Thursday, December 03, 2009

Signs of recovery are looking good

Moreover, fall in agricultural production will also give rise to yet another monster, inflation, which has been tamed for sometime now. Though the government is on a high drive to procure essential food items like rice and wheat by increasing the Minimum Support Price (MSP), anticipated drop in kharif still threatens the expected price levels. Meanwhile, the Wholesale Price Index has already shot up by 1.34 per cent in October as against 0.5 per cent a month ago due to rise in prices of key food items. But then that’s not all, one must also add to it the fact that after a historic fall oil price is again on a move, threatening to push inflation further up by increasing the cost of production itself.

Keeping the threat that agriculture is posing on the economic recovery one has to admit the fact that continuation of the stimulus packages is an essential requirement for the economy to sustain the recovery at the ground level. As Chan puts it, “The previous rounds of fiscal stimulus are now trickling down the economy, providing a notable boost to activity… and thus India’s GDP growth is unlikely to decelerate in the second half of 2009.” Moreover, going by what Jalan has to say, “So far these stimulus packages are doing no harm to anyone. So we should continue with this.” But now it all depends on how Union Finance Minister Pranab Mukherjee, who sees 9-10 per cent GDP growth by the beginning of next 5-year plan (2012-13), plays his cards. However, with his recent statement to continue with the stimulus till the western economies recover, the FM has certainly shown that he aims at a sustainable and long-term growth, does not matter if it comes relatively slow.

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Source :
IIPM Editorial, 2009

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative


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