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Unabated Inflationary Crisis

Updated: June 2, 2012 2:02 pm

It seems to be a mockery of things that in spite of having an economist Prime Minister, the UPA government at the Centre lacks in orientation to curb the ever-rising prices of essential commodities. This incident—of burgeoning price hikes—has been witnessed several times during the regime of UPA I and II, and this is eating into the vitals of the country. In fact, these hits of price rises have been keeping on coming for over two years. We have had the Standard & Poor’s downgrade, a collapsing Sensex, an eroding rupee, and recently the news that industrial output contracted by 3.5 per cent, bringing the average industrial growth rate for the last fiscal year almost as low as it was during the global financial crisis in 2008-09. But the sheer size of the negativity engulfing India’s economy has been deeper than what meet the eyes. No wonder the global rating agency Standard & Poor (S&P) lowered India’s outlook from subtle BBB+ to negative BBB-, which is the lowest investment grading. The RBI’s recent decision of giving local exporters a fortnight to convert half of their foreign exchange holdings into rupees is symptomatic of the anxiety gripping India’s macro-economic managers. The sliding currency threatens India’s place at the high table among potential economic leaders of tomorrow. The rupee on May 16 closed at all time low of 54.56 against the dollar as global risk aversion point and higher-than-expected domestic inflation data hit stocks by lowering expectations for future rate cuts. Further, the 3.5 per cent contraction in the country’s industrial production has come as a major jolt on the economic front. The fact that the production of capital goods has shrunk by as much as 21.3 per cent indicates that real investment is not taking place in the economy. What is more, the UPA government’s inability to curb surges in food crisis is a significant reason for rising discontent with it (UPA). One of the bizarre contradictions facing the country is that while food prices continue to rise, we also grope desperately for finding adequate facilities for mounting of rotting foodgrains following a record harvest. But it is not just foodgrains like wheat or rice that are driving up food prices. Those of vegetables, pulses and edible oils are soaring much faster. A 61 per cent spurt in the prices of vegetables and fresh produce, owing to a contraction in supply following unseasonal rains, has scripted the latest scene in an unrelenting inflationary crisis.

This gloomy scenario is substantiated by the fact that the Congress MP in the Rajya Sabha and former Planning Commission member Bhalchandra Mungekar warned, while participating in the discussion on the Finance Bill, 2012 in the Rajya Sabha, that amid fragile global economic recovery and its impact on India, if government did not take urgent steps, the country could face a bigger crisis. He said one of the primary drivers of the current account deficit has been the growth of about 50 per cent in imports of gold and precious metals in first three quarters of 2011-12. Pointing out that inflation causes the greatest anger particularly amongst poor and vulnerable sections, he said, “the government, therefore, must take all preventive and curative measures to control inflation”. In fact, in the last two years, the country has witnessed an unabated price rise. And two years is a long period in any economy. India has taken a reverse turn in this period and has entered a slow phase, thanks to continuous inaction on the part of the UPA government. The crisis becomes all the more glaring in view of the fact that we have an economist at the helm of affairs. Yet there is a continuous downslide in the economy. It is easy to engage in a blame game and try to escape the responsibility, as the UPA government is endeavouring to do. But that does not work for long.

Leave alone reaching out to the Opposition, this government does not take its own allies into confidence before announcing major decisions. What is lamentable that the Opposition also does not take the government to the task on these issues. Recently when the country commemorated the 60th year of the first sitting of the two Houses of the Parliament, the leader of Opposition in the Lok Sabha considered it appropriate to raise the women reservation issue but maintained studied silence on the burning issues facing the country, including the issue of bringing those to justice who had perpetrated attack on the Parliament. What is deplorable is the fact that meaningful debates over marathon sessions have been few and far between in the last six decades. In contrast, disruptions and slogan-shouting over any number of frivolous issues have been frequent. Too often, a boisterous few have held the whole of Parliament hostage. Forcing adjournment of the proceedings through high-decibel interventions and demonstrations is a common enough occurrence in the Lok Sabha as well as the Rajya Sabha. The question arises as to why today’s politicians are not true representatives of the people. To answer this vital question, one must compare the present lot of politicians with that of the yesteryears. Post-Independence, the majority of the political class had fought for Independence of the country and had made immense sacrifice in their personal lives. Hence, they earned respect of their countrymen. But at present, the pathetic unparliamentarily display and attitude by parliamentarians is uncalled for.

Deepak Kumar Rath

Deepak Kumar Rath

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