Saturday, 28 June 2014

Inflation: A passion for Indian Government.

This is one topic in which I do not have to think before writing an article. The recent price rise in the essential commodities has hurt the common man where it hurts the most. The prices of onion , tomatoes, pulses have skyrocketed which adds flavor to the otherwise normal lifestyle of below average Indian. The above statement is a sarcasm in itself, but its necessary to show the grave situation which the normal citizens of this country are facing in the normal time.
The prices of pulses which is nearly a staple diet for most of the country has risen to a large extent from the last 2 years. This may be due to less area under production for pulses in country or less per hectare yield of pulses or growth in demand. But the apathy is that there is no supportive government policy which could have helped India to raise the pulses production by giving more incentives to the farmers growing pulses, reducing loses to the intermediaries. One more benefit of higher pulses production is it takes less of nitrogenous fertilizers and is essential for regular wheat rice fields.
The prices of onion has risen nearly 300% or more in the last month. The first reason is inefficient government policy which do not foresee demand supply situations, since onions are perishable quantities. The recent unseasonal rains in Nasik area has destroyed 10% of the crops, but still the quantum of price rise cannot be substantiated. The major culprit here is no control over the last leg of supply chain i.e retailers , they are having the profit margin of more than 50% . They are speculating on the deficient supply and holding the common man on ransom. Moreover in India expert was stopped at a much later stage , which led to the spike in prices for the first instance.The rest and the last reason which is common to all, I would discuss in the later part of the article.
There is another factor which is at play in high inflation rates across the commodities and it is ever increasing rates of petrol and diesel. The common plea given by the government to the people of India during every rate increase is rising international crude prices, But they should first answer why there is double taxation by center and state on sale of petrol and diesel. My first question to the respective governments is why cannot these duties be reduced, so that at least the transportation cost for the common commodities is reduced.

Now let us come to the contentious issue which is common to all the commodities price rise and bone of contention between the government and opposition parties that is forward trading. Now some people will criticize me of knowing very little of the commodity trading, but my only point is why do you need speculative trading on the essential commodities, when you could have such trading on nearly each and every finance vehicle like equity shares, currency exchanges etc. The forward trading increases the speculation in markets and people who are really not in the supply chain of these commodities get into it and unnecessarily disrupts the chain leading to disparity in normal price mechanism of these commodities.

Similarly prices of milk and other commodities could be discussed singly, but I just want to make a point that a concerted serious action is required for dealing the situation as it is hurting the foundation of common man economics in India. All the arms of government machinery, NGO's, common man should make an effort to discuss this problem and devise solutions which are practical and pragmatic in nature. Well I am doing my part by writing and publishing this article on net, so that our online community is more educated on the topic which is raging in India currently.