The Impossible Trinity

Growth

Inflation

Currency
Depreciation

Steps to be followed :
1. Policies to be prepared for keeping growth as primary target ( Increasing the
growth rate to 7 %) thereby decreasing interest rate as first step.
2. Inflation is highly unlikely to increase beyond 10 % as per below charts (source : RBI press
release)so we will tackle inflation through non institutional measures and growth in
basic infrastructure like roadways, railways,etc. and agricultural development.

Agricultural sector reforms in economy

Factors for Agriculture growth
Curb Imports
-Reducing the imports of Sugar, food grains by increasing the import duty from 15%
to 40%

Milk industry boost

-Giving low interest capital and subsidies for a cattle feed and cows purchase

Increase exports
-Providing export subsidies
-

More area under cultivation

-Impart high taxes for converting agri land into non agri land

Increase production of sugarcane, cotton, pulses, oilseeds

-Make farmers aware of new breeds of the crops apart from the traditional varieties
and facilitate the cultivation of the export oriented crops.

Source:
Indias Agricultural Development under the New Economic Regime:Vijay Paul Sharma W.P. No.
2011-11-01 November 2011

Infrastructural reforms in economy

Factors for Infrastructural growth

Increase of power capacity, National Highways, Rural Roads, New Railway track and
ports to boost infrastructural industries
India currently faces coal shortage of 23.96 MT . Production of petroleum reserves to
be stretched from present 110 MT .
Introducing tax incentives, business investment in technology by optimizing on already
established R&D infrastructure and developing clusters.
Provision of world class infrastructure at Indian ports and airports is an absolute must
to reduce transport costs for manufacturers and ensure reliability of delivery for
facilitating manufacturing exports.
Developments in infrastructure will tangibly or intangibly help in boosting Indian
economy by acting as base in development in other sectors like agriculture, tourism,
real estate, manufacturing sector.
Source- Strategies for accelerating growth of Infrastructure in India in the 12th Five Year Plan and Beyond
- Planning Commission of India

Monetary policy :Quantitative tools

1. Decreasing repo rate to 7.5%
Targeting growth to cross 7 percent as per projection of inflation and growth in
chart 1 and chart 2 (source : RBI press release)

2. Increasing MSF to 10%

Encourage borrowing at repo rate and increase government revenue.

Monetary policy :Quantitative tools

SLR to be increased to 25%
As prime target is developing basic infrastructure to control cost-push
inflation, increased SLR will result in increase in monetary reserve with the
government to implement policies based on growth and providing
infrastructural requirements.
CRR to be decreased to 3%
The recent events of Fed Tapering and Ukraine crisis showed that the Indian
markets were less volatile in comparison to other developing economies
provide us room to take risk in our growth base approach as per charts (source :
RBI press release)

Monetary policy :Qualitative tools

1.Banks cannot accept EMI less than Rs 5000 on car loan/home loan.
This will lead to postponement of decision to buy property/car tackling inflation as
per chart . (source : RBI press release)

2. Banks not to give loans to traders of certain commodities

for e.g. sugar, gur, edible oil etc. to prevent hoarding/speculations and tackle
inflation.
3.Margin Requirement to be remain unchanged.

Fiscal Policy
1.Government Capital Expenditure is to be increased.
To accelerate investment in infrastructure.
2.Government Revenue Expenditure to be decreased
To take care of Current Fiscal Deficit.
3.Government Tax revenue is to be increased by increasing indirect tax on
luxury goods.
This earning will be used to boost up infrastructures which will results to
control cost-push inflation.

THANK YOU