Capital formation

The Chief Economic Advisor, speaking at the Global Economic Policy Forum, emphasised the anticipated rise in capital formation driven by private sector growth. However, India’s GDP growth of 5.4 per cent in the second quarter of 2024-25 fell short of policymakers’ expectations. To achieve long-term growth and stability, increased investment in capital assets such as infrastructure, plant and machinery, and human capital is essential to boost production capacity. Equally important is ensuring that demand keeps pace with output to maintain a balanced demand-supply cycle.

From a different perspective, the sharp decline in the savings rate has affected private consumption, a critical driver of investment.

To address these challenges, fiscal and monetary policies must create an enabling environment for robust capital formation. Strategies to attract greater foreign direct investment, control inflation, and ensure macroeconomic stability are imperative.

Srinivasan Velamur

Chennai

Tackling inflation

This refers to ‘Foreign banks predict RBI rate cut amid cooling inflation and fiscal optimism’ (December 13). It was interesting to learn that both foreign banks and the FICCI chief are anticipating a 25 bps rate cut in the February MPC meeting, owing to the November CPI inflation easing to 5.48 per cent from 6.21 per cent in October this year. However, it may be too early to expect such a ‘quick fix’ move on the part of the new RBI Governor.

It may be imprudent to take recourse to any ‘shortcuts’ if the real purpose of the RBI monetary policy is to attain sustained growth and, at the same time, effectively rein in retail inflation even as the central bank does not have any control over the ‘weather centric’ food inflation.

SK Gupta

New Delhi

MGNREGA balances

With reference to ‘Make sure unspent MGNREGA balances do not pile up: House panel’ (December 13), it is unfortunate that the huge amount of funds allocated under an important employment scheme like MGNREGA are remaining unspent in some States. And this at a time when unemployment is still quite high in rural areas and a large number of people are languishing in poverty. Actually, democratically elected governments should demand extra funds so as to expand the programme, to reduce and, if possible, eradicate unemployment in rural areas, including the remotest parts, by designing innovative rural development projects for execution under the scheme.

Kosaraju Chandramouli

Hyderabad

Fix MSP for palm

This refers to ‘Edible oil imports jump 38 per cent in Nov as soya, sunflower oil shipments rise’ (December 13). This directly affects the wherewithal of domestic oilseed producers, especially palm farmers. Since palm cultivation is not comparable to production of other oilseeds, in view of the hardships in harvesting, the government must fix a viable MSP for palm.

Rajiv Magal

Halekere Village, Karnataka