Money, Savings and economic development

The sixteen selected essays included in this book deal broadly with money, savings, prices, banking and credit, and economic development. The three essays on savings in the Indian economy provide a comprehensive picture of the trends in savings since 1951 and also analyse the factors that contributed to the dramatic graduation of the economy to the high savings phase in the late 1970s. The stagnation in savings witnessed in recent years has resulted in the emergence of the resource cruch on the eve of the formulation of the Eighth Plan. A new strategy for mobilisation of resources is therefore warranted.

The essays on money supply analysis raise two basic issues: the adaptation of the money supply analysis to the Indian milieu, and the interpretation of monetary data for policy formulation. It is stressed that analysis of the "quality" of money supply expansion in the sense of factors affecting money supply, is as important as the analysis of the quantity of monev supply.

The two essays on prices emphasise that inflation in India is a much more complicated phenomenon than what is implied in the popular definition of too much money chasing too few goods. Furthermore, price administration, interpreted in a broader sense, plays as important a role in the containment of inflation, as control of money supply.

The four essays on banking and credit, discuss the progress that banking has made since 1969, in the areas of penetration of semi-urban and rural areas, structural transformation in the deployment of credit, and mobilisation of resources. The techniques of credit planning are outlined and the innovative instruments evolved for achieving the objectives of monetary and credit policy are briefly discussed.

The essays on economic development review the recent reappraisal of development economics and in the light of this review stress the need for a different development orientation. A more meaningful development strategy to tackle rural poverty would have to be a tale of two cultures-a commercial culture related to the market with all its entrepreneurial problems, and a subsistence culture which is characterised by use of surplus labour, with simple tools, for providing a standard of living just above the poverty line. Thus most of the essays analyse issues in the case of which institutional complexities render the application of conventional economic theory untidy. Taken together, the underlying message of these essays is that for formulation of policy what is required is an insightful analysis of the concerned issues rather than a mechanistic application of text book concepts.