Over the past decade, it has become imperative for public policy to address the perils of socioeconomic inequality, which varies from region to region, and between rural and urban populations, social and ethnic groups, and rich and poor. It is clear that unless addressed appropriately, such inequality will have damaging side-effects such as social unrest, lack of security and crime.

Acknowledging these concerns, the Government has repeatedly articulated its commitment towards ‘inclusive growth’. This includes a bouquet of schemes that directly or indirectly target the poorest of the poor. On one hand, the budget for such social schemes has increased steadily, and on the other there are concerns about leakages in the delivery of benefits to the intended beneficiaries. Coupled with the mounting fiscal deficit, it is inevitable that the Government takes steps to plug the leakages to ensure effective utilisation of social sector expenditure.

The Unique Identification Database (UID) is one such initiative that seeks to provide all citizens a unique identification each. This would become a platform for efficient delivery of social services. Implemented successfully, it can become a game-changer in addressing poverty and exclusion. The UID can, for instance, help accurately identify and transfer social security benefits and funds for conditional cash transfer, or in plugging leakages in the public distribution system.

In the context of a post-2015 development agenda, also a time when a majority of the world’s poor would live in middle-income countries such as India, initiatives such as the UID hold promise.

Uncertainty looms in currency market

Currency markets have been caught in a web of uncertainty through the year, and the future looks even more uncertain, both at home and globally.

The lacklustre growth in the US, Europe, and even China is unlikely to improve in the year ahead, and the norm would be long bouts of risk aversion interrupted by brief rallies. The euro would continue to trade in a range, with limited scope for major appreciation from current levels due to the weak sovereign debt outlook, low employment and poor economic growth. The euro has also benefitted from the weakness in the US economy and managed to trade close to 1.3 levels for extended periods. GDP in the Eurozone is expected to stay at 0.3-0.6 per cent during the first half of next year. The single currency may get some support from the bond buying programme of the European Central Bank, as also the prospects of a banking union.

The US, meanwhile, is worrying whether the fiscal cliff can be averted with the Republicans and Democrats coming to a consensus by the yearend. While GDP growth is expected to be around 1.5 per cent (quarter-on-quarter) during the last quarter, it is expected to improve in the first quarter of next year due to the reconstruction work in the wake of hurricane Sandy. However, business investment is likely to remain subdued due to uncertainties.

At home, the Government’s announcement of economic reforms drove the rupee to a six-month high of 51.32 in October, but the euphoria did not last and the currency weakened to 55 levels. The fiscal and current account deficits, along with high inflation rates are likely to delay the RBI’s monetary policy initiatives, and foreign investment will hold the key to the currency value. The outlook remains hazy and gloomy, no major trend may be likely in the currency market.

Related Topics
comment COMMENT NOW