HindustanTimes Mon,29 Dec 2014

Judicious spending undercut by high inflation

Chetan Chauhan, Hindustan Times  New Delhi, May 23, 2013
First Published: 02:00 IST(23/5/2013) | Last Updated: 03:08 IST(23/5/2013)

The UPA government would have been on its high horse by now had not food inflation and leakages in its public delivery system deflated the gains.


The Manmohan Singh government adopted the inclusive growth model that relies on investment of the gains of high economic growth in the social sector to bridge the rich-poor divide.

The approach was noble but Singh’s team did not anticipate high food prices to come as a cropper. The admission of failure came from Singh at the January conclave of Congress where he described inflation as “one shortcoming in their record.”

The overall annual inflation of 6.5% was not the real concern. What hurt the UPA was its inability to check rise of food prices, especially cereals, pulses and vegetables, which more than doubled in the last nine years.

High food inflation dented the pockets of the poor (Congress’s traditional vote-bank) and the middle-class (which it attracted in 2009 elections) despite a three-fold increase in average annual income of Indians — from Rs. 23,242 in 2004-05 to Rs. 68,747 in 2012-13.

The National Sample Survey reports between 2004-05 and 2009-10 show that the divide between richest and poorest 20% of the population has widened and inflation was one of the primary reasons for it.

What remains to be seen is whether high food inflation will undo the electoral gains of allocating over Rs. 15,00,000 crore for the social sector in its ten years (including 2013-14). The UPA in the 11th plan spent Rs. 2,50,000 crore on education and health.

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