Proposed report

About: The Economy of India is the tenth largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). The country's per capita GDP (PPP) per capita is $3,339 (IMF, 129th) in 2010. Following strong economic reforms from the post-independence socialist economy, the country's economic growth progressed at a rapid pace, as free market principles were initiated in 1991 for international competition and foreign investment. Despite fast economic growth India continues to face massive income inequalities, high unemployment and widespread malnourished children Public finances 71.84% of GDP (2010 est.) $185.4 billion (2010 est.) $269.8 billion (2010 est.) $2.107 billion (2008) BBB- (Domestic) BBB- (Foreign) BBB+ (T&C Assessment) Outlook: Stable (Standard & Poor's) $319 billion (July 2011)

India is under a severe state of flux. The issues can be understood in the following manners with their complete explanations. Let us consider it factor by factor as follows 1. Inflation

On March 19, 2010, the Reserve Bank of India raised its benchmark reverse repurchase rate to 3.5% percent, after this rate touched record lows of 3.25%. The repurchase rate was raised to 5% from 4.75% as well, in an attempt to curb Indian inflation.

Indias 2009-10 Economic Survey Report suggests a high double-digit increase in food inflation, with signs of inflation spreading to various other sectors as well. The Deputy Governor of the Reserve Bank of India, however, expressed his optimism in March 2010 about an imminent easing of Indian wholesale price index-based inflation, on the back of falling oil and food prices. For 2009, Indian inflation stood at 11.49% Y-o-Y. This rate reflects the general increase in prices, taking into account the purchasing power of the common man. According to the Economic Survey Report for 2009-10, economic growth decelerated to 6.7% in 2008-09, from 9% in 2007-08. The economy is expected to grow by 8.7% in 2010-11, with a return to a growth rate of 9% in 2011-12.

The Indian method for calculating inflation, the Wholesale Price Index, is different from the rest of world. Each week, the wholesale price of a set of 435 goods is calculated by the Indian government. Since these are wholesale prices, the actual prices paid by consumers are far higher.

In times of rising inflation, this also means that the cost of living increases are much higher for the populace. Cooking gas prices, for example, have increased by around 20% in 2008. With most of Indias vast population living close to or below the poverty line, inflation acts as a Poor Mans Tax. This effect is amplified when food prices rise, since food represents more than half of the expenditure of this group. The dramatic increase in inflation will have both economic and political implications for the government, with an election due within the year.

2. Current account deficit The vulnerability of the economy arises from the fact that the funding is coming from sources that are unstable. The current account deficit is likely to be over 3% of GDP for the entire 201011 fiscal year, economists said. The last time India had a current-account deficit of over 3% was during the crisis of 1991, when the government was close to defaulting on its external debt. Although exports have been growing at a faster pace than imports in recent months on the back of a pickup in global recovery, the rising prices of commodities, especially crude oil, are likely to swell Indias import bill in the coming months. India imports almost 75% of the oil it uses. The survey said lingering uncertainty on the state of public finances in developed markets has pushed investors to commodities. The key reason for the widening deficit was slackening non-merchandise trade, primarily due to a decline in investment income and private transfer receipts, and increase in services payments to foreigners.

3. GDP growth rate deterioration.

GROSS domestic product (GDP) growth in India continued to slide falling to 7.7 per cent in the first quarter of the current financial year (April-June 2011-12), against a 7.8 per cent growth in the preceding quarter and an 8.8 per cent growth recorded in the first quarter of the previous year (according to the revised estimates based on the new series of IIP). The country's GDP at factor cost at constant (20042005) prices stood at Rs12,26,339 crore, as against Rs11,38,286 crore in the first quarter of the previous fiscal (2010-11), according to figures released by the Central Statistical Organisation (CSO). Sectors

