(1888PressRelease)
April 07, 2007 - One of the toughest challenges in managing the economy is to reconcile the need for high growth with checks on inflation as both have a tendency to rise at tandem. The UPA Government faced with the challenge has tried to control the same with monetary curbs that is controlling the money supply by raising the rate at which banks can borrow money from the Reserve Bank of India. They have also raised the cash deposit ratio to reduce money supply in the market.
These steps will certainly work to some extent but will also affect the rate of growth. With money becoming scarce and cost of borrowing going up, the prices of durables like cars, two wheelers as well as property will also go down because they are also fuelled by easy money or loans available at low rates. All this is being changed and the slow down in these sectors in turn will affect the growth rate.
This may help in bringing the inflationary pressure down by few points, but unless two main factors for price hike are tackled the life for ordinary man in street or in political terms "aam admi" will not change. He is essentially suffering because the price for items like wheat, rice and pulses has risen. He is also hit by high prices of fuel which has hit the housewife budget along with sharp hike in transport sector with petroleum products touching record levels every six months.
The solution to this problem is not easy to find. It is a double tragedy because poor farmers the producers of grains, vegetables and fruits are committing suicide under burden of the debts as they sometimes suffer because of a bumper crop which leads to fall in prices or by lack of rains which lead to drought. The consumers are suffering because they never get the benefit of low prices but have to pay through their nose in the event of fall in production. The role of the Government is also limited as it has in the last few years virtually demolished the public distribution system and allowed market forces to play freely.
It is also not in a position to meet the scarcity situation by imports as it has large foreign exchange reserves because there are very few countries in a position to meet our shortage of pulses the main source of proteins for large section of Indian population. Even import of food-grains is becoming difficult because of the farmers in India are not prepared to accept a situation in which they get a low price while the imports are done at higher prices with Government subsidizing the same.
The efforts by the Government to kick start agriculture sector by providing large outlays have made little impact so far as farmers are neither getting benefits of new technology or loans on soft terms. More so most of them complain that terms of trade are loaded against them as there is no other sector which is so closely controlled or monitored as agricultural sector. The farmers resent ban on movement of food-grains which deny them the benefit of getting better prices for their produce. Even the purchases by private parties are closely controlled as in turn it affects the state agencies procurement plans.
As such the Government efforts to control prices so far have not made any headway, but they have started posing a serious threat to the growth scenario as indicated by wide fluctuations in the stock market which has seen sharp falls in the index and slow down in some key sectors like banking, petroleum, cement and sugar. If the present situation continues along with adverse trends in foreign markets like U.S.A. and Europe which after years of stability are in facing recessionary trends there will be a critical situation ahead.
This offers no easy solutions for Indian planners who only few months back were talking of India along with China becoming engines of growth for the world. The Indian scenario as of day has come under serious threat from stagnation on the agricultural front, poor infrastructure in the form of inadequate power which is leading to power cuts ranging from two to three hours to six to twelve hours. There is no solution in sight because States are unable to check power thefts resulting in losses to electricity boards.
Both in agriculture sector and building infrastructure we are basically facing the problem of delivery as most of the schemes either are not implemented or fail to produce results because of large scale leakage. It is no secret that the Government from the time of assuming office has been aware of the problem but has not been able to find solutions. Under the present system while one village favoured by Chief Minister can find facilities like stadiums and hospitals unmatched even in larger cities while majority of rural areas are denied even basics like primary health centers and schools.
Solution is not easy as such Indian voters have devised a method of their own to teach erring politicians a lesson by making incumbency as the single largest factor which makes it difficult for political parties to get second term unless they have improved the level of governance. This however does not help much as there is little to choose between one set of rulers and the others who follow them. There is, however, hope as long as power of ballot is vested in "aam admi".
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