Letter to BS: Microeconomics focuses on issues that affect individuals, cos

This is with reference to the article of TCA Srinivasa Raghavan, “Limits of Modinomics” (May 5). He has said that Modi has reduced subsidies, broadened and widened the tax base, gone after the NPA-wallas and brought in other microeconomic policy changes. He has referred to the squeeze on the fiscal deficit, interest rate and overvalued rupees as macro-economic changes.

Let me point out here that those policies which he has called microeconomic are in fact macroeconomic. The difference between micro and macroeconomics is that microeconomics is the study of economics at an individual, group or company level while macroeconomics is the study of a national economy as a whole.

Microeconomics focuses on issues that affect individuals and companies. For example, a company such as Hindustan Lever fixes the price of soap taking into account its cost of production, demand and supply. An individual invests in fixed deposits or mutual funds. Such studies are microeconomic studies. Any study which covers the whole economy is macroeconomics. All the measures that the author has mentioned as microeconomic are therefore macroeconomic. It is a theoretical discussion. But precision in ideas is important.

Sukumar Mukhopadhyay,  New Delhi

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