India's Economy: "Goldilocks tests the Vindaloo"

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Bearing in mind that this article is comprehensive, coherent and fluent, the written account is inclusive and demonstrates an apparent connection with Section 3 Macroeconomics and sets up a close relation with the two sections in particular; aggregate demand along with supply and the demand and supply side policies , which in this case proposes a debatable analysis on whether India has finally achieved the “Goldilocks Economy” (neither too hot or too cold), or continues to have a loose-fitting monetary policy. This article is effective for the internal assessment because it does not dive into the economic theory, but introduces many notions that can easily be absorbed into economic presumptions and then be analysed. The extract portrays an effectual debate questioning the unpredictable growth sustainability of the recently meteoric rising Asian economy of India and its unfastened, lax monetary policy. Monetary policy is the use of interest rates and money supply changes to manage the overall level of demand in the economy and therefore help achieve the economic objectives  of controlling inflation, helping produce economic growth, keeping employment as high as possible, and maintain a satisfactory balance of payments.

 Demand has also been inflated by an excessively negligent monetary policy. The Indian government, initially was sluggish in reacting to higher prices, and have fractured this year with a series of administrative and fiscal measures, notably “banning wheat exports and lowering fuel taxes; and the Reserve Bank of India (RBI) has tightened monetary policy.” Yet the proposal that Indian inflation is controlled can to be based on three universal economic characteristics, which ultimately can resolve the indecision on whether the Indian economy should or shouldn’t tighten its monetary policy. The first economic conception is that the accumulation in inflation could largely be attributed by “supply shocks” in the agriculture industry; so monetary policy does not need to be tightened. In fact, manufactured goods have accounted for much more of the rise in inflation over the past year. The main reason for higher prices is that aggregate demand is growing rapidly, but not securely, which can be seen in Figure 1.1 where in this case, the national agricultural industry might fluctuate, meaning that aggregate demand will change and therefore growth along will change.

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Fig 1.1: Trade Cycle; “Supply Shocks”                                      Figure 1.2: Fixed Capital Spending

               in the Agricultural Industry                                                             by the Indian Economy            

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