The Hindu Business Line : Rising prices

Latest news reports indicate that inflation is rearing its head and hovering around 6 per cent, notwithstanding assurances to the contrary by the Finance Minister, Mr Jaswant Singh. It is not good news for the not-so-well-to-do who considers it as an additional indirect tax on his meagre earnings.

Neither is it good news for the party in power, especially at the time of elections, considering that the former Prime Minister, Indira Gandhi, had once swept back to power with a propaganda pitch over rising prices of commonly used items.

Many factors, outside the purview of government control, have arisen lately which have posed a "clear and present danger" on the price front. OPEC has just put up the price of "crude" which will create all-round price increases in the Indian economy. The Chinese juggernaut is galloping at a growth rate of 8 percent plus, consuming large quantities of various raw materials, such as steel and copper, as also oil from the world market. The Indian economy too presents a similar picture at this time.

On top of all this, the elections will also have a negative impact since vast amounts of money, largely in the form of cash, will be pumped into the economy.

Theoreticians will argue that increased productivity, with the help of technology, in all sectors of the economy such as manufacturing, farming and services can neutralise inflationary pressures to a great extent. But, what effect will it have on the "unemployment" situation which is also causing anxiety? It is, indeed, a "catch-22" situation.

Kangayam R. Rangaswamy

Madison (US)

Letters to the editor and contributions can be sent by e-mail to: bleditor@thehindu.co.in