DARE - Because Entrepreneurs Do

The public is today less charitable because much of the inflation is on account of poor management of supplies and stocks by government agencies.

The governments of India and Delhi have both taken a political gamble by presenting budgets that would literally add fuel to inflationary fires.

The presumption is that since the next general elections are scheduled for April-May 2014, while assembly elections in the national capital are due in December 2013, this is the most opportune time for politically difficult decisions such as increasing taxes on petroleum products.

Paranjoy Guha Thakurta

In the 2009 general elections, the United Progressive Alliance government, led by the Congress, was able to escape the resentment of the electorate on account of high prices, thanks to the international economic crisis. Since much of the rise in domestic inflation was on account of high prices of petroleum products, which, in turn, were on account of world prices of crude oil zooming—India imports more than three-quarters of the country’s total requirements of crude oil and petroleum products—voters were charitably inclined towards the government and did not hold it fully responsible for its inability to control prices.

The situation is different on this occasion. From the third quarter of calendar 2009 onwards, inflation in India has been driven by high food prices, especially the prices of sugar, dal, dairy products, fruits and vegetables. Inflation has now spread to other sectors and become more generalized. The public is today less charitable because much of the inflation is on account of poor management of supplies and stocks by government agencies. For instance, sugar was first exported and then imported at twice the price. But the government is not particularly bothered about facing the wrath of the proverbial aam admi because elections are not round the corner.

Since inflation was negative in the second and third quarters of 2009, the mere "statistical effect" will ensure that the increase in the wholesale price index as well as consumer price indices will remain around double-digits, if not higher, till June-July. Thereafter, if the monsoon is favourable, prices should start easing. The other point worth noting is that even when the inflation rate comes down, it does not mean that the prices of essential commodities have declined—it just means that the pace at which prices are rising has slowed down or decelerated.

Prime Minister Manmohan Singh and Delhi Chief Minister Shiela Dikshit are hoping that public memory will be short. They are hoping that "inclusive" economic growth will increase the real incomes of the middle class and the poor so that they forget the misery of the past. But our political leaders may be proved wrong.

The writer is an educator and a journalist with 32 years of experience in various media—print, radio, television, the Internet and documentary cinema.

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