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The unkind cut

An investment stimulus, not a trimmer budget, is the need of the hour.

There are two things that we hear all the time on television — that the next quarter will be better and the next year even more so. Mint Road seemed hesitant earlier, but not any more. The earlier refrain was that FDI in retail would flow in. Why companies up to their ears in losses and scams would sink billions of dollars in India during a recession was no one’s concern. Some scraps may get invested in India, but that will hardly matter.

If you talked of the need for an investment stimulus, you were branded a “lefty lunatic”. If you were a visiting finance czar whose job depended on India and said a domestic investment revival was needed, you were ignored. Investment stimuli are passé. Or at least, so says the World Bank.

The Chinese government carried out such a stimulus programme in August, and the Bretton Woods institutions pilloried them for it. But they politely stood their ground, and they are now growing at 7 per cent. But we are told that they will suffer, that the Chinese are making a mistake and their deficits will zoom upward.

But one can design a resource-raising programme along with a stimulus. For instance, we could cash in on the fact that this year has been good for agriculture and invest in markets and bazaars, processing infrastructure and roads in small towns. But that’s old hat socialist economics. What we will do, as the finance ministry tells us, is cut employment programmes, along with rural infrastructure and agricultural investment. Fortunately, the RBI governor has decided to bet on growth and resisted the temptation to raise interest rates, at the cost of the disapproval of the Prime Minister’s Economic Advisory Council chief. The PM’s men keep talking of controlling inflation, even if it means throttling the economy.

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