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For a common man the terminologies like sensex and inflation have no relevance as what all he is concerned about is what he has to pay for the basic essentials. However, what minimum people understand from inflation all that it concerns with the prices. The regulators, the Indian Finance Ministry, have declared that the inflation has ebbed but there has not been any corresponding ease in the prices. Soaring inflation, which was the bugbear of the economy till recently, has been tamed but that seems to be hardly a reason for celebration. Last year around this time inflation, caused by a host of factors including the rise in global crude prices, made changes in interest rates needed to bolster a slowing economy difficult. Now low inflation is posing a different kind of challenge. In the normal course, the six-year low rate of 2.43 per cent, as measured by the wholesale price index, is a matter to cheer about economic management and would testify to the success of the price control measures. But it seems the decline is beyond control now, and very soon the inflation rate may touch zero or even turn negative. Combined with falling demand and decline in industrial production, this may present difficult policy choices in the coming weeks. Another cause for worry is the refusal of food prices to come down. The prices of food articles and foodgrains have actually been rising and they are 8-11 per cent more than a year ago. This means that the most important items of consumption for the poor and the middle class is getting dearer and dearer and the fall in inflation may not be of any great help to the average person. Food stocks in the country are very high and there does not seem to be any supply constraint. If the prices are still high it is because of the high minimum support price regime, which has a political dimension. The MSPs announced for the coming season will necessarily stay but there is the need to take a holistic look in future of the entire scenario of support prices, stocks, domestic and international market prices and a preferred growth strategy for agriculture. International prices are below domestic prices now and therefore the government’s recent decision to allow exports will not have an impact. The curbs on private food trade and stock limits should also be lifted. High food prices and a food mountain are a contradiction, which should be resolved earliest in the interest of the common man. While food inflation is high, the prices of industrial products have been falling because of low demand. This too is not a good sign as it shows slackening industrial activity. If it leads to a slowdown in investment, it can delay economic recovery. Therefore the unhealthy side of the low inflation rate needs to be paid much attention to in the coming days.
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