driving the first quarter growth include electricity, gas and water supply (7.9 per cent), trade, hotels, transport and communication (12.8 per cent), financing, insurance, real estate and business services (9.1 per cent). As per the latest estimates of the index of industrial production (IIP), growth in the index of mining, manufacturing and electricity slowed to 1.0 per cent 7.5 per cent and 8.2 per cent, respectively, in April-June 2011-12 against growth rates of 8.0 per cent, 10.3 per cent and 5.4 per cent, respectively, during the first quarter of the previous fiscal. GDP at factor cost at current prices is estimated to have grown 16.7 per cent year-on-year to Rs19,37,123 crore during the first quarter of 2011-12 quarter, against Rs16,59,708 crore in the corresponding period of 2010-11. The sector-wise breakdown showed that the construction sector had been one of the worst-performing parts of the economy. Construction grew at 1.2%, down from 8.2% in the previous quarter, as rising interest rates and delays in planning approvals held up building projects. Agricultural output rose 3.9%, which was down from the previous quarter but above the level of 2.4% in the same period last year. Manufacturing grew 7.2%, an improvement from the previous quarter, but well below the 10.6% in the corresponding quarter of 2010-11.Private final consumption expenditure (PFCE) at constant (2004-05) prices is estimated at Rs7,95,683 crore in Q1 of 2011-12 against Rs7,48,395 crore in Q1 of 2010-11, while Government final consumption expenditure (GFCE) at constant (2004-2005) prices is estimated at Rs1,36,935 crore in Q1 of 2011-12 against Rs1,34,161 crore in Q1 of 2010-11. Gross fixed capital formation (GFCF) at constant (2004-2005) prices is estimated at Rs4,10,533 crore in Q1 of 2011-12 against Rs3,80,544 crore in Q1 of 2010-11. The first GDP numbers for the current fiscal confirm several analysts assessment of economic prospects for the financial year which would involve further moderation in growth due to stricter monetary policy to curb inflationary pressures. Signs are already visible as according to data from the Centre for Monitoring Indian Economy, new investment announcements by companies have more than halved to Rs 32.5 lakh crore during April-June 2011 from Rs 71.4 lakh crore in the corresponding period last year as high interest rates, decline in demand and policy uncertainty have taken a toll. Declining investment can only aggravate inflationary pressures as supplyside bottlenecks increase. While the 7.7 per cent growth silhouetted against a murky New Investment Announcements
Industry Apr-Jun 2011-12 (Rs. Crore) %change over April-Jun 2010-11 -55 -52 -61 -83 -59

All 32,53,158 Manufacturing 13,31,621 Electricity 9,02,591 Cement 30,000 Services (Non-financial) 6,85,889 st Source: Times of India, 1 Sep, 2011

4. Unemployment Rate

5. Interest Rate

6. Water Total IBRD/IDA Commitments as of end FY10: $21.4 billion

(by fiscal year, in nearest $ billion) Commitments New Lending Total Commitments (Active Projects) Total No. of Active Projects FY05 2.9 12.8 64 FY06 1.4 11.3 56 FY07 3.7 14.3 67 FY08 2.1 13.8 60 FY09 2.3 14.9 61 FY10 9.3 21.4 75

Indian economy on a slowdown phase: World Bank

Key Development Indicators GROWTH: Population Growth ( 2001- 2007) : 1.4% GDP Growth (2007- 2008): 9.0% GDP Growth (Govt. Estimates for 2008-2009): 7.1% Poverty (Below National Poverty Line) Rural: 28 % Urban: 26 % Fertility rate: 2.5 births per woman Life expectancy at birth: 64 years

Infant mortality (per 1000 live births): 57 Maternal Mortality (per 100,000 live births):450 Children Underweight (below 5 years): 46%

Primary school enrollment, net: 90%

Male Adult literacy (age 15 and older): 73% Female Adult literacy (age 15 and older): 48%

Access to improved water source (% of pop): 89% Access to improved sanitation: 33% Source: World Development Indicators 2008, NFHS 3 2005-06, and World Bank's 'India at a Glance'

7. Agriculture

Agriculture and allied sectors like forestry, logging and fishing accounts for 25% of the GDP. It employs almost 58% of the total work force. It is the largest economic sector and plays a significant role in the overall socio-economic development of India. Due to steady improvement in irrigation, technology, modern agricultural practices the yield per unit area of all crops has increased tremendously.
One of the major economic issues faced by the country is agriculture as this is the sector which is source of livelihood for about 54% of Indians till date. Still today this sector is not well developed and faces lots

of

problems

resulting

into

low

productivity

of

crops.

