Our Expensive World


The world is becoming a haven for the affluent class and hell for the average middle class. The prices of commodities which are used daily have increased. They have started burning holes into the pockets of the non-affluent. Just imagine the life of those below the poverty line; these are the people who eat from hand-to-mouth without any thought of saving money. A coin always has two sides, the same way, life, too, has two sides. The affluent class on whom the inflation creates no impact and the other is the average middle class which bears the burden of the rising inflation.

The prices of daily-use commodities like edible oils, wheat etc. is becoming dearer in the global market with inflation in India inching towards 7%. India is a developing nation with a consistent GDP since the past couple of years, but, what about spiraling inflation which is robbing the consumer? Almost everything which could be thought about has seen an increase in its market value be it the fuel, food grains, edible oils, vehicles etc.

Let us explore the problems and look for solutions by questioning ourselves.

What role does the government play when such a situation prevails in the economy? Should they go for cutting the import duties and provide an exemption to the taxes? However, when the inflation comes under control should they continue with the measures they brought in order to ease the burden on the consumers?

Is it right to blame the government for the rising inflation after all they control the economy? Blaming the government isn’t appropriate as the cause of the inflation partially depends upon the global market which is very volatile. The UPA came out with a slew of decisions to douse inflationary expectations. Politically, the government must be seen to be doing its best to curb inflation so that the opposition doesn’t get any opportunity to castigate the ruling party. Therefore, new measures such as scrapping import duty on edible oils, banning export of non-basmati rice, and, asking state governments to impose stock limits on traders should be seen as attempts to lower inflationary expectations. The Indian government has showed its incompetence in procuring grain from the global market. The government, which set out to procure 15 million tonnes of grain during the past season, ended up procuring just 11 million tonnes—a shortfall of 4 million tones. The reason behind this was more money being shelled by the private players. The government should have taken a call of importing grains beforehand but it didn’t.

Future Trading” has also contributed to the rise in inflation. Now, a deal is being made between the sellers, i.e., “the farmers” and the buyers, i.e., “the traders” based on the amount of grain the trader wants to buy from the farmer and the price which he’ll pay for it. The process takes place in advance before the grains are actually produced. So, in any case, if a trader offers to buy huge amount of grain then there is every chance of surge in inflation. Future trading may be a good thing but when the market is volatile the speculators are certain to make a killing.

What is government doing to depressurize the effect of inflation on the mass? Recently, in a rally in Uttar Pradesh, Sonia Gandhi has passed the buck on the shoulders of the state government for the rising inflation, thus passing on the blame rather than accepting the Central Government’s own shortcomings. Mr. Sharad Pawar is the Minister for the Agriculture and Consumer Affairs; is he doing his duty to the fullest? There is considerable doubt in this regard. Moreover, the past experiences of the rising inflation were not good. In 1998 a coalition led by the Bharatiya Janata Party (BJP) was defeated in a Delhi state election after a six-fold rise in onion prices. Inflation is the hottest political issue and it can mar the prospects of the ruling party. Every politician is up for saving his position and is thus resorting to malpractice.

It is important to face the present situation as even the government can’t control the global market, but at the same time, the government should be agile in taking effective measures to curb inflation as much they can, so that the poor don’t get burdened.

Ravi Agarwal

[Image courtesy: http://convergence.in/blog/wp-content/uploads/2006/09/Emerging_Indian_Economy.PNG]