It’s time to tame the inflationary monster

While divisive and increasingly confrontationist party politics hogs headlines, little attention is paid to the rising burden of consumer price inflation on the common man. The latest wholesale price index and the consumer price index ought to serve as a warning to the policy-makers. The economy is yet to recover fully from the disruption caused by the coronavirus pandemic which even after two years continues to still rage in parts of the country. Tens of thousands, especially in the unorganised sector, lost their meagre livelihoods in this period. Generous welfare schemes, especially free food rations, helped to a large extent in alleviating the resulting misery from joblessness. But the rising food and fuel prices in the recent weeks threaten to hurt the ordinary consumers the most. Notably, for the first time, Finance Minister Nirmala Sitharaman acknowledged the other day that consumer price inflation had crossed the comfort level set for the RBI. It was higher than six percent, the upper limit earmarked for the RBI’s Monetary Policy Committee. Indeed, the official figures do not fully reflect the pain of the common man who is now forced to spend far more on such everyday essential items as milk, cooking oil, atta, vegetables, etc. Even if lemon, the lowly nimbu, is priced out of the reach of the middle-income families due to the freak weather late last year in Andhra and other parts of the country which grow the nutrition-rich fruit, prices of plain dal-roti too have shot up in recent months.

The war in Ukraine has sent up the price of petrol, diesel, CNG, cooking gas, etc. into the stratosphere. This, in turn, obviously has had a cascading effect on the general price line. Besides, the disruption in the sea lanes due to the western sanctions against Russia has caused the price of wheat and soya oil to shoot up substantially. It is noticeable that after agitating against the three farm reforms for over a year, the Punjab farmers are now most enthusiastically selling their wheat to the Adanis, the same Adanis whom they had suspected of casting an ill eye on their farmlands. However, wheat exports to Egypt and other nations ought not to impact its price at home since the FCI warehouses stock far above the stipulated tonnage for an emergency. Under the circumstances, the sharp rise in the price of wheat and ‘atta’ in the open market is indeed surprising. Cooking oils, including mustard oil, have seen a sharp spurt in prices. Coupled with the higher charge for medicines, hospitalisation, other such services, and, above all, public transport --- in Delhi, the auto and taxi unions observed a two-day chakka jam this week demanding an increase in fare tariffs due to higher fuel costs--- the proverbial common man is in trouble. He needs respite from the ever-rising prices. In this context, the decision to continue the freefood programme for another three months is welcome. Even though the RBI has now hinted at a tighter monetary policy to rein in the inflationary monster, it should bear in mind the pain it will inflict on the middle-income households due to higher EMIs for autos and home loans. Hopefully, the interests of ordinary households can be protected when the RBI prescribes a hike in the basic rate to tame inflation.

Meanwhile, no tears need be shed should the Sensex lose a few more points given that the markets had been in the grip of an unusually long exuberant spell. Despite the lingering effects of the pandemic, the Russian war in Ukraine, the high price of crude oil, and the incessant pull-out by the FIIs, Sensex had been in thrall to the bulls. This seemed incongruous, especially given the paring down of growth by the IMF from the earlier 9 percent to 8.2 per cent. India may yet be the only standout economy in terms of growth this year, given that even China is projected to grow at a mere four per cent, but the need to keep consumer inflation in check cannot be exaggerated. A rising Sensex does not mask the pain of its people reeling under increasing prices of food and fuel. At all costs, we need to hold the price of food, vegetables, milk, public transport, etc., in check. It is not only good economics but good politics as well. As they say, inflation is an unlegislated tax on the poorest of the poor.