We should first acknowledge the fact that inflation is an India-specific problem in the sense that inflation in rest of the world is associated to housing price bubble or asset pricing bubble. Here we are not talking about any bubbles; here we are talking about real food price inflation which can only be negated when there is parity between fiscal measures and monetary policies. That man sitting in RBI has valiantly tried to tame this inflation bugbear – raising interest rates regularly. But Indian inflation is something that will respond to fiscal measures rather than monetary measures and therefore the lion’s share should be of fiscal measures and not monetary policies.
HOW FOOD INFLATION RISES
India is a developing country and whose national income is on the rise. When personal disposable income of individuals rises, there consumption pattern changes, increases demand for expensive nutritious food such as milk,pulses,eggs,meat and the like, therefore, the long term policy should ensure that the production of these items meet demand. Since our growth in productivity has not been up to mark, therefore food inflation rises.
Three years ago, a man sat at Ram Lila Maidan in Delhi, he announced that corruption is the root cause of inflation in India. And he was bang on with his concepts because corruption does add to inflationary index.
Let us take a simple example ofsupply chain inefficiency. If a local mafia controls the procurement & distribution of onions then in such a scene the chances of hoarding becomes high leading to sky-rocketing prices. This is what happens in many parts of our country.
SOLUTION: IMPLEMENT INNOVATIVE SCHEMES
SCHEME 1: BRING BACK THE GOLDEN QUADRILATERAL PROJECT
When the Golden Quadrilateral Project was implemented 10 years ago under the UPA-I regime it brought about a sea change in the distribution of agro and non-agro foods. Earlier potatoes had a captive market in West Bengal onlybut after this project it started reaching in other states thus increasing supply and controlling demand-led inflation.Now if we complement this with better storage and cold chain facilities for various agro products then supply chain bottle-necks would be removed. It would help ‘plugging the loopholes’ of supply pan-India and hence control food inflation.
SCHEME 2: IMPLEMENT ARC SCHEME
This is a new innovative scheme which can be implemented. It stands for Alignment of Resources and Crops (ARC). Our aim should be to increase farm productivity to contain food prices. For example, in Maharashtra 60% of water resources of India goes towards sugarcane production which is cultivated on just 3% of land in India. So we need balance between crops and the resources they consume. We shoul1d allow private enterprises to be directly linked with farmers where the role of PPP or the 3Ps or the Public Private Partnerships can be very beneficial.
I would love to make a point about inflation. Inflation should not be taken in the English sense of it. It should be taken in its Hindi counterpart i.e. mehengai… the Hindi word means unaffordability whereas in English, the word tends to focus on the increase or decrease in prices in percentage terms, especially among experts. Inflation is not a problem in the English sense of the word. Unaffordability is the problem. People have a fixed income and when that income gets squeezed, a lot of things become unaffordable.