In a country in which nearly five out of 10 people live on less than Rs 55 (or $1.25) a day, the rising prices of essentials like food are bound to be uppermost on its mind. Unlike, say, in Latin America, where the inflation of 200 per cent or more is taken in its stride, the tolerance level of headline inflation in India rarely goes beyond the double-digit level. There are, therefore, no prizes for guessing that the current spurt in prices beyond 12 per cent, is the biggest worry across villages, towns, remote townships and big cities of the country. This is the most significant finding of Hindustan Times reporters who have relied on the traditional technique of gut feel to gauge the national mood.
Interestingly, this pervasive concern over costlier essentials matches, in intensity and impact, the threat of terrorism. This is hardly surprising as inflation itself is a form of economic terrorism: its victims are mainly the poorest of the poor, including landless agricultural labourers and small farmers, besides the urban middle class whose living standards are eroded by rising prices. This is why this phenomenon is described as an iniquitous tax on the poor. Ahead of crucial elections at the state-level and national level, the the biggest worry of the political class, too, is that double-digit inflation is fatal for whichever government is in power.
Why is inflation haunting the nation? To be sure, the UPA government is doing whatever it can to control it. The central bank is also raising interest rates and taking out excess liquidity from the system. However, their impact has been more on slowing the overall growth of the economy than on checking prices. Costlier food has more to do with shortages in supply than demand. When farmers have to pay more for fertilisers and other inputs, the prevailing mood is that agriculture is itself unviable. Farmer suicides are on the rise. Unless this crisis is addressed, there will be no respite from food inflation.