Ourviews | Specious claims on inflation

Ourviews | Specious claims on inflation

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.

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, 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 views@livemint.com

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