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This refers to your news report “Centre ups GDP estimate to 9 per cent” (Business Line, May 31). The recent spurt in prices has come as a rude shock to the government. Nothing can be more worrying to a party in power than soaring prices in an election year. Surprisingly, the inflationary pressure is coupled with slowing economic growth, and the Indian economy is behaving like a typical developing economy.

The economy has been growing at around 8 per cent per annum during the past five years and the forecast for the current year is also around 8 per cent. But the soaring prices of food, articles, cement, steel and oil, pushed up by the global fuel price hike, may stymie this growth.

The worry over the rising inflation rate, now inching closer to 8.5 per cent, going by the WPI, was clearly reflected in the deliberations of the Cabinet Committee on Prices. With the global food crisis intensifying because of rapid industrialisation and unchecked population growth, there is hardly any chance that the graph of domestic price rise will be reversed.

One principle of the monetary policy is that the price rise due to increased money supply of one commodity is offset by the price fall of another. In a poor and agrarian country such as India, where the majority of people spend a major chunk of their earnings on food, this canon seems ridiculous. People need food at any cost and not cheap cosmetics.

Inflation can be controlled through fiscal measures like reducing unnecessary government expenditure, and increasing personal and commodity taxes.

It can also be controlled through such measures as credit control, demonetisations of currencies of higher denomination, increasing production of essential goods and rationing.

Sankar Lal Singh Kolkata

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