Few months ago, not many intellectuals hailing from different sections of the society had been so interested in the Sensex and its intricacies as they are today. And, there are no points for guessing the reason behind this massive change of interest; the persistent and the drastic rise in inflation rates.
The major indicator of the inflation rates has been the price of oil and their trading rates. Although with the recent fall of the trading rate at $137 reported on Wednesday, the challenge facing every nation and its government is maintaining costs of commodities and preventing any further rise, thus fighting the severe and direct effects of inflation.
Oil prices are at a historical high these days and world food prices have also escalated to alarmingly high levels, thereby causing great concern. However, the global problem has not resulted in global pain being felt equally across different nations. In China, the official consumer price inflation is at 9%, up from the previous 3%. India also reported a 13-year highest rate with the record inflation rate at 11.63%. The worst affected countries however, are Venezuela and Argentina.
Even in the face of such daunting adversities, the CIL has announced that it is not going to further raise the prices of coal fuel supply to power plants in India for the entire fiscal year 2008-09; much against the ever rising international prices and soaring operational costs involved in manufacturing. This is a step to abstain from putting any added pressure on the already increasing prices due to inflation.
In order to meet this objective, the CIL has set the rates for e-auction at much lower ends and is offering five times more coal than ever. The lowest floor price has been settled at 5% as against the earlier 30% to keep the priceline under check in the market. The global prices in the coal industry have been moving higher. However, price of coal in real terms has been quite low (due to deflation in the economy) of 8%, even lesser than the prices in 2000. Since, coal fuels the major bulk of thermally generated power stations in the country, a hike in its prices will further result in cost escalation of electricity, and those involved in the manufacturing process like steel and cement, all of which collectively will have an adverse effect on the economy of the nation.
With the prediction of the US Federal Reserve Chairman, Ben Bernanke; that the inflation will be continuing for some time now, and will not be a temporary phenomenon as few investors have been speculating considering the impending replacement in the US government, the policies that are being followed in our nation seem to be a strong and intelligent move to put up a strong front against inflation. Also, good news beholds the government with the update that a good harvest this year may be a timely rescue to fight the soaring prices of food commodities. With a 20% rise in production from last year, the promising figures of 230.67 million in the fourth quarter makes the government as well as the masses heave a sigh of relief.
On the whole, inflation in India is a part of the global phenomena facing the world . The independent moves taken by the government to combat this inflation is commendable and keeping aside the incubation period for their giving the desired output, the global problem can be solved at the national level by such measures. We have wasted enough time getting flustered with the problem, it is time to eliminate it from its roots.