Thursday, July 10, 2008

The Lesser Devil 2

Legacy is ending. And so would people say, about the Congress. So, I will focus on the current government and compare it with the previous regime, because the BJP-led NDA is considered to be the best alternative. For the same, I list out some of the contentious issues counted as the failures of the current government, deliberate upon them and do a comparative analysis in the following few posts to come.

Inflation and Price-rise

The inflation for the week ended June 7 was 11.05%, a thirteen year high in India. But hey, hold on. Food prices have soared 40% in the USA. China has seen its monthly inflation rate soar to 7.7%. Inflation in the European Union has just hit 3.7%, almost double the 2% inflation growth target, put forth by the European Central Bank. For the first time in a decade, Japan experienced a positive inflation of 1%, largely due to rising oil and food prices. There are food riots in Mexico and Argentina. Prices have risen globally, and India, with ironical thanks to globalization, can only be shielded from global trends and cues so far. A host of factors are pushing up prices of food and other commodities around the world and they are affecting India too. The examples are many - diversion of maize and other food-grains from the food basket to the energy basket, the floundering wheat supply because of a record drought in Australia, the entry of equity and hedge funds into the futures commodities and energy markets, etc.

Oil prices were USD 39 a barrel in 2004. They were USD 79 a barrel in 2007. Today, it is USD 137/bbl. And in case you are wondering, the inflation rate has soared from 3.8% in January 2008 to 11.5% on June 27. Not just that, the present Government has maintained annual inflation rates at an acceptable 4-6% for the past four years.

Jumping over to the other side, the NDA Government did perform better than the present one, but just about. Their inability to control inflation in 2000-01, which ranged from 6-9% for the whole year, deflates their claim of being an alternative to the present Government (sourced from the finance minister's website). Besides, the average annual inflation rate was 4.9% under the NDA, which is only a trifle better than the 5.3% rate clocked by UPA (till 2008). It is only in this year, that inflation reared up its ugly head.

What is more troubling, however, is the blatant sensationalism and politicization of the inflation figures by both the media and the opposition. Besides, inflation is more of an economic statistic than a political ruse to gather votes or a savvy story to spruce up TRP ratings. One cannot look at the inflation figures and say the economy is not doing well. I will focus on the economy in my next post.

References:
The Annual Economic Review (1998-2008);
'Myth about Economics and Politics in India': Surjeet Bhalla, March 15, 2008, Business Standard;
'World Inflation': Business World, April 2008; and
http://www.financeminister.gov.in/

2 comments:

lagordabella said...

Blaming the govt for inflation and price rise is unjust. The entire world is facing the same problem so how can one blame the govt for the situation in India? A couple of days ago, there was an interesting interview with the FM on UTVi, suggest you check it out.

vinay sainath said...

precisely my point. :)