There can be no disputing the fact that the prices of everyday goods will play a crucial role in determining the outcomes in the coming assembly and parliamentary elections. Therefore, if for nothing else than the fear that it might adversely affect its electoral prospects, the UPA government should take urgent steps to tame consumer inflation. Unfortunately, there is no indication that the government is alive to the woes of the ‘aam aadmi.’ The latest figures for wholesale price inflation once again tell a story of consumer hardship. Even the lowly onion and vegetables seem to have priced themselves out of the reach of the common man. The Wholesale Price Index increased in September to 6.46 per cent, from 6.1 per cent in the previous month. The Consumer Price Index rose from 9.2 per cent in August, to 9.64 per cent in September. Indeed, actual prices at the retail level will be far higher than these indices indicate. Food prices, especially of vegetables and onions, continued to increase in the month under review. This is despite a good monsoon this season. Surprisingly, prices of cereals have shot up in spite of the fact that the government is sitting on record stockpiles of wheat and rice. The rolling out of the controversial subsidised food scheme was expected to have a salutary effect on the prices of cereals, but this has not happened. Unless the government offloads a part of the food stocks, a sizable percentage of which is wasted on rodents, leakages and natural elements, even plentiful food stocks will fail to dampen market prices of cereals. Fixing high procurement prices for wheat and paddy for political reasons too has distorted the food market. Besides, obligatory procurement by government agencies prevents markets from discovering the right price for cereals according to the demand-and-supply factors. There is every chance of a further distortion in the food economy, once cheap cereals flood the market due to diversion from the proposed food guarantee scheme. Meanwhile, the latest WPI and CPI numbers may have made it harder for the RBI to abandon its anti-inflationary bias in monetary policy. On October 29, when Raghuram Rajan unveils the second-quarter monetary policy, in all likelihood, he will further raise the repo rate In any case, there is no question of his rolling back the 25-basis points increase he had enforced in the last quarter. Unless food inflation is tamed, and wholesale inflation is brought under five per cent, tight money is bound to be the preferred policy of the central bank. Correcting the demand-supply imbalances in the economy may not be the function of the RBI, but it cannot ignore them while formulating its monetary policy.
in the mirror
As feared, the Congress Party was quick to demand the resignation of Chief Minister Shivraj Singh Chouhan for the tragic Ratanagar stampede, which claimed more than a hundred lives last Sunday. Of course, the district authorities were to blame for the stampede. The identity of the persons who started the rumour about the bridge collapse over the Sindh river must be established and their political links, if any, probed. But it should prove sobering for the Congress leaders if they pause to consider the response of the party chief ministers following such human tragedies. Even when the loss of life was in multiples of the tragedy on Sunday morning, Congress chief ministers have failed to own up and quit. The Satara Temple stampede in 2005 claimed more than 350 lives. No politician owned up and resigned. Why, the world’s biggest industrial accident occurred under the eyes of Madhya Pradesh Chief Minister Arjun Singh – whose administration failed to ensure that all safety regulations were followed at the industrial unit with periodic checks of boilers and other equipment. Nearly tens of thousands died in the first week of the deadly gas leak in Bhopal. Lakhs of others were affected in diverse ways. Yet, instead of resigning, Singh and the Congress governments in Bhopal and New Delhi went out of their way to ensure that the Union Carbide top brass got away lightly. With such a terrible record in accountability, it is hard to imagine the Congress leaders are seeking the resignation of the Chouhan government. Look thyself in the mirror first before condemning others.