Inflation isn't a bad thing; it keeps labour demand up: Abhijit Banerjee

Given that the wages don't fall, you have to do something to make the real wages flexible, says Banerjee

Cutting interest rates will hardly help revive the massive demand deficit in the economy, claims Abhijit Banerjee, the co-winner of the Sveriges Riksbank Prize in Economic Sciences — popularly, the Nobel Prize in Economics — this year, along with Esther Duflo and Michael Kremer. In India to promote his new book, Good Economics for Hard Times: Better Answers to Our Biggest Problems — co-authored with Duflo, to whom he is married — Banerjee spoke to Rajesh Kumar about concerns of global and Indian economy. Edited excerpts:

We are in a situation where global growth is slowing and policymakers don’t seem