To curb inflation, hike food supply
The Reserve Bank of India’s latest review of its monetary policy has a clear message: that inflation is still a major concern and that while food inflation is coming down, the prices of essential food items of everyday consumption, at least of the asp rational middle class, such as eggs, fish, meat and milk, remain high and are still increasing, Manufactured goods are also getting costlier, and this is showing no sign of declining as the cost of raw material also keeps rising. The overall inflation figure has come down to 7.5 percent in November from 8.8 per cent in August. This has provided a breather, but only for a short while. The RBI is very clear on that. True, it did not raise interest rates when it announced its mid-quarter monetary policy on Thursday. In fact, it went a step further and injected around Rs.48000 cores into the system by reducing the money that commercial banks have to freeze with the RBI (the statutory liquidity ration) and purchasing government bonds from banks. But the Central banker was quick to say that this liberal attitude should not be interpreted as a shift in its monetary policy stance or that it was comfortable with the inflation figures. It emphasized that inflation was still a major concern- something with which the salaried class as well as the underprivileged will concur. Inflation is spurred not only from domestic demand but also from global commodity, food, industrial inputs and metal prices – which are all rising for different reasons. Crude oil is the latest to hit the roof – at nearly $100 a barrel; it is threatening to disrupt several major economies. In India, the government has already raised the price of petrol this week, for the second time in a few months, and there is talk of an imminent rise in diesel prices will. It should be remembered, though, that a hike in diesel prices will push up inflation across the board once again. Diesel is used across the board – from cars, buses and trucks to framers’ water pumps and fishermen’s boat engines. The government is inching towards pushing up diesel prices on the grounds that the oil marketing companies will otherwise not be able to bear the burden of rising crude process much longer. Also, even more important, with one of the major oil companies planning to tap the capital market in the not too much damage to the company’s bottom line. Minister of state for environment and forests Jairam Ramesh tried to pave the way for a diesel hike buy asking why the government should subsides diesel for the owners of BMW’s and Mercedes luxury cars and SUV’s. A good question. But one cannot throw the baby out with the bathwater, and the oweners of these fancy cars are a minuscule lot compared to the crores of Indian who use diesel. If Mr. Ramesh and his government really want to about differential pricing for diesel, they should carefully think about its implementations – and find find innovative and ingenious ways
