Financial Mess

Chidambaram, after taking over as the finance minister from Pranab Mukherjee, has announced a slew of measures to bring the economy back on track. While the intent may be appreciable, the task is easier said than done. Though the economic condition in India is not as grim as in other western countries, the situation is certainly precarious due to the global turmoil, especially in eurozone, and rising crude prices, and adding fuel to the fire is the below-average monsoon across many states in India. With such a range of factors playing havoc with the economy, it is indeed a tough task for the finance minister to turn the tide within a short span of time.

The government has attributed the marginal fall in WPI inflation to its fiscal and administrative policies. But the rupee still continues to hover around 55 to 56 level against the US dollar and this has sent the import costs sky rocketing. And in some cases the consumers have to bear the brunt leading to price rise and further inflation. The government in tandem with RBI have decided to put in place a number of steps to prevent the slide of rupee and all these focus on bringing investments back on track and also increase the cash flow into the country.

Boosting exports, regulation of tax laws, reducing the interest rates etc all have been aimed at reviving the growth and improving the investment climate in the country. Chidambaram has stated, "The slowdown in the growth of the economy is mainly on account of the slowdown in the industrial sector and lower growth registered in the agriculture sector" Well he has got that right and that should be his prime focus. Investments in the industrial sector has not made much headway in India in the recent past and 1 glaring example of this would be the recent comment made by richest person in UK, NRI Lakshmi Mittal "India remains a priority but not for investment. I'm not locating capital to India or China as I don t see things progressing there." Such a comment from one of the richest men in Britain would certainly send wrong signals to other prospective investors. Decision making and political compulsions are said to be the root causes for this. These things needs to be looked over and hard decisions have to be taken. Laws, which can attract new investments, have to be passed and these in turn would accelerate rapid job generation. Rating agencies such as Moody's and S & P have predicted low growth rates for India in the coming quarters on account of its poor GDP scores. Government inactivity is also seen as on of the catalysts for this and the manufacturing sector, which forms the core of the Indian economy, has been badly hit. Industrial output is reaching sluggish levels due to dried up investments. So the only way out of this mess would be to have a immediate look into how the output from agriculture and industry can be increased and sustained over a longer period of time.

Chidambaram would be well advised to chalk out a plan that serves to address the issues in these 2 sectors. India is a agriculture driven country and the backbone is agriculture. At the same time it is also a developing country and needs huge investments in the industrial sector. Population is growing exponentially and cities are becoming larger. Demand for water and electricity are reaching new highs and the number of graduates seeking employment have also grown by leaps and bounds. Subsidies for farmers and proper irrigation should be top priorities with the government. Farmer suicides which have been happening in recent times cut a very sorry figure for the nation and its high time the government wakes up to stop this. Loans to farmers need to be made cheaper and power supply should also be given free for desperate farmers. Agricultural scientists should be encouraged and supported to devise new and effective ways of farming and irrigation. The government needs to involve itself at all stages to ensure things move smoothly at all time. Reviving agriculture is they key to Indian economy's rise.