We have come too far without irrigation facilities...

INDIA and the US have now emerged as the two growth-pillars of the global economy when others are undergoing a slowdown. After the rate-hike delay in the US, investors amid the global recessionary and deflationary bias in the commodity prices in several regions breathe easy and are looking for similar accommodative action from the Reserve Bank of INDIA to give an impetus to the stock-market and slow recovery in the economic-growth-rate subject to the constraints of inflation and interest-rate. The RBI governor has retained a pause on rate cuts after a 50 basis-points rate cut in September last year even when the stock-market tumbled several rounds after that, however, a balanced budget has done its bit in improving the market sentiment and analysts are now expecting further easing from the RBI.

Even though the Reserve-Bank has cut down the base-rates by a cumulative 125 basis-points last years, but the commercial-banks are reluctant to pass on the full-benefit to the borrowers when the industry is still clamoring for more rate-cuts in order to boost employment and wages, and demand-supply and growth. Nevertheless, the marginal-cost formula to set the lending-rates might force the banks to pass on the interest-rate-cut-transmission.

The government has committed higher wages and incomes through the Minimum-Wages-Act, the 7^th-Pay-Commission and more spending for the rural and the agricultural sector, but if the industry fails to supply demand owing to higher interest-rates it may backfire resulting only in higher inflation.

However, in INDIA prices of food-items are largely irresponsive to changes in interest-rate due to monsoon conditions which has had been a major source of worry and concern to the farmers. Although, the government has put interest-rate-subvention in place for the agriculture, but the unexpected weather- circumstances coupled with lack of irrigation facilities have turned the tide against the development and growth efforts through monetary and fiscal policies. Therefore, even if interest-rate is low, it barely corrects the monsoon vagaries and the irrigation gaps. It looks meaningless to tackle the problem of weather and irrigation through higher interest-rates.

The inflation we experienced during the last few years of the UPA government may be ascribed to misdirected expenditure to increase demand and growth with supply-side bottlenecks in food-management. We have come too far with half of the agriculture devoid of irrigation and good weather which we have to take with a pinch of salt. None of the government after the Independence ever showed their full-commitment to this big-problem. We have been too much dependent on rains for irrigation and food. Nonetheless, the current government at the Center has taken the stock of the situation of the agricultural-economy, wages, incomes and demand which rests too much on the rains.

We hope the present government would show its will-power to implement its plans for the rural and agricultural welfare, and, demand and economic-growth.