!-- Begin Web-Stat code 2.0 http -->

Tuesday, June 10, 2014

Inflation Can Only Be Tamed With Growth And Modernisation




Inflation Can Only Be Tamed With Growth And Modernisation


It is heartening to see the Modi Government off to a spectacular start, quickly adopting a multi-pronged approach to growth and development, rather than the earlier administration’s obsession with inflation alone.  It is worth noting, among all the attention paid to big business, industry, security, defence, education, health, reformation of the judiciary, alternative energy, joining of rivers, roads, bullet trains, freight corridors, highways,  public-private participation etc.  that the new Government is laying a great deal of emphasis on measures to benefit the rural poor.

And this is to be done, not by way of subsidies and sops, but by engendering and sponsoring growth, modernisation, opportunity, broad-band and physical connectivity, plus a comprehensive upgrading of infrastructure.

It can safely be said that no President of India before Pranab Mukherjee has had the privilege to make quite such a bold statement of intent to the joint houses of parliament in the 67 years of our sojourn as an independent nation.

Inflation, both general and in food prices, in the previous regime, had a good deal to do with its huge and  mismanaged fiscal and current account deficits, the sharp rise in the cost of imported petroleum products, combined with a total neglect of all the growth drivers. That is why, because of the mix of domestic and international factors that were outside the abilities of the UPA Government to counter, that inflation stayed up, despite very tight monetary measures taken. Strangling an economy growing at nearly 9 per cent in GDP when UPA inherited it from the earlier NDA Government, was a colossal blunder in strategic terms.

Because, without promoting growth, the economy soon grows sick, and can even die. See what happened to the once thriving city of Detroit, once the hub and centre of the American automobile industry. As a country, one of the potentially strongest in the world, India too has been driven into stagflation and decline. There is no time to lose in reversing the economic drift spiraling ever downwards, and Prime Minister Narendra Modi knows it.

The Modi Government’s emphasis on rapidly modernising rural infrastructure, extensive irrigation and water management, the expansion of the energy sector, inclusive of hydro, thermal, solar, wind and nuclear power, combined with targeted information technology, is going to transform the agriculture sector and lead to great efficiencies. The reorganisation of the farm support systems, credits, storage, materials handling, transportation, food processing, cold-chain development etc. will improve yields and eliminate criminal wastage in a nation where the poor still go hungry.

All this together, along with modern retailing, will bring down food prices for good. It is the strength of comprehensive action, working on all the lacunae at the same time, that can and will work.

This approach has never been tried before, with piece-meal initiatives taken at best, and that is why the Indian agriculture sector has not benefited ever since the Green Revolution increased outputs dramatically, and made us food self-sufficient. There was a spate of mechanisation after that in some states to be sure, the introduction of tractors and combine harvesters and the like, and then we ran out of steam and ideas.

That is, till now. The President’s address outlined a ten year plan to modernise the country on all fronts with the agricultural sector playing an important part. The neglect of this vitally important contributor to the nation, in a predominantly agricultural country physically, has declined in the reckoning when it comes to contributions to the GDP, or the prosperity of the people whose effort feeds us all. Today the share of agriculture, including forestry and fisheries, on which at least 600 million Indians, some 51 per cent of the population, depend for their livelihood, has declined to only 17 per cent of GDP.

Modi has declared his Government will bring urban facilities to rural areas, even as the other 50 odd per cent of Indians are now city dwellers. His Government plans to build 100 new ‘smart’ cities to take care of the great rural-urban divide. Waste land will be identified, mapped and tapped for the purpose.

The other major difference in tone and tenor, on all initiatives coming thick and fast from this brand new Government, is epitomised by the motto ‘skill, scale and speed’, devised by NaMo himself. India has never dared to think big in the past, nor thought of competing with China in any manner, but this is set to change. Speed too has never been the strongest suit of the Government of India, and it has long been known that our national skills need updation and upgradation too. The NDA plan to introduce IIMs and IITs and AIIMSs in every state is not only audacious,but long overdue.

There is little doubt that the Modi Government, dynamic, willing to innovate and do things differently, will succeed in all its endeavours. Early days though these  are, people both in India and abroad are clear that optimism is once again in the air, and India has been woken up from its dormancy and dissatisfaction.


(839 words)
May 10th, 2014

Gautam Mukherjee

No comments: