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Inflation worry: a real solution far off
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Bikky Khosla | 08 Nov, 2011
Food inflation has continued to rise. In the week to October 22, it rose to a nine-month high of 12.21 percent y-o-y, raising fear of a higher WPI based inflation. Reacting to the recent data, the Finance Minister Monday cited high demand for protein-based food articles as the prime reason. âNo country in the world can feed 120 crore-plus people ... there is no alternative than to produce, preserve, process and distribute,â a media report has quoted him as saying.
These days, such news is a dime a dozen. Every time after inflation data is released, there are excuses - high demand, rising income, economic growth, bad harvest, surge in global commodity prices, costlier crude oil, and so on. In a bid to grasp the reins of inflation more tightly, the RBI in its every monetary policy review goes for interest rate hikes, the 13th (since March 2010) of which occurred in late October. But once and again high inflation figures come out to frustrate us. Everyone is growing tired of this repeating cycle.
With inflation refusing to be tamed down, the credibility of the monetary policy has been at risk. People hardly believe these days that the RBI will be able to bring inflation down. However, the RBI alone should not be blamed. At the same time, the government's loose fiscal policy stance is equally responsible to dilute the central bank's monetary stance.
Inflation is high, food prices are taking toll on the common man, higher interest rates are adding to the industryâs problems â these issues are not new. Also, it is increasingly clear that high inflation is not the result of only some sudden shocks and it cannot be tamed down only by monetary tightening. Monetary measures may be still required but what is more required is to remove the supply bottlenecks and make effective fiscal adjustments.
Whatever the cause behind, and whatever the solution to the inflation crisis, even a layman today knows that the government is fumbling and lacking a sense of direction -- they have failed to bring inflation to heel; they have failed to get the common man out of high prices; they have failed to show sensitivity towards people's worries. Ironically, last week petrol prices were again hiked, triggering opposition even from some of the government allies. In this backdrop, taming down inflation will continue to be a tough challenge for the government. Also for the RBI, which recently hinted at pause in further rate hikes, the test is far from over.
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The problems of the world
George Corvin | Thu Nov 10 12:27:10 2011
The world has 4 main problems. 1) We are too many and Eastern nations are the main culprits.2) People want too many, often unnecessary material things from life. 3) All governments (goon-one-ments) are filled with selfish dishonest and incompetent people. One may not keep down the population by giving away portable radios but more could be done by persuasion. 4) People are too PC and never dare to open their mouths to stop the dole in the Western countries or stop overpopulation by immigration. One of the experiments in psychology is to put rats into a cage, until they reach a critical number and start killing each other. Every space is made for a certain number of bodies. The world is made for two billion people, today we are well into eight. Everybody talks about food shortages, GM food, energy shortages, pollution, global warming and so on, but few people have the guts to say: do not multiply like rabbits and live a healthy life.
Supply/demand equation
Krishnan Raman | Thu Nov 10 08:30:13 2011
Supply/demand equation to be set right first to keep the price line. I don't think tinkering around the interest etc.will yield the desired results. They can check marginally only. Cultivatable land is shrinking day by day as being converted into stone structure.Even in the present level of agri produce, about 30 % is goes as waste,and more processing industries are needed to covert them to use it later date. Our Govt.'s immediate priority would be to focus on this area.
Increasing the fuel price ( even if petrol) puts lot of pressure on the common man and agriculture. our currency should be made stronger. Passing on the burden to people is not good governance.
Focus on common man basic needs
Jagadeesh KV | Thu Nov 10 03:33:35 2011
The government is acting slowly on tackling inflation issues.
The government has to increase monetary benefits & subsidies to farmers to encourage them to grow basic products which is high in demand.
The benefits availed by the government are to be passed to the framers by creating awareness in the public through media like news paper/all TV channels & has to make it mandatory to broadcast the government monetary benefits to the farmers and its effectiveness.
Government is focusing on how to generate revenues by encouraging investment in industrialist, real estate but no focus towards common man basic needs.
Creating awareness through NGOs and implementing the policies also one more way.
Inflation & Culture
KR. Gnanasambandan, Vice President - Tamil Nadu Small and Tiny Industries Association (TANSTIA) | Wed Nov 9 16:37:29 2011
Inflation has close relationship with the culture of people. Indians are not spendthrift like westerners. They have family commitments and having highest savings rate. RBI is increasing the rate of interest thereby discouraging people to spend and encouraging to save. This may bring certain results if SAVINGS is not our usual habit. But, we Indians save naturally. Every Father is saving money for his children's education and their marriage. When the children are young in age the family goes on saving irrespective of the Interest Rates and irrespective of the prices prevailing in the market. They are not lured by the low price or discouraged by the lower rate of interest. Once the children are grown up and the need arises like Marriage, Education etc. they come out and spend all their savings. At this juncture, they will not hesitate to buy the required items at any cost and they will not tend to save even though they are offered higher rate of interest. Hence, the RBI's move to increase the rate of interest will have only a miniscule effect and that too for a limited time. On the other hand it will produce negative effect because of the higher rate of interest the cost of funds goes up and all manufacturers and traders will raise their prices in order to accommodate the higher rate of interest.
My submission to the RBI and the Finance commission has not been taken in the correct perspective. The top Bosses sitting at the helm of affairs feel that we are not capable to suggest.