As 43% of land in India, is used for farming but contributes only 18% of the nations GDP. The poor condition of agriculture in the country is the point of concern for Indians. The rural farmers in India suffer from poverty and most of them are illiterate so there is lack of good extension services. Another major problem faced by Indian farmers is their dependency on nature and poorly maintained irrigation systems. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Poor roads to market from village, rudimentary market infrastructure, and excessive regulation are few of the other concerned points for the agriculture sector in India. The low productivity in India is a result of the following factors:

According to World Bank's "India: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity-enhancing investment. Over regulation of agriculture has increased costs, price risks and uncertainty.Government intervenes in labor, land, and credit markets. India has inadequate infrastructure and services. World Bank also says that the allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating. Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce. Very small (less than 20,000 m) size of land holdings due to fragmentation, land ceiling acts and family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labor. Illiteracy of farmers and their ignorance in the field of modern agricultural practices and technology, hampered by high costs and impracticality in the case of small land holdings. Inadequate Irrigation facilities and dependence of farmers on monsoon season, where good monsoon results in a vigorous growth while a poor monsoon leads to a sluggish growth for the economy as a whole. Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent.

Ministry of Agriculture is also working in direction to improve the conditions of farmers by employing different programs like Insurance plan and ITC Limited plan. Under Insurance plan Agriculture Insurance Company of India insures farmers cultivating wheat, fruit, rice and rubber in the event of natural disasters or catastrophic crop failure, under the supervision of the Ministry of Agriculture. ITC Limited plan aims to connect 20,000 villages to the Internet by 2013 providing provide farmers with up to date crop prices for the first time, which should minimize losses incurred from neighboring producers selling early and in turn facilitate investment in rural areas.

8. US downgrade to impact markets but not growth

in the short term there might be some impact, but in the medium to longer term there won't be any impact if India frames its policy accordingly. The global recession could even prompt foreign institutional investors to park more funds in the Indian markets.not much impact on the real economy. American companies will be forced to outsource more of their work to save costs.

9. Impact of subprime crisis

The US has been a major investor in Indian markets. The slowdown could mean decreased inflow of foreign funds in India, which has been responsible for the booming stock market. This could lead to a sharp correction in the market.

Many leading companies, particularly IT, BPO and exports, have flourished on the back of a robust US economy. They have contributed a lions share to Indias foreign exchange reserves. Any slowdown could mean a reduction in profitability in these sectors, which in turn can lead to companies closing down and unemployment. This could lead to a slowdown in the Indian economy as well.

Many experts think this is not the end of subprime crisis and they are not sure of its impact on the Indian economy. All they say in wait and watch.

10. Market linked interest rates

Another Move towards Market-Linked Interest Rates... Another Move towards Market-Linked Interest Rates Reforms to Small Saving Schemes (NSSF) A government panel, headed by RBI deputy governor Shyamala Gopinath, was set up to review the small investment schemes of post offices and banks. The panel has recommended a 0.5% raise in the interest rate for post office savings account to 4% in line with the rate on savings bank deposits; raising the annual contribution limit in Public Provident Fund (PPF) to Rs.1,00,000, from the current Rs.70,000; discontinuation of the Kisan Vikas Patra; reduction in the maturity period of National Savings Certificates (NSCs) to five years from six, and introduction of a 10-year NSC scheme. The panel has also advocated benchmarking of interest rates on other small savings schemes to rates of government securities of similar maturity with positive spread of 25 basis points for most schemes, while it proposes a 100 basis points spread for senior citizens' schemes, keeping in view its social

objective, and a 50 basis points spread for the proposed 10-year NSC, keeping in view of its higher illiquidity. The administered rates may be notified by the government at the beginning of every financial year based on the average yields on government securities in the previous calendar year. The Committee also agrees with an earlier recommendation made by the Rakesh Mohan Committee on placing a cap of 100 basis points so that the administered rates are neither raised nor reduced by more than 100 basis points from one year to the next, even if the average benchmark interest rates rise or fall by more than 100 basis points. This would keep in check undue volatility in the administered rates, which if approved will be effective July 1, 2011 . The proposed benchmarks and the administered (/current) rates for various instruments are given in the following tables (Table 1 and Table 2).

