In the middle of last year, the government claimed that the price rise was seasonal. Later, the finance minister began putting out the argument that inflation is a natural consequence of rapid economic growth. In the recent period, the government and its economic advisors are pointing to ‘supply constraints’ as a main cause for inflation. Despite all these arguments, the government cannot escape the responsibility for its gross failure. The rising inflation and price rise is a direct result of the policies of the government. The argument that inflation is a consequence of rapid growth also does not stand scrutiny. The Chinese economy has been registering rapid growth for three decades. Inflation is currently below 2 per cent in China.
The wrong policies of the government and mismanagement has led to shortages of supply and price rise of many commodities. The world prices of sugar have fallen sharply. Yet, the retail price of sugar in India continues to climb. The fiasco of wheat imports last year underlined the failure to procure adequate amounts of wheat from farmers because private players are being allowed to corner stocks. Large-scale import of wheat last year did not check the rising price of wheat. The government has failed to deal with the basic causes for the overall slow down in agricultural production.
Minister of State for Planning V Narayanasamy :
The newly-appointed Minister of State for Planning V Narayanasamy expressed confidence that prices will come under control soon following the steps taken by the Centre to contain inflationary pressure. “Union government has done its job, and within some days price situation will be rectified", he said after assuming the charge of Minister of State in the Planning Commission.
I don't understand how he is so confident about that ??? .
He's statement shocked me.
Don't he know that rise in price has hit the homemaker's budget like never before. Even the middle class is feeling the pinch.
From 5.92 percent on February 21 to the current rate of 7 per cent, inflation has soared to a 39 month high, and people's grocery list is changing by the week, in direct proportion to the skyrocketing prices of essential commodities.
The international oil prices have come down substantially. After the token cut in Rs. 2 for petrol and Re. 1 for diesel in December 2006, the government has refused to restore the pre-June 2006 prices by making a further cut. Neither is the government prepared to do away with the advalorem duty structure on oil imports. The government shows no political will to crack down on hoarding.
The government has to revise its agricultural policies. Food security and strengthening of the public distribution system is linked to adequate production of food grains. Encouragement of incentives to switch from food grains to cash crops along with other reasons has led to a fall in production of food grains. The public distribution system has been systematically weakened in order to cut back on food subsidies. In the union budget last year, there was a cut of Rs. 3000 crores in the food subsidy. The government will have to take urgent steps to strengthen the public distribution system and expand its purview by including pulses and edible oils and other essential commodities.
Instead of taking these steps, the government announced in January cuts in import duties on cement, capital goods, project imports, metals and chemicals. This was a wrong step. Such drastic cuts in import duty on manufactured items will have an adverse impact on domestic producers leading to deflation and unemployment. Similar cuts in import duty on wheat and pulses did not succeed in bringing down inflation.
While the performance of the Manmohan Singh government in the power sector has been dismal just about 50 per cent of the targeted 41,000 Mw was added in the 10th Plan period, it can take credit for prying open the nuclear door for India.
Though there seem to be last minute hiccups in the India-US nuclear cooperation deal, which would give India access to US nuclear technology and fuel for the first time in 30 years, it clearly caps everything else that the government has managed in the energy sector.
There was the plan to set up the country's largest power plants the 4,000 Mw ultra mega power plants across nine cities in the country but only one at Mundra in Gujarat has managed to get off the ground so far. Critics say the government would have done better by focusing incentives on smaller-sized plants since "not many companies have the ability and willingness to invest Rs 16,000 crore (Rs 160 billion) or more required for each ultra mega project."
"Inflation not only reduces the level of business investment, but also the efficiency with which productive factors are put to use."
Now people knows that rising inflation and price rise is the biggest failure of the UPA government so far.
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Author : Samir Bhoir
Article Source : Rising inflation and price rise is the biggest failure of the UPA government so far
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