19 May 2012

Inflation, India & Politics (IIP)

There’s one thing common between inflation and the Indian government. God damn them both!

Very quickly, inflation is the increase in price of an item sold versus its previous price. The inflation could be measured on a month – on – month basis or a year – on – year basis (the price during the same month in the previous year). Inflation has 2 indices viz. WPI (Wholesale Price Index) – price of goods sold in the wholesale market and CPI (Consumer Price Index) – price customers pay for buying goods. The Indian government conveniently uses WPI to measure inflation in order to show numbers far less alarming than the actual ones. CPI (the price we citizens pay) is inclusive of chains of retailers, service taxes, excise duties and more. It’s probably 2 – 2 ½ times the WPI.

Inflation & the Economy (c) colourfultimes.com
While we're busy debating over IPL match fixing allegations, SRK's ban from a cricket ground and stupid actions of Siddharth Mallya, fuel inflation has increased 7%+ as compared to the previous month, while vegetable prices increased a mammoth 61%. IIP (Index of Industrial Production) is gloomy, export figures are being fudged, and the current government is mired in scams. And just a couple of weeks ago, corporate India was begging for rate cuts due to the slowdown in growth. Right! This would give people more money to buy, reduce operational cost of corporate houses and make them profit while we foolishly spend on stuff we don’t need.

The present predicament is also called stagflation, where growth slows but inflation stays high and it’s very 
bad news for a country’s economy.

Yes, fuel inflation is justified because it depends upon the global price of crude. But food prices?

Arresting inflation (c) economicnoise.com
I’ve discussed some reasons for inflation here. The price of primary food items has shot up more than 80% in the last 2 – 3 years. These are essential for survival of a country’s citizens; rich or poor, urban or rural. But precious little has been done to address this. India, in 2011, sat on a 75 – million tonne supply of food, about half of which will get wasted while about 50% of our population will stay malnourished. Sub standard warehousing and storage facilities, infrastructure, transportation & logistics and more contribute to this inflation conundrum we’re facing. Then there’s the huge chain of middlemen and wholesalers. The increase in lifestyle cost has prompted them to hoard food supplies which lead to price rises. And yet, we vehemently oppose FDI in retail – something that could improve these circumstances – easily fooled by the political rhetoric of kiraana stores losing their livelihood. Political parties propose this reform when in power and oppose it when in the opposition. Why? Simply to show how pro – reform they are when in power. Supporting the same when in the opposition will mean potential loss of bragging rights in campaigns running up to the elections.

The government has already stated there will be no major reforms until 2014 (read elections for the Union Government). And what will they offer? Fuel cost cuts, subsidies in food and other incentives which will squander tax payers’ money. All this while, the ‘India Shining’ story is gradually fading away. A 1% drop in GDP leads to loss of 15 lakh jobs in India. And we’ve fallen 2 ½ % in the last 2 years. Should we really vote this government into power again? The Congress needs a jolt! One that makes them realize not to take their seats for granted. Agreed we will lose out for the next few years again due to an even more inept party coming into power, but it things will get better in the long run. Remember how we grew when the Congress came back into power after the BJP lost their incumbency? Politicians are not incapable; they simply don’t want to support growth for fear of loss of voters who depend on their meagre handouts. Maybe they should take lessons from the late YSR Reddy, Naveen Patnaik, Narendra Modi, Nitish Kumar and others.


  1. Great post. Agreed with all of your points. India is all messed up due to its politicians and their hunger for money & votes. If they would have been serious only for their work then we would have topped any other country in case of properity. India was a "सोने की चिड़िया" whereas politicians and corrupt people are only looking for golden eggs from her and then they would kill her,so that others don't get a chance to enjoy this prosperous life.Wish they learn something from the above mentioned person.Nitish changed the look of Bihar,nobody wanted to go their a few years back and now see the lifestyle of people their.Perfect example.

    1. Thanks Janak. There is lots of scope even if the states work on developing themselves. But somehow, because of our culture, caste, creed etc. it's doubtful that will happen.

  2. Very nicely compiled and very well written..
    If only our politicians worked for the welfare of the country rather than theirs and their party's we would have becoming far more developed than most of this so called developed nations. Its so sad to realize that in spite of having so much of natural and intellectual resources we are still so under developed. Hopefully someday things will change.

    1. Very true, Binoy. Whatever said or done, we all harbour the hope that some day things will change for the better.

      Thanks for dropping by.

  3. lesve the political talking to dystopean novels, friend. I don't want you to get into serious trouble. :)

    Do you major in Economics? Anyway, we suffer from the same predicament and I don't think India is too bad a country. I don't live there to exactly know what's going on but India create amazing people such as Pranav Mistry and Aamir Khan. hahahah. :)
    It's an Asian country but even 7 year old Indian children are fluent in English.

    My comments are so dumb but I'm just passing by. Take care yourself Vishal. :P


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