Few lessons from past...

The past government kept the money-supply loose in the form of fiscal spending and also pushed the central bank for lower interest rate longer in the aftermath of the Recession 2008 which set fire in the market leading to double digit inflation and the problems of twin deficits – fiscal deficit and the current account deficit. Economists saw the period after 2011 under the UPA rule as a period of gross mismanagement under all the supply side and structural constraints and INDIA had a history of easily overheating under a directionless agriculture and food supply management increasing food inflation and lowering real wages and demand. The unprecedented increase in spending by the UPA led to inflation, higher interest rate and lower real wages and lowered demand and growth in the economy in the final years of its term. INDIA has a full-fledged irrigation deficit upto 50% land dependent on the rains for irrigation and a major factor driving the food inflation every year, but none of the government in the past has showed determination to deal with the problem of lower productivity and food security. The demand for agricultural loan waiver due to flood and droughts has had been a regular problem faced by the every government which needs attention of the government to reduce the risk associated with rains in the agriculture sector of the economy which has given employment to the half of the labour force due to less investment, less job opportunities and slow growth. However, demand might advent after the implementation of the 7th Pay Commission and Good Monsoon... Higher inflation and successive droughts in the last years of UPA considerably dented demand of the urban and the rural areas which is also responsible for rising NPAs due to less demand and slowdown... The Government must try to contain demand due to loss in real wages and incomes because of inflation; otherwise 8th pay commission is not far resulting in Public deficit/debt... The government must continue spending on increasing productivity instead of blindly investing on increasing employment and demand... The Reserve Army of Labour is also important to keep prices and wages low through increasing productivity... Wages should correspond productivity otherwise it would just create demand without supply... Higher spending on education, skills and innovation or technology is expected if we want to increase demand and supply, both, without heating or inflation. If investments either create only demand or only supply that would destabilize the prices and unemployment, but if we try to increase both that would result in better growth outcomes with stable prices and unemployment.