The Government, headed by two 'economists' ,Dr. Manmohan Singh and the Dy. Chairman of the Planning Commission Dr.Montek Singh Ahulwalia, has only one prescription to tackle inflation - To increase the interest rates. And this is plainly not working.
We are currently back to the bad old days of 1980's when the interest rates were very high, stiffling productivity and consumption. Immediately following the Petroleum product price hike last week, RBI has quietly increased the repo and revere repo rates by 0.25 basis points. And a probable further raise can be expected on 27th July, when it announces its credit policy.
There has been both supply and demand side pressures on inflation. The petroleum price hike will result in another 1% rise in inflation at the WPI level, while at the retail level, it is likely to be almost double, taking into account the ripple effect on various sectors. However, the unbearable food inflation is purely due to supply mismanagement. We had identified supply side problems for over a year now, but has hardly done anything to combat that. One would have expected Government to come out with a long term Agricultural master plan to to ensure food security for the country. Unfortunately, this Government has shown very little interest in the Agricultural sector, probably because there is no US angle to it. The alacrity shown by MMS in getting the Nuclear Bill, Nuclear Liability Bill, Peace Talks with Pakistan, policies favouring MNC's etc - all with a view to pleasing the Americans, is absent when it comes to a basic issue like Food, which affects the common man.
UPA has been in Government since 2004. Any government is measured by its ability to give a comfortable life to its citizens, with inflation contained and manageable at best. But, Indians have been suffering badly due to inflationary pressures, mainly due to poor governance. Some figures are given below for you to assess for yourself,
The impact of inflation is felt in School fee which has gone up by 100%, public transport charges that has risen by almost 80%. The personal loans have become dearer.
An interesting point to note is that there has hardly been a major farm crisis, or a unprecedented spurt in demand (like export opportunities) for the Sugar, Rice, Tur Dal prices to go up. This can be attributed to bad policies, negligence and downright mismanagement.
We have gone horribly wrong with our economic planning and priorities. The Congress is back to its bad old days of tax and spend high interest rate policies of 1970s and 80s that proved disastrous for India, and took it to the verge of bankruptcy in 1991. I have a bad feeling about the current scenario. Let us just hope we dont end up seeing food riots in the country.
