Padding up for better ties
Irrespective of whether ‘cricket diplomacy' between New Delhi and Islamabad gets third-time lucky — Zia-ul Haq tried it in 1987 and Pervez Musharraf in 2005 — Prime Minister Manmohan Singh must be commended for sticking his neck out and inviting Pakistan's President and Prime Minister to Mohali to share in an event that will be watched by hundreds of millions of people in the subcontinent and around the world on Wednesday. Since the high-excitement World Cup semi-final between India and Pakistan coincides with the resumption of full spectrum dialogue after a hiatus of 27 months, much is being read into the invitation, which has been received in Pakistan with guarded optimism amid talk of a possible high-level interaction on non-cricketing issues as well. But even if nothing tangible comes out of it, the sight of the two premiers sitting side-by-side cheering their teams and applauding good efforts from either side makes for powerful imagery. Cynics on both sides of the border have sought to dismiss this latest edition of cricket diplomacy as a non-starter, given the general impression that neither Prime Minister carries much weight within the government he heads. In Pakistan, Dr. Singh is viewed as a man isolated in his advocacy of better relations with Islamabad and some have interpreted the invitation as an attempt by the telecom-scam-cum-WikiLeaks-bruised premier to deflect attention from the damage caused to his image.
Whatever happens on the cricket field on Wednesday, there can be no denying the feel-good factor Dr. Singh's invitation and the Pakistan President's reciprocal gesture of pardoning a long-incarcerated Indian prisoner have generated. The Facebook generation seems to have caught on to the spirit; creating a ‘Together We Shall Win' link that is already celebrating the subcontinent's half-a-chance at winning the cup and deciding to cheer together irrespective of which team goes on to Mumbai for the final. Since this is the generation for whom today's policymakers are supposed to be making decisions, the sentiment ought to be celebrated even if history is replete with instances of bilateral relations souring on one pretext or another, including non-inclusion of Pakistani players in the IPL teams last season. A U.S. Embassy cable, accessed by The Hindu through WikiLeaKs and published on March 15, reported former National Security Adviser M.K. Narayanan's embarrassingly frank observation that the Prime Minister was isolated within his own inner circle on the question of how to deal with Pakistan. On this crucial issue, it is Dr. Singh who is right and he must be supported in staying the course. Non-engagement with Pakistan is not a real option for India; and engagement, if it is to be meaningful, must necessarily encompass dialogue on outstanding issues.
Unintended boosters
The Economic Survey 2010-11 makes the fairly obvious point that it is necessary to get the micro-foundations of the economy right for macroeconomic development. Among the key economic problems affecting the micro or unit level is of course inflation, which has remained persistently high for the greater part of this year. The RBI has recently raised its inflation target for 2010-11 by one percentage point to eight per cent. Food inflation, after showing signs of moderating, has climbed back to double digits. One of the key tasks is to understand how inflation, especially food inflation, affects the poor particularly severely. Not all segments are partaking of the fruits of economic growth in the same measure. While the average Indian may be better off — per capita incomes have risen by about 7 per cent — some sections of the people are worse off because their nominal incomes have hardly grown and inflation has negated whatever growth there has been. Moreover, despite the high real GDP growth, many in the bottom quintile of India's rural population, whose expenditure on food accounts for 67 per cent of their spending, are bound to be worse off.
The case for comprehensive policies to support inclusive growth and providing safety nets to the poor has never been stronger. It is certain that the relatively high inflation will accompany the expected high economic growth well into the medium term. In an insightful analysis the Survey points out that some undoubtedly beneficial developments have the unintended consequence of stoking inflation. Financial inclusion is on top of the agenda because it aims at encouraging particularly rural households that hold their savings in cash to deposit them with banks. Once the previously dormant money gets into a bank or a mutual fund, it automatically gets lent to other people, increasing the total money supply in the system. There is evidence from around the world that monetisation of the economy and the roping in of more and more people into formal financial systems add to the pressure on prices. Integration with the global economy can also create inflationary pressures. In India and other emerging economies the purchasing power parity (PPP) is low to begin with, but once industrialisation gathers pace, the PPP correction has to become smaller. This happens partly because of exchange rate changes but more substantially because the prices of basic non-traded goods and unskilled labour that ruled low catch up with the prices in the developed world.
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