Summary of current economy

Due to Demonetization, inflation was under control. As money supply was reduced from the economy but it kept reducing and a point came where the supply of money was lesser than the requirement. RBI had to reduce Repo Rate and Reverse Repo Rate so that money supply will elevate to the standard requirement(money supply will increase) as per the economic condition. We can say that, that was the time of less inflation and it was still the good days for our Economy as the shortage of currency was recovering.

Although the main problem occured when Government introduced GST in the market which affected all the businesses. It caused the WPI food inflation to rise abruptly thus whole WPI rose in July 17 (from 0.9% in Jun 17 to 1.88% in July 17.)

So indirectly it relates with CPI in two ways one the money supply is increasing and second is the price of commodities became costly because of GST.

But the sad part is it happened at that time when all the country had lack of enough money/income so how citizens were supposed to spend money on the commodities and their utilities are remaining unsatisfied.

Business Economy 

Now let’s see this case from business perspective, all the existing businesses can enjoy the benefit of low interest rates on loan(as Repo rate was reduced by RBI so banks will also reduce their interest on lending rates). But at the same time they had to impose GST on their goods and services so now if they want to enjoy present profit margin, they will not change their prices after imposing GST but if they have fear of losing the customers or loyalty just because of price then they will reduce their profit margin which is not a good thing for an organisation. Because when their Return on Investment is reducing they will change their dividend policies and it leads to the less investor in the companies. Even traders will also think much to invest on delivery base as well.


But one who have any startup ideas and they want to become a new player in the market, they will be less affected as compared to existing players because to start it they will have to pay low interest on loans and the effect of GST will not give them much impact because the prices of upcoming goods and services before or after the GST is unknown for their customers. Starting a business with or without any new rules is fine but while running in the competition and follow the rules give much impact with relate to the customers.

Also, learn about the Forex Reserve in India

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1 Response

  1. Jibrail says:

    Great piece of writing and makes a lot of sense. It reflects that our country has lack of economic competency.

    I really want you people to write an article based on current business affairs and how GST is changing the overall business flows.

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