It is imperative for management students to understand how things have gone round the circle, approaching the starting point globally and domestically. Several countries which were ?closed? to foreign trade opened up their borders over a period of time. But today some of the hitherto ?open? advanced economies are adopting protectionist measures reducing their openness. Long back, countries traded internationally in their own currencies, or in a semi-barter fashion. After Bretton Woods, the developed nations got rapidly dollarised, and the dollar then became the global reserve currency. But with recent global economic crises, many bilateral trades have emerged in non-dollar currencies. For cold war fears, some oil-exporting nations are denied dollar payments. In India, our emphasis shifted away from agriculture to manufacture and services since Independence, but again we find ourselves looking to the primary sector as a saviour of our economy.

Is protectionism back again?

In the earlier centuries, many countries were quite ?closed? to foreign trade. Then came the British imperialists who imported raw material at throw-away prices and exported their machine-made goods. Later, the potential gains from freer international trade became evident and there were the GATT and the WTO. Signatories vouched to reduce their trade barriers and most developing countries complied. America, the strong preacher of free trade, however, kept protecting its farmers under the guise of green box and blue box subsidies. And now we see an open ?buy American? campaign in the US and import restrictions from developed countries under the pretext of humanitarian issues, defence and security concerns, genetically modified strands and what have you. The ongoing crisis has prompted various countries to go back to protectionism.

And is de-dollarisation back again?

Earlier, various countries carried on their bilateral trade with their own currencies. During the Bretton Woods agreement, the US persuaded developed nations to hold dollars by promising to pay an ounce of gold for $35. Later by getting the major oil-exporting countries to accept dollar payments for their oil exports, they further pushed dollars out through their own trade deficits. Subsequently, the world got dollarised. Of late, however, several countries have entered bilateral trade pacts wherein they swap each others? currencies, thus doing away with dollar as the intervention currency. Also, concerned about having to run a perpetual deficit to flood the world with dollars, what with Triffin paradox, the US will probably reduce dollar liquidity initially by tapering off QE3 and later by raising Fed rates as their economy recovers. Thus, the weight of the dollar in the Special Drawing Rights (SDR) will also likely go down and the world could get partially de-dollarised.

What about agriculture?

India?s planning effort shifted from agriculture to manufacturing and the services sector, especially the export-oriented units. Resources were poured towards this end and agriculture got neglected after the successful Green Revolution. But the agricultural sector has frequently made its presence felt by creating food shortages, price spikes and recessions. After the failure of monetary measures in combating inflation we have understood the importance of agriculture in Indian economy in generating incomes, employment, demand, food and raw materials. It?s almost sacrosanct. The 12th Five Year Plan emphasises on creating social infrastructure in rural India, but its execution unfortunately lies in the hands of an unwilling polity and lethargic bureaucracy. It?s high time we shifted resources back to enhance agriculture productivity and output quality.

India?s problems and solutions

One problem with US-returned people taking highest Indian offices is that they apply monetary solutions to problems of real economy, as is evident from the maiden policy announcement of the new RBI Governor, raising repo rate though reducing MSF. Between inflation and recession, the former is wrongly prioritised again. RBI has tried combating inflation through monetary tightening but failed miserably and, in the process, led the economy into recession. RBI has tried to arrest rupee fall by urgent measures ranging from rate hikes, raising MSF, capping LAF to direct intervention, currency swaps. Monetary policy has a lagged effect and all policies of past few weeks, together with positive foreign news, are bearing fruit now. But urgent things are not always the most important.

Outside RBI?s scope are important problems like all-pervasive corruption, voters? myopia and blind-folded politicians. Rising crime rate, injustice, unemployment, extreme poverty, deprivation can be set right only by the policymakers. When these problems reach a threshold level, hopefully India will see a revolution which will help usher in the long-awaited and desperately-needed reforms, else they will be clamped on us by outsiders like in 1991. Why can?t we develop alternate sources of energy or good public transport system like the Delhi Metro, or propagate use of fuel-efficient vehicles to reduce oil imports? Why can?t we create a nation-wide ?buy Indian? (swadeshi) campaign to reduce imports and the CAD? Can?t we enter into ?swap deals? with more countries? Can we not remove the project clearance logjams, taxation anomalies and hindrances to growth? Can we not stop the demographic dividend from turning into a curse? If the R2.5 lakh crore outlay on the political monster called the Food Security Bill is spent on irrigation, warehousing and logistics for the agri-sector and education, healthcare and sanitation for rural India, the much-talked about ?inclusive growth? will happen and the poor will not need subsidised food! Rate cuts, not hikes, will spur credit off-take, demand, investments, employment and production, and inflation will moderate automatically. Once macroeconomic issues fall in place, the rupee will appreciate without ventilators!

The author is faculty of economics, Symbiosis Institute of Management Studies, Symbiosis International University, Pune. Views are personal. shubhada.s@sims.edu