Today the biggest concern facing the country is rising prices. There is uproar in the Parliament as political parties jostle to grab as much mileage as possible from the government’s apparent failure to curb runaway inflation while aam aadmi has been worst hit by the skyrocketing prices.
Food inflation is hovering around 20 percent. Everyone is facing the brunt of the oil prices. Food prices are souring as all the essential items like vegetables, oil, milk, sugar, etc are getting costlier. Rentals and real estate rates have doubled in just a few months in most of the cities in India. All these make lives miserable, especially for people who have migrated to cities for jobs.
Inflation hits you badly as prices keep rising. You end up spending more money for things that you could buy for less earlier. As a result, your savings and purchasing power comes down. Inflation hits the working group, the unemployed, and the retired lot.
Two theories explain inflation: demand-pull and cost-push theories. According to demand-pull theory, if there is a huge demand for products in all the sectors, it results in a shortage of goods. Thus prices of commodities shoot up. In cost-push theory, the labour groups trigger inflation. When wages for labourers are increased, producers increase the price of products to compensate for the wage hike.
The inflation fell to 16.3% for the week ended March 6 on easing prices of pulses and vegetables, but fuel inflation shot up to 12.68%. As fuel prices rise, the costs of all the essential items increase. So with the fuel price hike announced in the Budget, the inflation is going to move even more steeply. The annual rate of inflation stands at a high of 9.89%.
Inflation is not rising out of nowhere. While we aim for a double-digit growth, we do not look at effects on other factors of the economy. As growth rate increases, income rises and therefore the purchasing power in the hands of people increases. In conditions of shortage of rainfall, droughts, and floods the agricultural produce lessens. Because more people with increased income chase so few goods, the inflation rises over time. As we cannot curtail growth, we need to control inflation by removing supply-side bottlenecks.
On its part, the RBI tightens the monetary control and hikes the interest rates. This leads to people saving more than consuming. This only helps to control demand and balance it with supply. In the long run, however, it is the supply that has to match the demand. Therefore large-scale measures need to be taken to improve the agricultural scenario of the country.
The government should also take measures to prevent food wastage. According to a report, almost half of the wheat stored in the Food Corporation of India’s stock is stored in the open and runs the risk of getting spoilt. Mountains of grain will be built and rot, even as people starve for food and food prices stay stubbornly up. So before fresh procurement of food grains, the stock must be emptied, released in small batches to a large number of traders at prices significantly below the market price, so that in turn the consumers benefit from lower prices. So the government must revamp the entire food management system. Private public partnerships should be encouraged to play a larger role in procurement, storage, and distribution of grain.
Hence as large number of people find it difficult to arrange for two meals a day, we need to preserve the existing produce and prevent wastage at least till the time a revolution in agriculture takes place.
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