The Hindu Business Line : ‘Inflation antidotes’

Needless to say, wages and salaries must be commensurate with the quantum of work done and time worked. In the larger interest of the nation, the workforce must avoid strikes, lockouts and so on, and may be allowed to work overtime to increase the supply of goods and services.

S. Ramakrishnasayee Ranipet

Go to the root

The editorial “Inflation antidotes” (Business Line, June 23, 2008) rightly states that cosmetic measures such as export curbs, fuel price hikes, tax cuts and austerity in Government travel only treat the symptoms of the problem and do not cure the causes.

Employment generation is certainly a measure to help newly employed people cope with the increased prices for which capacity addition and GDP growth are facilitating factors.

However, we are making the cost of credit, also an important factor in the production process, higher.

Ideally, we should follow the Japanese and Chinese models of production, where increased production is sold at marginal costs. This would help increase the demand for the goods and products, which helps increase the capacity further by reaping the advantages of scale.

The market so captured, though not always of quality products, helps increase employment as well as sales, GDP and scales of production.

Though the formula is simple, the facilitating factors are unfortunately absent in India, where we try to follow the traditional methods of costing and production, which are inflation inducive and not production augmenting.

If we switch to this new model, the process will take care of GDP growth and employment creation.

P. E. Muthu Mumbai