The price vice
The big question is whether a crackdown on traders or middlemen will indeed moderate inflation as desired by the political class.Updated: Apr 14, 2008 21:48 IST
There is no doubt that the rising prices of food and essentials are the biggest worry for most of us. As many as nine out of ten respondents participating in a Hindustan Times-C Fore survey said their household budgets were impacted by inflation. In a strong message to the political class, six out of ten respondents also stated that rising prices would affect their vote. Such tidings are bad news for incumbent governments that face assembly or national elections. Keeping in mind the experience of 1998 when the rising prices of onions routed the BJP, the Delhi government is now cracking down on hoarders and raiding wholesale depots and godowns to hold the line on prices.
Such measures might be taken nationwide as well, according to Union Finance Minister P. Chidambaram. “A number of steps will be taken to enhance supply, especially supply of food items. If, after all of these some sectors behave irresponsibly, then the government will have to consider strong measures to moderate prices,” he stated. There are no prizes for guessing these sectors include traders who are believed to stockpile food and raise margins. As if on cue, a study by Assocham has found that a chain of middlemen make essential commodities costlier than they should have been: “They are fleecing the buyers. The difference between wholesale and retail prices has gone up to a never-before 60 per cent. Ideally, it should have been around 20 per cent”.
The big question is whether a crackdown on traders or middlemen will indeed moderate inflation as desired by the political class. Certainly, they make for dramatic coverage with visuals of seized hoarded food and edible oils. But these tactics don’t have any lasting impact. To be sure, food prices are higher due to hoarding. But they will keep spiralling upwards as supply-demand mismatches persist in food production. That is the problem that must be fixed if the government is as worried over inflation as all of us.