Will emotional theories increase economic growth?

A "consumer confidence survey published by the Reserve Bank of India (RBI) before its last monetary policy meeting of 6 August" "made for grim reading", wrote Prof VA Nageswaran. "Expectations on income for the near term have worsened, from -50 in May to -59 in July." "Expectations for spending on non-essential items have worsened not only for the present but also one year from now." A total of 45% of households think that current inflation rate is above 10% and a total of 43% of households think that inflation will be above 10% one year from now. Curiously, 13.3% of households think that future inflation will be less than 1%. These people maybe the hardcore supporters of Prime Minister Narendra Modi who are known as Bhakts, which means devotees, Times of India (TOI). News media have repeatedly exposed how the government has been deliberately hiding rates of infections and fatalities due to the coronavirus, BBC, yet this has hardly affected Modi's popularity. According to US data intelligence company Morning Consult, "People who 'approved' Modi fell from 82% exactly one year ago to 63% now, while those who specifically disapproved his policies rose from a mere 16% to 30%, The Wire. Shows, that Modi's support base is solid. The RBI and the Finance Ministry have not commented on the prospects of 'tapering' of the US Federal Reserve's purchase of $120 billion worth of bonds every month but this will decrease liquidity, which will lessen foreign inflows into Indian markets, and expectations of rising interest rate in the US will "dampen capital markets, harden bond yields and depreciate the India rupee, there by introducing inflationary impulses to the country's economy", wrote Rajrishi Singhal. "As things stand, despite the assertions of fostering growth, India's gross domestic product (GDP) is unlikely to reach 2019-20 levels anytime soon." "India's current economic predicament sharpens the oddities, economic stagnation combined with the possibility of rising prices." "State Bank of India (SBI), India's largest lender, is making it easy and cheap for Indians to monetize their most cherished asset -- gold," wrote Aparna Iyer. "At the same time, gold is being auctioned in increasing amounts by lenders to recover money from distressed borrowers." If the price of gold falls from the rate at which the borrower had pledged it, then the bank sells off a certain amount of gold to make up for the fall in the value of its security. This is known as 'margin call', Investopedia. So, the distressed person loses his valuable security but still has to repay the amount borrowed. A double hammer blow. "Credit rating upgrades of corporates by multiple agencies outpaced downgrades in the June quarter, indicating rising debt servicing ability despite the second wave of covid," wrote Nasrin Sultana and Shayan Ghosh. Of course, they did. The RBI has been suppressing interest rate at record low level of 4%, indiatoday.in, allowing companies to pay back their more expensive loans by borrowing at cheaper rates. "As HSBC's Pranjul Bhandari has repeatedly pointed out, gains to the formal sector post the pandemic have come at the cost of putting small, informal firms out of business. And while this 'forced formalisation' has kept profitability high, it has left the bulk of India's households, which find employment in the informal sector, financially vulnerable," wrote Yamini Aiyar. No matter. Private final consumption expenditure was around 3% in three of the six years between 1997-98 and 2002-03, "Yet, in the following five years, India witnessed a credit and investment boom," wrote Nageswaran. So, he sees no reason for private companies not to invest in expanding capacity to increase jobs creation and stimulate the economy. Average consumer price index (CPI) inflation was 3.81% in 2003 and 3.77% in 2004. It soared to 10.83% in 2009 as the rate of growth increased. CPI inflation was 5.59% in July 2021, indiainfoline.com. Capacity utilization dropped to 68.6% during the third quarter (1 September-31 December) of 2019-20, well before the Covid epidemic struck India. With so much spare capacity why would any company make new investment? Perhaps, Prof Nageswaran is turning into a Bhakt. Sad.