The Burning Issue
There has been a lot of brouhaha about the monetary tightening measures that the RBI Governor is exercising to control the headline inflation rate.But looking into the nuances of this problem ,the deep rooted cause lies in another aspect of the economy which is equally important,i.e. growth. There have been fears raised over the growth of the Indian economy being limited to the urban side of the populace.The rural economy has largely been averse to this growth rate thanks to their non participation,as there have not been any concrete measures taken by the Govt. to include them in the upward spiral that the economy has been witnessing,the reason being does their inclusion has any significant impact on the economy?Sure it does.Let us look this problem of Inflation V/s Growth a little objectively.
If you go through the business dailies you will find that probably all the economists are of the view that the current phase of high inflation is largely driven by supply side constraints.And rightly so as the production of food grains have been stagnating for a couple of years in a row,let alone seeing any growth.The world wheat production is down for two straight years thanks to the drought conditions being witnessed in Australia,one of the major producers of wheat.India has done itself no good by ignoring the critical condition of water reserves in states like Punjab.India used to be self sufficient with the food grain requirement but the lack of care to include the rural economy has cost us dearly.The growth has hardly been inclusive as can be seen by the abysmal situation prevalent in the rural areas in terms of depleting water resources,higher costs of fertilizers,declining productivity of the agreable land,shortfall of credit available to farmers,lack of technology inclusion in the farming system et al.Although recently the Govt has increased the minimum procurement price being given to the farmers producing wheat by around 33% as compared to the last year but measures like these are a temporary soothing and also burden the tax payer’s purse.
The need therefore is for more reformist measures like microfinance model which ensures easy availability of money to the rural populace, the replication of the model employed by the Nobel Prize winner,Mohd. Yunus can be very beneficial as the model has ensured the successful implementation of microfinance lending viz easy availability of funds for all and very high percentage of timely repayment rate. India Inc has also been active on this front as the likes of Bharti and ITC have undertaken measures like contract farming which ensures that the rural farmer is assured of the buyer and also technology upheaval by these corporations enhances the productivity of the existing land.But due to the lack of clarity on policy front these companies have been skeptical in putting in a long term partnership with these farmers.The Govt needs to step in and assure that no policy changes is going to impact the long term viability of the partnership between these two sides.On the worsening water situation ,the FM has announced a huge revival package for the canals in the country.As the initiative has already been taken now it must be ensured that the measures see the light of the day within the stipulated time frame.It should be made amply clear that if we fail to include the rural structure in this growth phase,we are sure to pay a price for the same ,if not now then later.So now if we can see the eagle vying for its prey we better catch hold of the gun.
