Panic has gripped the Government over the sudden spurt of prices in the country. It has resulted into a series of decisions including banning export of some goods, allowing easier import of some others, reducing or eliminating Customs duties, invoking restrictive storage laws and delisting a couple of essential commodities from the bourses. Unfortunately, these steps have come as too little too late. This is so because financial analysts were already citing apprehensions from a few months now regarding the continued swelling of inflation. And the reactions when they have come are being seen as knee-jerk and topical rather than a well-planned effort to counter the problem.
As it is, it was being said that the fruits of much-touted economic growth have not reached large sections, especially in the rural areas. In fact, the fallout of rapid growth was that the pockets of multinationals and big Indian companies continued to swell, even with additional money generated from the rural areas. Galloping inflation is sure to rob the poor further and hurt the lower middle class as well, though a little less grievously. Under present conditions, the benefit of high prices paid by consumers does not flow back to primary producers, but is siphoned away by middlemen and speculators who enjoy a free run in an economy of shortages. Government has done little to better the plight of agriculture sector as well as the physical market while the manufacturing sector has been reeling under the burden of excess demand, leading to shortages of essential commodities. This demand cannot be countered with increased imports as the high global market prices have not allowed it to remain conducive for our economy.
Measures taken by the Government are not sufficient. In fact, it failed to act on time and the present inflation is courtesy our deviated policies. Otherwise, inflation is not an overnight phenomenon.
Even announcing the cut in fuel product prices is being seen more as a political ploy to dampen the BJP’s stirrings against the general price rise, rather than a sincere attempt to go to the root of the problem. Crude oil prices have as it is fallen recently, though they have started looking upwards post Bush’s fresh tirades against Iran. Once the prices will rise again, the Government can easily reverse the cut.
Clearly, the country is paying a heavy price for the omissions and commissions, primarily in neglecting the farm sector which has not allowed us to take proper remedial steps towards augmenting supplies and controlling prices. And finally when we did take some decision, it was primarily a negative one, which is not going to have any worthwhile impact in the future. Banning export of wheat and wheat products and putting an embargo on milk powder export is the buzz world whereas till only sometime back the companies from abroad were coming to India, purchasing the wheat in bulk, taking it back and then reselling it to India in times of need. That was one extreme, what we are doing now is another extreme, which is going to have only short-term impact. We are so paranoid that we are bent upon closing even the smallest window of export.
The Government has to consider a range of fiscal and speedy delivery mechanisms to tackle the current price rise that shows little signs of abating. Long-term solutions will have to be incorporated in the forthcoming Budget if we wish the situation to remain in control.
All this show that our revered saints of market economy were either not vigilant or were differentially focused when it comes to reading the signals and acting in time. Consequently, it has gone on defensive, and without any effective ammunition to fight the rise in prices all of a sudden, it is appearing to be an impotent force trying to show it is still virile.
As it is, it was being said that the fruits of much-touted economic growth have not reached large sections, especially in the rural areas. In fact, the fallout of rapid growth was that the pockets of multinationals and big Indian companies continued to swell, even with additional money generated from the rural areas. Galloping inflation is sure to rob the poor further and hurt the lower middle class as well, though a little less grievously. Under present conditions, the benefit of high prices paid by consumers does not flow back to primary producers, but is siphoned away by middlemen and speculators who enjoy a free run in an economy of shortages. Government has done little to better the plight of agriculture sector as well as the physical market while the manufacturing sector has been reeling under the burden of excess demand, leading to shortages of essential commodities. This demand cannot be countered with increased imports as the high global market prices have not allowed it to remain conducive for our economy.
Measures taken by the Government are not sufficient. In fact, it failed to act on time and the present inflation is courtesy our deviated policies. Otherwise, inflation is not an overnight phenomenon.
Even announcing the cut in fuel product prices is being seen more as a political ploy to dampen the BJP’s stirrings against the general price rise, rather than a sincere attempt to go to the root of the problem. Crude oil prices have as it is fallen recently, though they have started looking upwards post Bush’s fresh tirades against Iran. Once the prices will rise again, the Government can easily reverse the cut.
Clearly, the country is paying a heavy price for the omissions and commissions, primarily in neglecting the farm sector which has not allowed us to take proper remedial steps towards augmenting supplies and controlling prices. And finally when we did take some decision, it was primarily a negative one, which is not going to have any worthwhile impact in the future. Banning export of wheat and wheat products and putting an embargo on milk powder export is the buzz world whereas till only sometime back the companies from abroad were coming to India, purchasing the wheat in bulk, taking it back and then reselling it to India in times of need. That was one extreme, what we are doing now is another extreme, which is going to have only short-term impact. We are so paranoid that we are bent upon closing even the smallest window of export.
The Government has to consider a range of fiscal and speedy delivery mechanisms to tackle the current price rise that shows little signs of abating. Long-term solutions will have to be incorporated in the forthcoming Budget if we wish the situation to remain in control.
All this show that our revered saints of market economy were either not vigilant or were differentially focused when it comes to reading the signals and acting in time. Consequently, it has gone on defensive, and without any effective ammunition to fight the rise in prices all of a sudden, it is appearing to be an impotent force trying to show it is still virile.
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