The Hindu Business Line : The price hang

THE formation of the Cabinet Committee on Prices is the clearest indication that the price issue has become an important matter for the Manmohan Singh Government.

Among other things, it is a departure from the past in that there was no such committee under the Vajpayee dispensation, the offered reason being that there was "no need" for such a body simply because price inflation had not assumed such threatening proportions.

This may or may not be true, but what is apparent is that there is now a need for a Cabinet committee to keep track of prices, the inference being that inflation has become a matter of national concern and will have to be tackled on an institutional basis by the Government of the day.

But, to some observers, this is only the fig-leaf hiding what the Government really intends to do to tackle the price problem.

The decision of real import is not the setting up of the Cabinet committee on prices but the informal group formed to deal with the same issue, the members of which are the Prime Minister himself, the Deputy Chairman of the Planning Commission, the Governor of the Reserve Bank and, of course, the Finance Minister.

In fact, the very membership of the two committees, one formal and the other informal, tells the entire story of how effective the respective deliberations will be.

The unstated point of difference is that while the Cabinet committee will take note of the political aspects of the price issue (principally the impact of measures contemplated to control the rise), the other body will deal almost exclusively with the technical aspects of the price increase and the possible remedial options.

As opposed to the technocrat composition of the informal group (the Finance Minister being included probably because he had to be in view of the portfolio he holds in the Government), the other grouping has a cross-section of members.

Apart from the Prime Minister, it comprises the Deputy Chairman of the Planning Commission and the Finance Minister, the Defence Minister, the Railway Minister, the Petroleum Minister, the Industry and Commerce Minister, the Agriculture Minister, the Fertiliser Minister and the IT and Telecom Minister — in other words, a veritable UPA concoction!

This, in fact, is how it should be. Indeed, this is the hallmark of the Prime Minister, Dr Manmohan Singh, who has always been known to be a technocrat rather than a hardboiled politician, a description which eminently suited his predecessor, Mr Atal Behari Vajpayee.

To cap it all, Dr Singh is not just a technocrat but also an economist, and understanding the causes of rising prices and devising effective measures to control such a situation is just what should be up an economist's street.

The timing of the formation of the informal committee also suggests that the Prime Minister feels that, unless a collective professional eye is kept on the behaviour of prices now (the price indices have been rising for the past few weeks already), there is every possibility of the situation getting out of control, inducing unwanted reactions in other spheres of the economy which could add up to become a truly national economic `hiccup', or even a full-blown crisis.

It remains to be seen how the immediate future will unfold, whether in particular the behaviour of the rains and international oil prices will continue to push up the inflation index or whether both will tend to stabilise as far as their impact on domestic prices are concerned.

Reports say that the Prime Minister's advisors feel that the wholesale price index will decline in the next two weeks. This may or may not be so.

At least this much can be said with some certainty that it will take more time for world oil prices to stabilize at comfortable levels, from the point of view of consumers.

This would mean that the pressure on domestic prices will remain intact for some more time, which in turn would test the ability of the PM's informal "brains trust" to come up with appropriate policy measures which would counter such pressure without ruffling political feathers beyond a point.

Ranabir Ray Choudhury