The Hindu Business Line : Inflation misery

Although inflation has receded to lowest levels all over the country, the life of ordinary citizen has become miserable in as much as it has become very difficult to make both ends meet. Prices of foodgrains, oils, milk, vegetables and other essential commodities which constitute an average of more than 50 per cent of the family budget have hit the roof and have remained stay put at those levels The situation has become alarming.

The main reasons are the fall in agriculture production in the country and all over the world. The Government has adopted various fiscal and monetary measures to curb inflation by restricting exports of essential items and by permitting imports and reducing duties thereon to augment the supply. These are only temporary measures. In the short term not much can be done on the supply side.

But that is so on the demand side too. Irrespective of inflation, the demand for essential commodities is relatively inelastic and is unlikely to come down at any time in future. One of the factors identified for the inelastic price levels of food items is the minimum support prices offered by the Government even though the market prices are lower.

More needs to be done in demand management. India has been a net importer of food grains, pulses and oil for many years.

While the rate of increase in agriculture production has already reached a plateau, the population growth has been galloping. The thought of the Malthusian theory of Population being applicable to India is a frightening reality.

It is an accepted fact that the inflationary situation arises when the supply falls short of demand. The strategy, therefore, calls for effective reduction in the demand for these commodities by addressing the growth of population.

The Chinese model of adopting one child or the two children norm is worth serious consideration and emulation. Not only will this stabilise the population but will solve the major problems we are facing. It is a question of will!

S. Narayan Mumbai