A FEW ASPECTS OF INFLATION WHICH MUST BE KEPT IN MIND BY MEDIA DEBATERS. (Correction/ amendments to this post are welcome) 1- Inflation rate say 10% per annum = on an average prices are rising at the rate of 10% per year. 2- Inflation rate has declined by10% = Actual deceleration is only one percent. Prices are still rising at the rate of 9%. 3- Inflation rate has declined from 10% to 5% = Prices are still rising at the rate of five per cent. Consumers will not feel any relief. Tolerable rate of inflation, as accepted internationally is 2% per annum. In India it is 5% p.a. 4-Inflation rate has declined by100.00% = Price stability has been achieved. 5- Inflation rate has declined by 110.00% = Slump has started to increase miseries of production units. 6-Factory/farm gate prices = prices which are available to producers. 7-Whole-sale prices = Factory/ farm gate prices + margin of whole-sellers. 8-Retail prices = Prices which are paid by consumers. 9-Sectoral inflation = Prices of all commodities do not rise or fall simultaneously at the same rates due to economic reasons. This causes favourable and adverse terms of trade for some sectors. 10- Is there any organisation or publication which could enlighten Indian consumers periodically by publishing figures of per unit farm/ factory gate prices, transport, selling cost and profit at the levels of whole-sellers and retailers in respect of all commodities or at the least wage goods? 11- Should it not be made mandatory for all production units to publish the above mentioned figures on their own? After all, it is not against the policy of Liberalisation, privatization and globalization. 12- Benefits of development do not accrue uniformly to every members of society, not even in the strictly managed communism. Beneficiary of monetary expansion are big borrowers and bribe harvesters. Poor, poorer and the poorest get less and less through exchange of their goods and services. Terms of trade is generally against poor. Food inflation even if due to market and cost led corrections is painful to poor, but present MODI government can not be blamed for it, because vegetable and food grain producers are not getting a big margin of profit. If inflation is not being found as an effective contraceptive to contain the number of poor and unemployed people, causes of poverty and inflation will have to be searched for in the legacy of political mismanagement and uncontrolled population explosion. 13- No producer will sell below cost of productions barring distress sale in blue moons. Economic development can oblige poor people only to the extent of providing them with jobs. Market can not oblige them in accordance with money available in their pockets. Options available for mitigation of their miseries are (1) Neglect of development (2) population control and (3) subsidization of either producers or all consumers or only poor. First option can not be followed. Second is against secularity. Direct cash transfer via bank accounts is liable to misuse. Sale of wine will exceed the sale of food grains. Subsidization of products is the best option. Government agency can buy high and sell low. The argument that rich will also harvest the benefits is not tenable. After all, subsidy is paid by rich people who pay taxes as levied by government. Duel price management will never succeed.
Posted on: Sun, 07 Sep 2014 10:23:48 +0000
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