Addressing the media on the concluding day of the summit of the Group of Twenty countries at Cannes, Prime Minister Manmohan Singh presented what seems to be rapidly becoming the official line of the United Progressive Alliance (UPA) in explaining away persistent inflationary pressures. Inflation, Singh said, was a reflection of demand for food items such as fruits and vegetables exceeding supply and, therefore, “to some extent, at least, is a sign of growing prosperity of our country”.
A few days later, Union finance minister Pranab Mukherjee reiterated the argument.
This prognosis raises fundamental worries. One, it smacks of profound insensitivity on the part of the government at the plight of people struggling to cope with nearly three years of double-digit inflation. Instead of providing policy succor, through say an overhaul of the public distribution system to reach concessional food items to the needy, the UPA seems to be emulating its predecessor that had created the line “India Shining”. This is especially true for those vast sections bypassed in the first round of the economic boom and, in that sense, rampant inflation has been a double whammy for them.
Second, it confirms popular perception that policy planners are clueless about persistent inflation. Earlier, various policy mandarins would regularly put out optimistic forecasts suggesting the worst was behind. After two years, they have abandoned this practice and are instead now claiming that inflation is a fallout of their ability to have nudged the economy to a new growth trajectory.
It is not the first time that an economy is growing at this pace, and the correlation being drawn by Singh and Mukherjee is not necessarily true—China has grown at near double digits for the last 15 years and has rarely seen such an inflationary spiral.
It is, therefore, time that the UPA puts an end to such specious reasoning. The effort instead should be on fixing the problem that, like the Prime Minister himself indicated, is the failure of supply to keep pace with demand. This requires some hard political decisions, especially if the stranglehold of cartels in wholesale food markets is to be broken and robust supply chains put in place.
Is the UPA government serious about checking inflation? Tell us at firstname.lastname@example.org