As for the usage of small savings funds the panel recommends that the mandatory component of investment of net small savings collections in state government securities be reduced to 50%. States can access up to 80% of NSSF for financing their annual expenditure. (The funds are given as a 25-year loan carrying 9.5% interest, higher than market rates. It has been proposed that the tenure of these loans may be reduced from the current 25 years, so states might be able to minimise their interest outgo and borrowing requirement by opting for 10-year loans at lower rates.) The balance amount could either be invested in central government securities or could be on-lent to other states on basis of requirement or could be lent for financing infrastructure projects requiring long-term finance, according to the panel.

The share of small savings as a percentage of net financial savings of households increased sharply from 7.9 per cent in 1996-97 to 22.3 per cent in 2004-05. Thereafter, the share declined and even turned negative during 2007-08 and 2008-09 as the alternative savings instruments became relatively more attractive. The outstanding amount of collections under small savings stand at Rs. 7,93,447 Crore in 2010-11. The measures to reform the small savings plans offered by the government, if implemented, would help to ensure transparency, move towards market-linked rates and reduce the governments fiscal burden.

11. RBI Unmoved by Pointers to Moderating Demand and Growth The RBI formulated its Annual Monetary Policy for the year 2011-12 against a backdrop of moderating demand and growth, however, uncontrolled inflation has led the central bank to raise its key policy rates, for the 9th time since March 2010 and this time, quite sharply. While the RBIs strong hawkish stance and bias, has been lauded by many, several analysts have also expressed the view that it is time that the emerging economys central bank adds to its arsenal more specific weapons to fight inflation rather than simply sacrificing the growth momentum. The RBI has of course pointed to the need to adjust domestic energy prices in line with the rising global prices, in order to reduce misalignment of energy demand with prices. Energy price adjustments may raise inflationary pressures in the short term but should definitely help curb the twin (fiscal and current account) deficits through adjustment of demand to actual prices. The problem with the continued hawkish bias is that it is the infrastructure sector which suffers most leading to further supply bottlenecks fuelling and adding to inflation imported from overseas. The Review states that :

According to the IMF WEO (April 2011), global growth is likely to moderate from 5.0 per cent in 2010 to 4.4 per cent in 2011. Growth is projected to decelerate in advanced economies due to waning of impact of fiscal stimulus, and high oil and other commodity prices. Growth in EMEs is also expected to decelerate on account of monetary tightening and rising commodity prices. Consumer confidence in major countries, which improved during January-February 2011, moderated in March 2011 on the back of higher oil prices. The Indian economy is estimated to have grown by 8.6 per cent during 2010-11. The index of industrial production (IIP), which grew by 10.4 per cent during the first half of 2010-11, moderated subsequently, bringing down the overall growth for April-February 2010-11 to 7.8 per cent. The main contributor to this decline was a deceleration in the capital goods sector. The growth is projected to be in the range of 7.4 per cent and 8.5 per cent in 2011-12 with 90 per cent probability According an RBI Survey (OBICUS), the order books of manufacturing companies grew by 7 per cent in October-December 2010 as against 9 per cent in the previous quarter indicating some moderation. The Reserve Banks forward looking Industrial Outlook Survey (IOS) shows a decline in the business expectations index for January-March 2011 after two quarters of increase. The services PMI for March 2011 showed some moderation as compared with the previous month.

The baseline projection for WPI inflation for March 2012 is placed at 6 per cent with an upward bias. Inflation is expected to remain at an elevated level (around 9 per cent in the first half of the year due to expected pass-through of increase in international petroleum product prices to domestic prices and continued pass-through of high input prices into manufactured products. Against this backdrop the Monetary Policy Measures announced are

The repo rate under the liquidity adjustment facility (LAF) has been increased by 50 basis points. Accordingly, it goes up from 6.75 per cent to 7.25 per cent. As per the new operating procedure, the reverse repo rate under the LAF, determined with a 100 basis point spread below the repo rate, will stand adjusted at 6.25 per cent. The Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, gets calibrated at 8.25 per cent. The Bank Rate remains at 6.0 per cent. The cash reserve ratio (CRR) remains unchanged at 6 per cent of NDTL of scheduled banks.

