Under the new trade policy, India is being integrated with the world economy. Tariff levels too have been reduced, though to a small extent, to be in concord with the low tariff levels prevalent in other countries with which India trades.

Though strictly not a part of the trade policy, the foreign direct investment (that is, foreign equity capital) policy has been another major initiative for globalising the Indian economy. This brings in not only money, but also modern technology, business culture and work-ethos of the developed countries.

Taking an overall view of the reforms in industry, trade and financial systems, one can expect the economic environment to become favourable for the fiscal policy to work.

No government can make inconsistent strategies to open up the economy. India is no exception. On the one hand, it is opening up its economy for greater growth, enhanced level of trade, raising the living standards and in persuasion to the terms and conditions of different agreements. On the other, the RBI by making money cheaper (lower interest rates) influences money and credit conditions in the economy, targets good growth, employment and stable prices. India is in an inflationary cycle which begins after an event — such as a crop harvest — that puts a lot of money in people's pockets, which is spent. This drives up prices. As prices rise, production is stepped up, employment increases, more money comes into circulation — driving prices up further. The extra liquidity, thus, created, pushes down the interest rate and gives a boost to business activity which is now financed more cheaply.

For maintaining purchasing power stability, the guiding factors are:

The downward trend of bank interest, the growth of nuclear families and the easy availability of finance at lower interest rates help in growing trade practices and domestic investment in housing, auto and other household items.

But what is actually happening on the social front? More than 90 per cent of Indian households lead difficult lives, receiving little support, encouragement and nourishment from the government and organised political structure. These households have no breadwinners who work for government or the business undertakings and enterprises that it operates.

Indians are famous for their frugal ways and their emphasis on savings. The management of public finances in India is an aberration that has fortunately failed to suppress private savings. Indian households save a larger part of incomes than their counterparts elsewhere.

Therefore, it is quite unfortunate that their savings lose vitality after being turned into investment, since the monetary policy has all but created a parasitical growth of inefficient industries, draining scare resources and depriving regional development. Under the condition of reduced interest rates, what returns Indians are getting from savings of their hard earned income and sacrificing the other utility of their incomes. The opportunity cost in this case appears to be extremely high.

A majority of the superannuated persons depend on bank interest income. What social security net is the country offering its senior citizens? Even insurance companies refuse to cover them. Senior citizen facilities are offered at age 65 (though the the retirement age is generally 58) but not enough to cover their expenditure and the various problems they might face.

Therefore, on the one hand, India is doing well economically, but on the other it offers nothing to its senior citizens. Such imbalances need to be at least reduced to attain a sustainable socio-economic growth.

(The author is Assistant Professor, The ICFAI Business School, Kolkata. The views are personal.)

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