Inflation...Is UPA responsible ?
It has been a month, when the barometer of purchasing was showing 4-5% figure, but what all of sudden happened that figure has reached 7-7.5% figure. What drove inflation crazy like any thing. It is really Bad luck for UPA government that Inflation arose when elections are due in coming year and UPA’s extraordinary performance left Opposition with no issues to highlight during coming elections. But now Opposition has INFLATION as the punch lime for the elections.
What went wrong ...
Nothing, absolutely nothing. It is not the case also that all of the sudden people are given so much of money that crunch of basic commodities arose. Actually, it was the implication of World commodities that determine the inflation of the world as a whole. First is the price of crude oil, which has as insane as the Arabs who are still controlling 70% of Oil supply to the world, Secondly the price of Wheat and thirdly and most importantly the price of Corn. Corn consumption increased because of its demand that arose in production of ethanol based fuels. So what ever happened is not at in the control of government.
What next to inhibit its impact on common men....
Permanent solution of the problem is difficult, because implication of the solution can be dangerous in long term. For maintaining the growth of 8-9% GDP is possible only taking all the possible wise decisions. Let me take one by one the option available.
1. Increase the import: This may look wise decision to cater the increasing demand so that price can be controlled, but Problem with this solution is that it will compete and will eat-out the pie of Indian manufacturers. Lets say, government reduce the custom duty of edible oil, it will make the competition tough of Indian products in longer run, and that is loss of business, employment and over all mood of the business.
2. Discourage Export: This is again a solution that will be harmful in the longer run for the producers of the commodities as they will not be offered better price of their products, and that will result into problem for the produce and situation might be much graver than the existing one.
3. Increase the interest rate: WOW !!! RBI is in and things will be solved, but this is not the case, Increasing CRR and removing liquidity from the market would definitely hit the pockets of consumer, but it will affect overall investment scene of the country, increased interest rate will only discourage the FDI and FIIs.
Then what!!!....
A million dollar question. Policies are made to get the maximum amid all the possible constraints. Best way is to go by the Public distribution channel so that the producer (farmer) may not feel cheated for the consumption of the product that he has produced. Secondly, it can increase the interest rate for the time being so that extra liquidity can be checked with in the market. Export-Import balance is what it should dwell upon so that best solution can be found.
