Economic Highlights
New Delhi, 4 April 2016
Inflation & Govt Regulators
HOLISTIC APPROACH CRITICAL
By Shivaji Sarkar
The Government needs to pursue policies that ease inflation
and reduce prices to lubricate the economy. This is so because the trap laid by
previous regimes is seemingly tightening. It is just not the fuel prices that
firm up prices. Though it remains the base, there are other factors such as continuous
increase in insurance premia, toll taxes, banking, parking, airport charges,
tuition fee, dynamic railway fare, high taxi and bus fare apart from high
commodity prices which lead the country to a phenomenon of price rise.
For example, why Mumbai airport should demand transit
passengers to pay more? Nobody wants to stay at an airport even for an extra
minute, if he gets his connecting flight. It is strange that airports built
with passengers’ money could think of punishing him more.
Each of the sectors functions independently of the other and
increase their prices or fees. Each justifies it saying their cost of
operations have increased and “have to pass on the burden to the common man”
The flak for this is borne by the Government as it is blamed
for not controlling the situation. It also has to bear the cost by paying its
staff more to sustain unhindered profiteering of the unscrupulous. The Government
has taken a view that it would not intervene to facilitate business. It calls
for a review.
The business in this country is thriving on the poor man’s
money, easily available through the questionable bank practices. More the
inflation, higher the charges, more they gobble up public funds, their coffers
grow and so does their exploitative practices grow. All the same the private
reserves remain intact or increase. Who suffers? Obviously, the common man and
the Government he elects.
The Government has sealed itself out through a system of
regulators. They, whether in insurance, electricity or telecom sectors act in
favour of the perpetrators and care less to protect the consumers. The logic seems
to be “the consumer has to pay more and more to keep business profitable” – or
stated differently consumer can be exploited at all times and if he seeks a
relief it is denied being “unsustainable”.
Should we really have such regulators or go back to the
earlier system of people’s (government) control? This needs to be pondered
seriously. Regulators are primarily responsible for higher power bills,
insurance premia and most other hikes.
Just go to any city, parents are found fighting with schools
which arbitrarily raise fees, force students to buy books and stationery,
uniforms and what not. Refusal to do so would cost the students dearly
including refusal to hand over their results, cancellation of admission and
many other retributive practices.
Is there any remedy? The State governments have expressed their
inability on many counts to help the parents or students. The officials may say
it is not part of the economy. But that is the fallacy.
High education cost is causing severe stress among the middle
class. They have stopped going to the bazaar for buying anything except that is
utterly necessary. Even there they have been reducing necessary consumption of
essential items. This affects the Prime Minister Modi’s concept of ‘Make in India’. Such
reduction in demand affects production. The nation needs to seriously
reconsider whether cost of education should be low or not. Institutions at all
levels have devised methods to pay less to the teachers – even they are asked
to refund a part of their salary credited to their bank accounts – and increase
the profits of institution operators.
The insurance companies and IRDAI have been raising premia
every year from third party motor vehicle claims to health, fire property and
what not on unjustifiable pretexts. The claims in this country are at their
lowest but IRDAI allows insurance companies enormous increases forgetting that
it finally hits the industry and individuals alike. It increases their cost of
operations and leaves them with less spare money to sustain the market.
The IRDAI has itself stated that “incurred claims ratio of
the motor segment came down by two per cent in 2015 against 2014”. Then why has
it hiked third party premium? It hits the transport sector heavily and they make
it up by raising freight several fold.
Similarly, there is little rational in increasing premium
for housing, health, fire and other sectors. There is also little rational for
charging higher premium for someone who has staked a claim. It is becoming an
unsustainable and unnecessary system.
Let us make insurance in all sectors voluntary. The Government
or the regulator appointed by it should not support or sustain a business that
per se is unsustainable. The companies do not reveal the percentages of claims
it declines. It is a highly profitable business and is bleeding everyone.
No less illogical is the decision to disallow registration
of high-powered diesel vehicles in Delhi.
The courts are supposed to go by the provisions of the Motor Vehicles Act that
allows all vehicles to ply all the 24 days – provision that helps production of
new vehicles and creation of jobs. The so-called National Green Tribunal (NGT)
is playing havoc with the production process.
If everything is to be banned, then let us start with
banning the illogical NGT. In no country vehicles are junked as the NGT
suggests. It hurts the economy and wealth formation. The Tribunal forgets that
the junked vehicles also add to pollution. Besides, it has a financial cost
apart from causing disturbance to ecology and economy.
The NGT is also ignoring the suggestions of Modi to make the
country a hub of activity. The NGT seemingly has only one aim --to take the
country many centuries behind. It is oblivious that its quixotic suggestions
add to costs and is inflationary. In short, organizations such as NGT are
anti-development else it would have come down heavily on unsustainable odd-even
car system.
The NITI Ayog and the Government have to consider various
aspects that are hitting, hindering the economy and creating an inflationary
process. It also needs to look at how it can keep wages and business expenses
low – an essential condition for ease of doing business. A new holistic look at
economy and those adding to inflation is needed. A stable and judicious pricing
system is required to keep the economy on rails and cut fiscal deficit. ---INFA
(Copyright,
India News and Feature Alliance)
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