Savings Bank Deposit Interest Rate

Pending a final decision on the policy of deregulating the savings bank deposit rate, it has been decided to increase the savings bank deposit interest rate from the present 3.5 per cent to 4.0 per cent with immediate effect.

Changes in operating procedures of Monetary Policy and several developmental and regulatory policies have also been announced. Detailed Highlights are presented in our monthly statistical bulletin EUpDates

12 . The MFI Industry in India from Micro to Macro? The operating style of many microfinance institutions (MFIs) in India has been criticised by several eminent policy makers. MFIs provide small loans to the poor who do not qualify for traditional banking credit, help lift them out of poverty and spur entrepreneurship. Rash and faulty practices both on part of the lenders and borrowers in the industry have now led to borrowers defaulting on payments and taking their lives and banks ceasing to lend to the cash-strapped micro-loan companies. Collections by MFIs in Andhra Pradesh had deteriorated considerably and there were some incipient signs of contagion spreading to other States. To deal with the problem, the RBI has temporarily relaxed provisioning norms to enable banks to continue lending to the cash-strapped MFIs. Banks can now restructure loans extended to MFIs even if they are not fully secured; bank loans to MFIs were mostly unsecured but to avail of the regulatory asset classification benefits under the present restructuring guidelines of the RBI, the accounts had to be fully secured. As a special case, banks need not for now classify such loans as non-performing assets (NPAs). The RBI also constituted a committee, headed by Y H Malegam, to look into issues facing the microfinance sector in order to bring about long term and structural changes in the functioning of MFIs. According to the committee report the players in the Microfinance sector fall under three main groups: The (Self help Group) SHG-Bank linkage model (pioneered by NABARD) accounting for about 58% of the outstanding loan portfolio; Non-Banking Finance Companies (NBFCs) accounting for about 34% of the outstanding loan portfolio, which encourage villagers to form Joint Liability Groups (JLG) and give loans that are jointly and severally guaranteed by the other members of the group, and Others including trusts, societies, etc, accounting for the balance 8% of the outstanding loan portfolio. All NBFCs are currently regulated by RBI (under Chapters III-B, III-C and V of the Reserve Bank of India Act). There is, however, no separate category created for NBFCs operating in the Microfinance sector, which is required as the borrowers in the microfinance sector represent a particularly vulnerable section of society lacking individual bargaining power, financial literacy and the ability to absorb external shocks The need for regulation is also strengthened because over 75% of the finance obtained by NBFCs operating in this sector is provided by banks and financial institutions including SIDBI. As at 31st March 2010, the aggregate amount outstanding in respect of loans granted by banks and SIDBI to NBFCs operating in the Microfinance sector amounted to Rs.13,800 crores. In addition, banks were holding securitized paper issued by NBFCs for an amount of Rs.4200 crores. Banks and FIs (including SIDBI) also had made investments in the equity of such NBFCs. Many NBFCs in this sector started off as non-profit entities providing micro-credit and other services to the poor however, as they found themselves unable to raise adequate resources for a rapid growth of the activity, they converted themselves into for-profit NBFCs. Others entered the field directly as forprofit NBFCs seeing this as a viable business proposition. Significant amounts of private equity funds have consequently been attracted to this sector. As there have been accusations of MFIs charging unreasonable fees and using loan sharks to collect outstanding payments, the Malegam panel has proposed a cap of 24% on the interest charged and an upper limit of 25,000 Rupees ($549; 344) on individual loans (as well as the aggregate value of all outstanding loans of an individual borrower). It has recommended an average margin cap' of 10 per cent for MFIs having a loan portfolio of Rs.100 crore

