As I was screaming in my earlier articles interest rate is only one of the areas of work. Unfortunately there seems to be more focus on the Interest rates rather than the other factors affecting the economies. The US Fed is not dropping rates to zero but is conducting monetary policy as if it was zero. That is because saying it is at zero which might be a bad omen for the economy.

Interest rates have been widely used by the Central banks to impart direction to the economy. But under these circumstances this is simply not good enough. The magnitude of the problem in the economy is so high that interest rate is only an “asprin or advil”, whereas the need for the hour is a major surgery followed up by a prolonged chemo therapy. Obama’s focus on Infrastructure, education, creation of jobs is the step in the right direction. It will take time but will definitely solve some of the problems in due course. He has identified good opportunities for Government expenditure to result in viable value creation and thereby stimulation the economy.

 It is the time of India to act. RBI has started off expectedly with the reduction of interest rates and the finance Ministry is announcing packages for the realty sector. The government is found wanting at this point of time and they are probably wondering what needs to be done.  At this point of time the government has to increase expenditure in addition to the stimulus packages. Some of the areas of expenditure for the government is discussed here.

Improvement of IT

There is still a huge scope for government to get IT enabled on various fronts. Combined with the state governments this could provide much needed relief for the IT sector in addition to the Government getting savvier and the citizens benefit due to increased efficiency. Rural computerization is another area of potential available. Long outstanding projects like Central repository of Citizens, Unique Ids for the citizens, Social security numbers etc should be taken up at this point of time and completed. Get the whole thing done indigenously to provide a win-win for all.

Realty Sector

No amount of stimulus package can help this sector. While they had gone overboard in the charging of prices and making big margins they will land up in some trouble. The government has done more than enough by bringing down the interest rates and the sector must be allowed to fend for itself. Instead this money should be deflected to Rural Realty projects

Internal Homeland Security

I do not think this needs any elaboration. Build more systems, use technology, hire more forces and the list can go on. No questions will be asked

Infrastructure

There can be no article about India without mention of the infrastructure. Obama is suggesting rebuilding the US infrastructure; India can at least start giving the right focus to stimulate the economy. Rural infrastructure again offers a lot of scope for improvement

Education

Education access to the poor is still extremely bad in India. We are still at least 50 years away before education becomes a fundamental right in India. Let us try to accelerate that.

Root out Corruption at all levels

Spend Money to root out corruption. Sound funny may be outrageous. But these are outrageous times.

After Expenditures it is time to look at some areas of government investments. This has to be carefully thought out but here may be some guidelines to follow.

Bailout

This can be done only when the business is sustainable in the long term and hence warrants attention. Getting money into bad businesses, however successful they have been in the past is not a good idea. Bailout should be done with a combination of Loans and equity investment. For temporary help, loand and warrants would be the way to go.

Get into new Real Investments

Government should create fund houses which encourage Venture Capital investments. During these times of crisis, the SMEs would be severely impacted and these should be helped with a separate fund. During these times it is to be ensured that promising startup do not perish lest a lot of good work may be undone.

Right diagnosis and the right prescription is the need of the hour today.  Lets hope the right medication is prescribed for us to recover in good time and put the past behind us.