economy

Sri Lanka’s central bank reduced interest rates for the fourth time in as many months to bolster an economy growing at the weakest pace since 2001.

The Central Bank of Sri Lanka cut the repurchase rate to 9 percent from 10.25 percent and lowered the so-called penal rate to 13 percent from 14.75 percent, according to a statement on the bank’s Web site today. The Colombo-based central bank left its reverse repurchase rate unchanged at 11.75 percent.

The sobering reality is that Gujarat had the lead in 1995 which it lost after the post-Godhra violence, and is trying to regain its erstwhile pre-eminent position. The fundamentals to attract investments—industrial peace, great infrastructure and ancillary industries—preceded Modi’s tenure. The Narmada dams were already under construction, workers polished diamonds in Palanpur, petrochemicals and cars were made in Vadodara, milk flowed from Anand, yarn churned out in Hazira and a refinery was being built in Jamnagar, much before Modi took office.

"This is a home brewed macro economic crisis," Razeen Sally from the London School of Economics, said in Colombo.

"It is not a result of global forces for the most part..."

Sri Lanka has gone to the IMF several times either for bailouts or for comprehensive reforms to put the island on a higher growth path, some of which were abandoned in mid-program.

"There is always a ritual dance at work with these aid conditionality packages. The lending organizations are in the business of shoving money out of the door," observes Sally.

In the past four years, the Indian government has invested heavily in programs aimed at boosting rural income, which grew at 4 percent annually, according to government reports. Government prices for rice and wheat have jumped nearly 65 percent over that period; about $38 billion has been pumped into rural development programs and more than $9 billion into building rural roads.