1/6
The decline in India's unemployment rate is clearly bad for the economy, as is the reversal of urbanization, but this isn't necessarily the case for a rise in income inequality, which tends to boost the domestic savings rate.
ft.com/content/b99a43…
The decline in India's unemployment rate is clearly bad for the economy, as is the reversal of urbanization, but this isn't necessarily the case for a rise in income inequality, which tends to boost the domestic savings rate.
ft.com/content/b99a43…
2/6
In advanced economies – and some developing economies like China – where savings are too plentiful and demand weak, the main constraint on business investment is weak demand.
In advanced economies – and some developing economies like China – where savings are too plentiful and demand weak, the main constraint on business investment is weak demand.
3/6
In that case conditions which raise ex ante savings (i.e. by lowering consumption) tend to suppress growth in productive investment, especially private-sector investment.
In that case conditions which raise ex ante savings (i.e. by lowering consumption) tend to suppress growth in productive investment, especially private-sector investment.
4/6
This isn't the case, however, in developing economies, like that of India, in which productive investment is more likely to be constrained by the high cost of capital and by transportation and supply bottlenecks.
This isn't the case, however, in developing economies, like that of India, in which productive investment is more likely to be constrained by the high cost of capital and by transportation and supply bottlenecks.
5/6
In these economies higher ex ante savings, if they are retained within the domestic financial sector and not exported abroad by the rich, can lead to higher productive investment which, in turn, leads to higher growth and higher household income.
In these economies higher ex ante savings, if they are retained within the domestic financial sector and not exported abroad by the rich, can lead to higher productive investment which, in turn, leads to higher growth and higher household income.
6/6
The problem for India might not be rising income inequality per se, but rather the ways in which the rising savings of businesses and the rich are deployed within the economy.
The problem for India might not be rising income inequality per se, but rather the ways in which the rising savings of businesses and the rich are deployed within the economy.
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