Dinesh Kamath's Editorial 'Something drastic needs to be done about inflation' that was published in Newsband

Something drastic needs to be done about inflation

Price rise was one of the key issues in this election. The monster is rearing its head. The rising prices of vegetables and fruits is become a source of headache for a common man. The wholesale food prices have also risen.

This inflation only serves to underline the problem of rising prices half-way through the election season, and it spells trouble at the hustings for the UPA government. The current dispensation will be handing over a troubled legacy to the new government in the form of inflation. The coming monsoon will be critical in determining near-term inflationary trends.

The reasons for this inflation are hidden storage, mid agents, irregular distribution and also high-cost government planning. The main reason for uncontrollable inflation is the amount of unaccounted money that is in vogue. Inflation in India will not come down so long as constraints on production, productivity and supply are not removed.

The main problem in supply side constraint is the traders. There are too many of them and every one of them wants to become rich at the cost of common man. They may allow the goods to perish but will not sell at reduced price. The second major reason is the lack of water resource to grow more vegetables and fruits in more areas to cater to increasing living standard among more people. The first problem can be solved by opening more mega stores by either indigenous or foreign investors or both to create more competition. The idea is to reduce the number of traders as intermediates. No doubt this will reduce employment opportunity but this employment is unproductive and against the interest of the common man. The solution for the second problem of more water resource can be found by interconnecting rivers by number of small canals like roads connecting like a mesh, to reach water in every corner and store water in the canals themselves instead of in big dams.

What's needed is sustained investment in farmer education, seed and fertilizer distribution, transportation facilities and the removal of structural barriers that prevent produce from efficiently reaching the dining table.

Food price inflation is also due to bad weather, lack of warehouses, mismanagement and conspiracy of middle men. Whenever prices are increased middle men make the most of it and moreover increase the price violently on the already increased price. First of all, the new government must regulate the management of food in stringent manner and then regulate the middle men. Only good governance can cure this problem.

A number of steps to check inflationary tendencies need to be taken. What is also needed is a strict enforcement of these steps. Apart from accelerating growth and imposing curbs on money supply, we need an effective distribution system. We also need the support of the social workers and other public minded citizens to keep a watch on the unethical practices of shopkeepers. But nothing can mitigate the situation unless the growth of our population is checked.