Home arrow Archives arrow Economic Highlights arrow Economic Highlights 2010 arrow UPA-II Report Card:RISING PRICES & LOPSIDED PROJECTION, by Shivaji Sarkar,4 June 2010
 
Home
News and Features
INFA Digest
Parliament Spotlight
Dossiers
Publications
Journalism Awards
Archives
RSS
 
 
 
 
 
 
UPA-II Report Card:RISING PRICES & LOPSIDED PROJECTION, by Shivaji Sarkar,4 June 2010 Print E-mail

Economic Highlights

New Delhi, 4 June 2010


UPA-II Report Card

RISING PRICES & LOPSIDED PROJECTION

By Shivaji Sarkar

 

The rising prices and studied silence on agricultural reforms and growth signifies the UPA-II. Sadly, the report card does not even acknowledge that prices are rising, poverty is increasing and there is a need to have a fresh look at agriculture and food production.

 

Prices are rising every week and marginally vary in points. This week it rose to 16.55 – a jump of 0.32 per cent over the previous week. The rise was driven by items of primary use – pulses, fruits, milk, potatoes, fish. This is not to say that prices of other food items including rice and wheat have shown any declining trend.

 

The Government’s silence on prices is rather intriguing. The report card does not suggest any action plan to contain it. It seems as if inflation is not an issue at all though the RBI and even international agencies are extremely worried over the situation.

 

In a way the projection of figures is lopsided. It creates the view that prices have risen at a particular level. This is the greatest myth. Prices or inflation is presented week to week comparing it with the corresponding week a year back. It does not take into account the continuous rise of prices of commodities. The Government has been able to create an illusion that prices are rising around 16 per cent and thus it is “in control of the situation”.

 

The figures, however, suggest the contrary. The food price rise is hovering around 20 per cent on an average. If prices of some commodities that are continuously rising are taken into account,  it would  be found that many items have become dearer by over 30 per cent in a year and some like butter have become doubly expensive i.e. 100 per cent increase.

 

Pulses have become 30.84 per cent expensive, fruits 13.74 per cent and milk 21.12 per cent. Butter prices per 100 gram that was available for Rs 12 a year ago is now being sold at Rs 25. Edible oils have also become equally dearer.  Importantly, the price index does not mirror the whole situation and is only indicative.

 

The rise in prices is no more restricted to food items. There is a spurt in prices of rubber, raw silk, jute and oils for industrial use and other non-food items. Within a week these have risen as per the index by 0.4 per cent and are continuously on the rise.

 

The RBI had expressed concern that food inflation would spill over while releasing the monetary policy. Now the international agency, Goldman Sachs, has found the situation equally grim and predicts a continuance of the inflationary situation through the year.

 

The Goldman Sachs’ view is contrary to what Prime Minister Manmohan Singh has said recently that prices would come down. If the RBI and Goldman Sachs are to be believed the situation might go out of control as the food inflation spills over to manufactured and other items.

 

The Government has not realised that food prices decide the wages. Higher food price would force the industry to hike wages. Consequently, its products would become expensive. This is likely to have an impact on consumption. If that happens then what is being apprehended may well turn into a reality.

 

The apprehension is that though high inflation has increased the profit of selected people and traders, it might ultimately lead to a repetition of the European situation. Like Europe, India, despite a supposed high-growth economy, might slip into a recession. If it becomes deeper despite realization of money from 3G spectrum sales and some from disinvestment, the Government might fall into a debt crisis.

 

Even now the Government is finding a difficulty in pursuing its flagship social inclusion programmes. The NREGA, Bharat Nirman  and rural development schemes are facing many road blocks. If prices are not contained and continue spiraling many of these may only turn out to be mere slogans and propaganda exercises.

 

Additionally, recent studies have come out with grim realities. Growth and employment in Delhi is being driven by the construction industry, in the wake of the Commonwealth Games. Other activities have slowed down. It has also come to light that many small retailers, sweetmeat sellers have closed their shops down being unable to meet the high cost of inputs in view of the fall in sales.

 

Though the Government is keen on projecting the growth at 8.4 per cent, its chief statistician Pronab Sen says it is difficult to achieve as many uncertainties persist. “Investments have gone fast but we have a question mark about sustainability. Credit is growing but not in a way that would support an 8.5 per cent GDP acceleration”, he adds.

 

If closely looked into the depth of his apprehension is linked to the high prices. The commodity prices decide growth in all large economies. The US has sustained its growth primarily on this factor. Despite the crisis it continues to heavily subsidise its agriculture. India, however, not only does the contrary but also has not tried to evolve an agriculture strategy after the 70s. Food production has either fallen or stagnated coupled with the crisis of dismantling of the public distribution system (PDS).

 

Indeed, this  has left the  market totally unregulated. It is even alleged that some top functionaries in the Government have been helping those who have been playing with the availability of food, milk and vegetables. The unregulated market is supposed to be the main culprit for the present inflationary situation.

 

Clearly, the Government needs to have a holistic look at the agriculture production, land usage and prevention of use of farm land for any other purpose. Almost over 40,000 hectares of farm land has been lost to urbanization and the construction industry sharks. More hectares are likely to be lost in the coming years. If remedial action is not taken then the price situation is likely to worsen.

 

The projected growth trajectory cannot be sustained on promises. High inflation is leading the bankers to mull over increasing interest rates. This again is bound to have impact on the prices and growth prospects.

 

The Government needs to have a cogent thought process on the grim situation. Sadly, it is presently engaged in day-to-day fire-fighting simply to maintain its image. It must stop doing that. Instead, it must present the country a policy for not mere growth alone but a strategy for stable price regime, if it wants to really take the country to its promised trajectory.---INFA

 

(Copyright, India News and Feature Alliance)

< Previous   Next >
 
   
     
 
 
  Mambo powered by Best-IT