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.
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| 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?
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| 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.
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