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Paying the price

The most efficacious intervention really is to strengthen the public distribution system so that the poor are insulated from inflation.

india Updated: Apr 08, 2008 22:28 IST

If wishes were horses, the UPA government can indeed rein in inflation — that hit 7 per cent for the week ended March 22 — in a couple of weeks time. The Left has set the government a deadline of April 15 to bring down prices. A worried government, on its part, is doing whatever it can to dampen the price rise even as it keeps rising. The 7 per cent figure is an underestimate of the prices consumers, especially in metros like Delhi, Kolkata, Mumbai and Chennai, pay when they purchase food and essentials. Delhi is the worst-hit with consumers bearing the brunt of the maximum surge in retail food prices.

Of course, part of the problem is that prices are higher because of the higher purchasing power of people in metros. But the big question is: why such a big differential in retail price across the Big Four? Among these metros, the nation’s capital had the highest retail prices for onion, gram, rice, sugar, groundnut oil and vanaspati. In south India, where rice is the staple food, prices were up by a whopping 40 per cent since last year despite Andhra Pradesh and Tamil Nadu being the largest-producers of this particular foodgrain in the country. Clearly, inflationary expectations have set in and these are self-fulfilling. What more can the government do? Prime Minister Manmohan Singh has stated “Our government is doing everything possible to contain inflation,” adding for good measure, “What more can be done will be done”. The measures already taken include bans on rice exports, scrapping duties on crude edible oils, bearing down on steel producers to hold the line and so on. The last measure includes the possibility of including the commodity under the purview of the Essential Commodities Act that allows the government to have a say on pricing.

The government has also taken a decision to form a strategic reserve of 5 million tonnes of foodgrain to combat emergency situations. But as always, the devil is in the details. Weekly or fortnightly imports sound fine. But are they really feasible as global stocks are low and prices are unaffordable? Under these circumstances, the most efficacious intervention really is to strengthen the public distribution system so that the poor are insulated from inflation.