17th February

Holding Steady

The article talks about steps that have to be taken with respect to monetary policy to come out of economic crisis since very little government can do from fiscal side considering the fact that polls would be underway in 2 months from now.

Although India’s economy is slowing down, the government can still fight. Fiscal deficit of 6% of GDP is a major cause of concern not more then the 10% deficit when consolidated Center-State deficit is considered. Talks on further fiscal stimuli are underway and it won’t even have to adhere to parliamentary custom. However, as indicated by Pranab Mukharjee, fiscal consolidation is the mandate for the next government. 

Increased spending on public welfare and infrastructure programs like NREGS and Bharat Nirman is a good sign but the programs have been victim of largely unused funds (64% funds in NREGS unutilized till end-2008), poor planning, time overruns and poor accountability. Poll bound govt has very limited means to introduce recovery through fiscal measures but there is a lot that can be done through monetary tools. India’s better then expected performance cannot be sustained with risk averse banking system. Slashing interest rates is imperative. Although India is the second fastest growing economy in the global meltdown but RBI needs to play a proactive role in order to sustain the momentum.

Zardari’s Admission

The article talks about the recent admission by Pakistan’s President Asif Ali Zardari that the center no longer controls the Swat valley and that Islamic law supersede in the region. The article demands deliberate attempts from international community to restore law and order in Pakistan and Afghanistan to prevent its Talibanization.

This incident marks the victory of Taliban in conquering a strategic area on Pakistan-Afghanistan border even as the local civilians are fleeing from the region. Add to it the already strong Taliban force that has the ability to strike anywhere in Pakistan at any time on its will and it suggests that Islamabad is not very far from the hands of Taliban. What’s important is the constant state of denial during the Musharraf era when the military forces in Pakistan, post 9/11, took head on the forces of theocracy and at the same time constantly seek military aid from US to build so called anti-terror (actually anti-India) capabilities. The result is when military entered the rebel-held Bajaur province; they found a strong infrastructure developed by Taliban to build up for a fierce resistance. 

Now, with the border between the two countries almost non-existent, the sins of past have come to face. The strategy now should be to improve civilian infrastructure and developmental aid to Pakistan and cut back the military aid, most of part of which goes to the wrong hands. The world needs to develop a coordinated strategy for stabilizing Pakistan and Afghanistan.