a financial industry that is “far from being in the clear.” In an interview with The Nikkei, the University of Chicago professor also warned that the world needs to stay vigilant against new and unforeseeable risks. This is the first in a series of interviews with prominent players in the financial, policymaking, industrial and academic sectors.
Q: It seems that optimism for the global economy is spreading in 2018. What is your view?
A: I think recently was the first time the International Monetary Fund has upgraded its growth forecasts rather than downgrading [them], which is good news. The world economy is doing better because all the engines seem to be firing for the first time — the U.S., Japan, China, Europe. Europe, particularly, is doing better than expected. In Europe, the unemployment rate is coming down at about 1 percentage point a year. And in Japan, at 2.8%, it’s extremely low.
Of course, this means that monetary policy cannot continue to be so accommodative going forward. And it also means that the consequences of monetary policy — such as appreciated asset prices — will also adjust.
So, why is inflation not picking up? Most economists would say that as the labor market gets tighter, eventually it’s going to go back to wages. Even in the new economy where service price is low — there’s all this Uber replacing taxis and so on — the point is at some point when wages start moving up strongly you have to see the consequences in inflation, unless productivity increases hugely.
Q: Would lower productivity not be a concern in such scenario?
A: Some of the innovations that are being made are not translating into actual higher output because it takes time. There was a period, 10 years in the 1920s to ’30s, when productivity gains collapsed but then reasserted themselves afterwards. So there are temporary periods in which productivity can vanish, but it may be that it’s a matter of time before it comes back.
Q: If inflation picks up, central banks will inevitably raise interest rates. Can they avoid creating financial shocks, such as plunging stock prices?
A: In the short run, because inflation still seems relatively quiet, people are willing to buy the argument that monetary policy will normalize in a very slow fashion. But inflation numbers could suddenly move up, and if they move up and there’s a sense that the central bank is behind the curve, then it could result in somewhat rapid adjustment of asset prices also. That could create the downside risk, which so far, seems a little distant.
In an economy which is running at potential, to keep real interest rates negative for too long is problematic, both from the potential inflation but also from the financial stability perspective. We are seeing some excess. If you look at covenant-lite loans [for which little collateral is needed], they are a multiple of what they were before the financial crisis. I still won’t say it’s at crisis levels or anything of that sort, but I would say the longer we stay in these very accommodative conditions, the more risk we run of high leverage in certain areas of the economy, creating sort of a serious delta