The Tale of Double Digit Inflation

The current rate of inflation in the country stands at a little over 11%, highest in the last 40 years. Everyday in the last few weeks the growing rate of inflation has been in the headlines. The government and the Prime Minister has been receiving flak from all quarters. However like we have seen a lot of times, the media jumps the gun in condemning the Government, which in this case I think is unwarranted. When the opposition parties blame the government for inflationary pressures in the economy it is understandable as unfortunately the concept of a constructive opposition does not exist in India.

The problem arises when media, mainly the news channels and newspapers, hold the government responsible for an issue which touches a chord for the masses. The people get swayed by the popular sentiments doing the rounds and fail to realize the overall implications of the issue, and this is true not just for this issue but most others.

The problem of inflation is directly linked to the price of crude oil imported by our country. India’s 70% oil needs are fulfilled through imports. As of now the price of one barrel of crude oil is over $140. In our country the prices of petrol are regulated by the government so that the whole burden of the global price rise does not fall on the common man. The prices of petrol and diesel were increased by Rs. 5 and Rs. 3 (per litre) respectively and the cooking gas by Rs. 50. Let us be realistic and understand that the oil companies operating in the country incur daily losses of about Rs. 6.5 billion. For how long can they be expected to go on incurring losses of such magnitude? This marginal price rise will at least cover their operational costs if nothing else. For the consumers, the increase in petrol price does mean more expenditure but then again we must also realize that the purchasing power has gone up over the years too. Plus this price increase will affect urban dwellers more or less and not the rural population so much, which constitutes for about 70% of the populace. Also the government has not increased the price of kerosene which is used primarily by the poor. We must acknowledge and support the government in their efforts to curb inflation. I wonder why doesn’t the media talk of the long term measures adopted by the government(like increasing the repo rate by RBI).

It is in the best interest of the country that the government has not resorted to pressure politics and applied short term measures which could wrought havoc in the years to come. The prices of essential commodities if we see have not gone up or marginally, if at all. The double digit inflation is only reflected in the petrol price but not in other necessities of daily life. I agree that over the years things have become costlier but with economic prosperity, the standard of living of the people have also increased. Another aspect we must keep I mind is that of the growth rate which is going steady at roughly 9%. This too will help in halting the climbing inflation but in time to come. The impending general elections of 2009 have had a role to play in this whole matter too. For the opposition, it is a chance to come to power but I am unsure if that will have any effect on the global crude oil price and hence inflation. Inflation will cool down but it cannot happen overnight. In the coming months hopefully the efforts of the government will bear fruits and bring relief to harried consumers. Till then however let us show confidence in the government who has shown its pro peoples face time and again.

Niha Masih

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