Here's some more food for thought ....

Will these strategies work?  Are legislative reforms sufficient to ignite growth?  And what about employment?

http://www.newindianexpress.com/editorials/Onus-on-Both-Govt-India-Inc/2015/09/25/article3046432.ece

http://www.thehindubusinessline.com/companies/bilt-pulls-out-of-malaysia-sells-stake-in-sabah-forest-for-500-million/article7686130.ece

http://www.thehindubusinessline.com/opinion/editorial/chinks-in-make-in-india/article7686002.ece

Aggregate demand, corporate debt and deleveraging

Here are a couple of articles which indicate the consequences of a slack in aggregate demand on corporate debt and the growing need for companies to deleverage debt through asset sales.  We can notice this trend not just in India but also in China.

http://www.livemint.com/Companies/JBn41JpbNPdPBxzOb2FzIO/LT-to-sell-assets-dilute-stake-in-noncore-businesses-AM.html

http://www.thehindubusinessline.com/opinion/editorial/taking-a-haircut/article7678161.ece

Does the government need to step in and increase infrastructure spending?  Can we hold on to "austerity" and worry about fiscal deficit targets?  How do we know that infrastructure projects will not be underutilized (like ghost towns in China)?

These are questions to ponder over.

The conventional circular flow and endogenous money

Once again a report in the Livemint of 27-11-2014 caught my attention;

“Perhaps the reason we have been so willing to protect the borrower against the creditor is that the hated moneylender looms large in our collective psyche. But the large borrower today is not a helpless illiterate peasant and the lender today is typically not the sahukar but the public sector bank. In other words, we are the lender,” said Rajan in his speech on Tuesday, adding that when the large promoter defaults wilfully, he is essentially robbing the taxpayer and making it costlier to fund new investment in the economy.*

This sounds so much like the conventional circular flow reasoning - that deposits come before lending.  Endogenous money questions this view; loans create deposits.

I am not questioning the fact that growing NPAs are a cause of concern but simply raising the point that economists still cling to the conventional view that banks use savings to lend just like the moneylender.


* Read more at: http://www.livemint.com/Money/TaNyxECKa6pbuWYuS7vAaN/RBI-ready-to-give-more-flexibility-in-recasting-distressed-l.html?utm_source=copy