And then, what to do?
Call in a corporate icon like Captain Gopinath to streamline the foodgrains management and rationalise the price of essential commodities!
There is a 40-month high inflation at 7 and above per cent. There is a great deal of tension in the government. The Cabinet is divided as to what to do. The Prime Minister’s own reputation is now put to test.
On the one hand the PM is being weakened from inside the government. With Arjun Singh raising the chorus “Rahul Gandhi as the Prime Minister candidate”, the Opposition wi8th L.K.Advani, pitching himself with the distinction of the Opposition’s candidate for the next PM’s post, there is some understandable confusion and even demoralisation, if we can say so, in the government ranks.
Surely, Sonia Gandhi’s motives would also be put to test, as she knows well what Arjun Singh said was unworthy of a senior Cabinet colleague and also the ever-obliging Pranab Mukerjee’s endorsement adds another dimension to the demoralisation trend that is clearly noticeable in the Government.
As it is, the way the collation partners, given the Sharad Pawar and DMK chief like characters who are gunning from the sidelines, for scoring points and also making their positions stronger, it is time Sonia Gandhi must act. She must surely act, first, to gently remove, if possible, Arjun Singh from the Cabinet and otherwise, she has to call in Arjun Singh and warn him in no uncertain terms that this is not the time to embarrass the Prime Minister and weaken the government.
Sonia Gandhi’s skills would be put to test if the government doesn’t seem to show some semblance of performance on the price front.
There are all the signs that the government is helpless when it comes to taking some energetic steps.
What causes inflation?
The question is as old as economics and at least it is as old as the current economic thinking on the subject that started with economic reforms era.
Inflation is just price rise, in a faster manner. Yes, some moderate inflation is necessary for any economic activity to become profitable and in fact for economic growth to take place.
Given this basic assumption of economic thinking, it becomes all the more challenging to ask and answer in turn, why this sudden price rises, to such an unacceptable level?
P.Chidambaram to others says that this is globally-driven outcome.
World food stocks dwindled, hence, there is pressure on food supply and therefore there is a price rise on essential commodities like rice and wheat and other edible oil, pulses etc.
This is just another aspect of the same phenomenon.
As for the global phenomenon, the globalised economy is now made up of faster flow of foreign funds, financial services and hence the MNCs in business, from financial services to commodity trading also play big and cause dislocations. There are some truths in all these observations.
There are some financial dislocations in the much liberalised era, globally and in terms of the flow of foreign funds.
So, it does require some experts, experts in finance and elsewhere, like in farm sector reforms to advise the government to minimise the dislocations. Dislocations of food stocks and food supplies to dislocations of financial resources in the foreign and the domestic front.
Let us also recognise that everyone is not sitting easy and the RBI and the IMF, the World Bank is all attending to these tasks.
Now, as for India where we have some peculiar problems. First, the farmers distress. Every 30 minutes a farmer commits suicide! So, the Rs.60,000 crore farm loan waiver is unlikely to disrupt the financial system, considering the RBI is writing off such huge loans for the corporate sector.
So, what to do?
One obvious suggestion from our point of view, one hopes we have a credible point of view for the New Delhi mandarins to take is we have been engaged ,full-time, please note, in studying the agri sector and also watching from a practical point of view, as we are also engaged in actual agriculture operations. Our point of view is this:
There are no proper, independent institutions that are supposed to organise marketing the farm produce, or supplying funds, farm credit, or inputs and also extension ,all these institutions have fallen into disuse or highly politicised or simply run over by fanciful populist schemes and freebies that have completely distorted the rural economy.
Institutions like, say, Amul, are needed. Our milk and dairy industry is somewhat a shining exception in an otherwise dram and discouraging rural economy model, right?
Likewise, we need some professionally run agricultural credit system, our rural co-op credit institutions must be managed by a professional body on the lines of the NDDB model.
That one decisive step would stabilise the current distorted rural credit system.
One more institution model is to check corruption in PDS and even to revamp PDS we need a governance system in place. The World Bank has come out with several suggestions and we have also written about this more than once.
So, we need a whole lot of new institutions, from Lok Ayukta to state-level human rights to women’s commission to consumer redressal forums to legal adalat.
As it is ,it is becoming a burden to live in the villages, a more bigger burden to engage in agriculture and still a challenge to market one’s produce in a reasonable manner, as, say ,on the Amul model.
We have been urging the Prime Minister, Finance Minister and the Agriculture Minister to do a series of things. They simply don’t bother.
They are all caught up in their own, shall we dare say, in their own unworthy petty ambitions of holding on to their offices!
Yes, the banking system doesn’t deliver on their priority sector lending. The FM is more preoccupied with his own publicity and his own position in the scheme of things.
Who don’t know that the higherups, in the party and government are being tied to the apron strings of the big business houses?
So, what chance to rein in the retail chains in controlling the inflation?
Or in reining in the steel and cement manufacturers?
Even procurement of foodgrains, paying MSP and also stocking and distribution through PDS must be done independent new institutional oversight, by professional managers.
So, we say: call in some known corporate names, like say, Captain Gopinath, the icon of the low cost airline to take up the job on behalf of the government to streamline the foodgrains procurement, movement and stocking and distribution.’
Luckily, he has just now launched a logistics business, in cargo movement. We are sure he is the man of the moment.
A man who can inspire confidence, he had started his careers in farming and he is still engaged in agriculture, he told us the other day! Seriously,.
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