Nitin Desai's article "Reviving animal spirits" and Rahul Jacob's column "Make (believe) in India" (Caveat India, March 19) show how hard it will be for India to become a manufacturing-led economy and exporter. One misses a mention of the real distress that is developing in the rural sector. What is not appreciated is that most farmers have little or no marketable surplus production. An increase in procurement prices does not help them at all. For them, the rising cost of inputs such as fertiliser, diesel, pesticide, power and services has sharply eroded their ability to maintain their standard of living and buy FMCG goods.
India faces a huge challenge. It has to engineer an increase in domestic savings so that investment can be made in physical, defence and social infrastructure, and also in domestic consumption. This will ensure that the expanding industrial sector can sell its output because exports are not going to increase immediately. Of course, this is an accounting impossibility. The alternatives available are politically hard to swallow - reduce subsidies by better targeting, tax the rich more and sell off all non-strategic public sector undertakings. Relying on hot money from abroad, like NRI deposits and foreign institutional investor debt inflow, is a dangerous path.
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India faces a huge challenge. It has to engineer an increase in domestic savings so that investment can be made in physical, defence and social infrastructure, and also in domestic consumption. This will ensure that the expanding industrial sector can sell its output because exports are not going to increase immediately. Of course, this is an accounting impossibility. The alternatives available are politically hard to swallow - reduce subsidies by better targeting, tax the rich more and sell off all non-strategic public sector undertakings. Relying on hot money from abroad, like NRI deposits and foreign institutional investor debt inflow, is a dangerous path.
P Datta Kolkata
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number