Stop wasteful expenses, bring back black money
Pankaj Maheshwari | Wed Nov 9 08:54:59 2011
The govt needs to put a cap on wasteful expenses eg. over-staffing in govt departments, unproductive payments against NREGA waste of food grains in FCI godowns and ports, etc. Return of black money could be of a great help at this juncture and the govt may strengthen its efforts on recovery of the same and subsequently offer a disclosure scheme to cover a wider group. Inflation is bearable if the incomes of a majority of citizens rise, which is possible only if the economy grows through out the country not just a few pockets like Gujarat, Maharashtra, Karnataka, Tamil Nadu or Delhi/Haryana. The backward states need to be guided by the experiences of the the stronger ones...build infrastructure and develop industry even if short term benefits on taxes & duties, land pricing, electricity, etc. are compromised.
Contradictory Govt position raising doubts on PM's sense of economics
Dr. Amit K Chatterjee | Wed Nov 9 08:01:25 2011
According to Manmohan Singh - reason for high food inflation is rising affluence. Indian people are consuming more protein based food items, causing demand supply mismatch. However ludicrous it sounds, even if we accept it as reason for high food inflation - why increase interest rate ? if money supply is reason for high inflation - why not freeze salaries of Govt employee, at least DA payments ? No wonder we are nowhere near a solution as Govt words and actions never match. And we all thought Manmohan Singh as a economist of high caliber !
Shocking difference in prices
Cyrus | Wed Nov 9 05:07:47 2011
The answer's are pretty obvious, however those who are in power are covering it for their own petty reasons. If one studies the difference in procurement prices for vegeies, cereals and foodgrains from the farmer at the village level and the prices when it reaches our tables in urban India, the difference is shocking. No amount of inclusive political agenda can justify it.
No proper step now, a revolution unavoidable
John Michael | Wed Nov 9 05:05:21 2011
Dear Editor,
We highly appreciate the bold statement. After a long interval we are happy to see a editorial focusing the real face of government policy makers. If the government is not going to take a proper step now then a revolution from people is unavoidable. If people are going to starve to death, nobody is safe. As stated the population is 120 crore, no military force or police force could do anything if people lost their patience and morale. Thanks to the cultural value of India which was fertile on thousands of years of by our wise forefathers, India is consisting very good and highly esteemed people compared to any part of the world. But continued immorality from political leaders may lead the people to frustration and uprising. For nobody can with stand if their child is dying in front of their eyes because of starvation while another group is well off.
Human Development Index should be benchmark
Ketan@florafab.com | Wed Nov 9 05:02:24 2011
Many discussions are going on regarding inflation. I am not an expert on economics but I feel that the government can decrease inflation by doing the following.
1. Stop the practice of increasing DA. This is contradictory to what the RBI does buy increasing interest rates to tame inflation.
2. Remove Rs 1000/- currency notes from circulation and may be Rs 500 notes. Fake 500 and 1000 notes are flooding the market.
3.Facilitate infrastructure growth
4.Decrease the number of holidays of all Central and State Government offices. Holidays are delaying matters and are a bottleneck fur businesses.
5. Freeze salaries, if possible.
6. Redefine growth. Not GDP numbers but use Human Development index as a benchmark.
Congress does not inflation come down
Radha Rani Bansal | Wed Nov 9 04:50:41 2011
Congress does not want that inflation should come down. Solution is mid term election and new govt should come. Inflation came down drastically in 1977 when after Congress, Janata party came in power. Sugar prices came down from Rs 12/kg to Rs 2.75 /kg - same country, same people, same demand. Congress increases holding and black money that is universal truth
Working policies gone awry ...
Arvind Kamath | Wed Nov 9 04:50:28 2011
Are we really looking at inflation as a
problem or it is just a topic for discussion only. Root of inflation
lies at working policies gone awry, lack of foresight, lack of a
strong will to reform. The above required quality attitudes in
perspective of fiscal policy & supply-demand balancing will see
us through.
Fighting against inflation
Vinay Dhoble - Pune | Wed Nov 9 03:04:12 2011
Unless we have plan for
1. Optimum utilisation of resources - as we convert agriculture land into non-agriculture one for new construction of buildings. Is there any plan to convert barren land to agricultural land ( of course difficult but not impossible)
2. Efficient distribution systems - fluctuation in prices given to farmers by involvement of middle agents forces farmers to throw their products as transport cost exceeds income.
3. Continuous working towards productivity improvement - Efforts for increasing resources and yield particularly for dairy products to cater the ever increasing demand and to prevent
adulteration
.
4. Conservation of resources - we have stock of grains but major part is either rotten or regular feed to rats etc. How can we afford such luxury. We have to prevent wastage.
5.I may be wrong but general feeling in government machinery is that we are not poor and can afford wastage. Of course entire society is responsible for this thinking.
Land for agri purpose
R Saha | Tue Nov 8 16:14:37 2011
Rather than all the time talking about cyclic and periodic increase in inflation especially in agri products, we should look at a long term perspective and scenario. The majority of our people are dependent on local agriculture both as a producer and consumers. Our food needs cannot be fulfilled by imports. We should have a policy of earmarking a certain percentage of land for agri purpose for the next 20 years, not to be diverted for industries or housing projects at any cost. Whether 25% or 50%, it is a matter for specialists to determine. It may be reckoned that we do have similar policy in respect of forest land. Whenever agri land is diverted for industries, we should enforce tough norms for waste disposal so that the quality of land is not degraded beyond a certain limit so that it can be used for agri purpose in furture if the need arised.
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