Price rise, a consistent feature
The rate of inflation based on Wholesale Price Index prepared by the Union Govt, is likely to cross 7% soon.india Updated: Feb 18, 2007 19:15 IST
Price rise has been a consistent feature of the economy since the UPA government came to power. But lately it has been breaking all previous records.
The rate of inflation based on Wholesale Price Index (WPI) prepared by the Union Government, is likely to cross 7 per cent soon.
This price rise is not due to any scarcity of commodities. The monsoons for the last three years have not been bad. The harvests have been good, but food management by the government has not only been bad, but has also worked to cause the price rise.
The government has asked the Reserve Bank of India to tighten its monetary policy to contain the expansion of credit. But the price rise is steepest in essential commodities like flour, sugar, cooking oil, pulses and milk and these are not bought by taking loans from the banking system. They are essential commodities even for those who have never seen a bank in their lives!
The reality is that the price rise has been caused by the faulty policies of the union government. Last year, when the price rise was steep, I had asked the government to take some concrete steps by strengthening the Food Corporation of India (FCI) and its food procurement activities.
I had also asked for strengthening the Public Distribution System (PDS), which is in very bad shape and not catering to the needs of the poor. Since last year I have been asking the government to close down the multi commodities exchange for essential goods. But not a single piece of advice of mine has been accepted.
This attitude of the government shows that it is not serious about checking inflationary trends. Congress President Sonia Gandhi only expresses concern over rising prices, but mere expression of concern cannot have any effect. For this you have to take appropriate corrective actions.
If she is really serious, why does she not categorically ask the government to scrap the system of multi commodities exchange, which has emerged as the main cause of inflationary pressure in the Indian market by giving rise to speculation in forward trading?
By encouraging multi commodities exchange and forward trading the government has kept essential commodities on the same footing as share prices of companies.
Price in the share market is growing, so is the price in commodities market. The government cheers the share market rise openly. But what about the rise in the commodities market?
It seems there is a scheme behind the price rise. Rising prices are an invisible tax on the masses, by which their money flows away from them and towards the rich, which invests it in the share market, in real estate and precious metals. I am afraid that the government through a mechanism of rising prices is funding the share market and the real estate market.
Inflation cannot be used to finance development. But the present government is doing just that. It does not go for procurement at the right time by FCI. It does not support farmers by raising the Minimum Support Price (MSP) at the right time.
It says that it has no money to subsidise the Indian farmers, but in the name of containing inflation it imports foodgrains at higher prices. It cannot support the Indian farmers who are committing suicide, but it has no hesitation in supporting the Australian farmers by paying higher prices for food grains imported from there.
According to an estimate around Rs 20 lakh crore is invested in the multi commodities market. Those who have invested such a huge amount will not allow the prices to come down, even if there is adequate supply of commodities.
In fact, it is not the market forces of demand and supply, but the money power of speculators, which is deciding the price levels in the market.
Again the government has allowed domestic and foreign companies to procure foodgrains directly from the farmers. These companies manipulate the prices to earn huge profits. The power of FCI to make market interventions has been reduced by the entry of these private players.
I, therefore, ask the government to immediately close the multi commodities stock exchange and ban the forward trading of commodities. Again the private companies should not be allowed to procure food grains from the farmers.
FCI's role should be restored. The PDS should also be strengthened. It is not serving the poor of the country, so it is high time to take corrective measures to fine-tune the PDS.
The tragic fact about the price rise and the government is that a single man is holding all the sensitive ministries and departments that are concerned with food security, procurement, public distribution and multi commodities exchange.
He is supposed to take measures on behalf of the government to tackle the situation, but unfortunately he is pursuing policies which fuel price rise and weaken the food security of India.
The Consumer Affairs Ministry is supposed to monitor the prices in the country, but perhaps the Minister has no time to even look at the weekly bulletins provided to him on the price situation. While the masses are crying aloud because of the price rise, he is busy with the politics of Cricket.
(The writer in President of Janata Dal (U) and former Union Food Minister)