and of 12 per cent for smaller MFIs It also proposed a transparency in charges, with an MFI allowed to levy only three charges - processing fee, interest and insurance charge. Further, NBFCs operating in the Microfinance sector not only compete amongst themselves but also directly compete with the SHG-Bank Linkage Programme. The committee has made a number of recommendations to mitigate the problems of multiple-lending, over borrowing, ghost borrowers and coercive methods of recovery. These include: a borrower can be a member of only one self-help group or a joint liability group; not more than two MFIs can lend to a single borrower; there should be a minimum period of moratorium between the disbursement of loan and the commencement of recovery; the tenure of the loan must vary with its amount; a credit information bureau has to be established; the primary responsibility for avoidance of coercive methods of recovery must lie with the MFI and its management; and the RBI must prepare a draft customer protection code to be adopted by all MFIs. As there may be a need to give special facilities or dispensation to NBFCs operating in this sector, a separate category of NBFCs for microfinance institutions is suggested, defined as A company (other than a company licensed under Section 25 of the Companies Act, 1956) which provides financial services pre-dominantly to low-income borrowers with loans of small amounts, for short-terms, on unsecured basis, mainly for incomegenerating activities, with repayment schedules which are more frequent than those normally stipulated by commercial banks and which further conforms to the regulations specified in that behalf. The committee also recommends that bank advances to MFIs shall continue to enjoy priority sector lending status. However, advances to MFIs which do not comply with the regulation should be denied priority sector lending status. While the committee guidlines are overall well balanced in favour of both borrower and lender, certain recommendations raise additional challenges in terms of both compliance and operations and may phase-out smaller MFIs. For example, the ascertaining of family income and that a lender borrows from not more than two sources would be very difficult in reality. For the borrowers, a Rs.25,000 limit may not be enough in certain circumstances to pull a family out of poverty and make the borrower credit worthy in future. Insistence on loans being made primarily for income-generating activities may, again defy the very purpose of microfinance. Currently an MFI being a NBFC is required to have a minimum capital of Rs.2 crores, the suggestion that for a NBFC MFI this should be increased to a minimum Net Worth of Rs.15 crores, if adopted would raise entry-barriers to the industry 13.Cause Enough for RBI to Pause? RBIs tightening cycle was almost unanimously presumed to continue in its September policy review, however, the global economic scenario has clouded considerably recently and though the Indian economy seems to be steaming on there are a few warning signs which ought to be heeded before it is too late. Growth in the world's largest economy decelerated to a pace of 1.6 percent, signaling a more pronounced slowdown in the recovery from recession. July consumer spending a key driver of US economic growth, usually accounting for two-thirds of output rose 0.4% and incomes rose a mere 0.2%, with spending outpacing income. The US Unemployment rate for August came in higher as forecasted at 9.6%, while the Change in Nonfarm Payrolls for the same period showed a better than predicted shed of 54 thousand jobs. However, the Change in Manufacturing Payrolls showed a shed of 27 thousand jobs,

which is actually worse than the predicted outcome, and also Change in Private Payrolls showed that jobs added were lower than expected. Europe looked better; economic confidence in the 16 countries that use the euro rose to its highest level in nearly two-and-a-half years during August, as unemployment concerns eased somewhat. The UK economy expanded at 1.6% year-on-year, faster than previously estimated in the second quarter in the biggest growth spurt since 2001 as companies rebuilt stocks and construction work surged. Japan's government and the central bank had to throw the economy a double lifeline; accompanied by an unanimous vote to keep its key interest rate at a 0.1 percent the central bank unveiled a new sixmonth low-interest loan program to financial institutions to boost liquidity, combined with an existing three-month funds-supplying operation worth 20 trillion yen ($236 billion) so that banks would have access to a total of 30 trillion yen ($355 billion). India's economy grew 8.8 percent in the first quarter of the current fiscal, its best performance since 2007, led by a 12.4 percent year-on-year surge in manufacturing, a 9.7 percent leap in services and an 8.9 percent jump in construction and was also boosted by agricultural output expansion of 2.8 percent. Yet many economists suggest that the central bank, which has hiked rates four times since the start of the year to curb inflation, should pause its monetary tightening the most aggressive in the Asia-Pacific region in the face of the shaky global outlook. If that is not cause enough RBI should possibly heed the warning signals emitted from the slowdown in domestic investment; not only has manufacturing growth slowed from 16.3% in the previous quarter to 12.4%, essential supplies and construction outputs have also shrunk as compared to the previous quarter, while services growth in important sectors have not really picked up. More concerning is the fact that gross fixed capital formation has decelerated compared to the last 2 quarters at a time that it ought to be rising with a need for vast infrastructure spending both for physical and human resources development. Should inflation control measures delinked from monetary policy and targeted at select necessary commodities now be evaluated instead?