The Hindu Business Line : Weaponless in price war

What began several months ago as apprehension turned into anxiety, gave way to serious concern and then transformed into fear. Now panic has gripped the Government. A series of decisions, rather knee-jerk reactions, have burst forth: Banning export of some goods, allowing easier import of some others, reducing or eliminating Customs duties, invoking restrictive storage laws and delisting a couple of essential commodities from the bourses... New Delhi has tried it all, but with little yet to show by way of success. Inflation continues to swell.

Galloping inflation robs the poor, and hurts others, though much less grievously; the fruits of the much-touted economic growth have not reached large sections, especially in the rural areas. Under extant conditions, the benefit of high prices paid by consumers does not flow back to primary producers, but is siphoned away by middlemen and speculators who enjoy a free run in an economy of shortages. If attention to agriculture has been limited to rendering lip service, inefficiencies in the physical market remain unattended. With production trailing demand in recent years, shortages of essential commodities have widened. Imports have become expensive because of high global market prices.

It may be instructive to remember that inflation is not an overnight phenomenon. It is benign to the extent that it allows you time to cover yourself. Here is where the government failed. Its approach to augmenting supplies and controlling prices has been causal at best. Clearly, the country is paying a heavy price for the omissions and commissions, primarily in neglecting the farm sector. Rapidly rising political heat over spiralling prices of food products has prompted negative responses. The latest is the ban on export of wheat and wheat products, coming on top of the embargo on milk powder export. New Delhi is so paranoid that it wants to seal even the smallest window of export. Mercifully, maize (corn) import has been declared duty-free till the year-end.

The journey from apprehension to panic demonstrates how poorly equipped the Government really is in reading signals, identifying emerging problems areas and taking remedial measures. Today, the Government finds itself completely on the defensive, and without any effective ammunition to fight the rise in prices. Some relief may come with the softening of market sentiment ahead of the impending harvest. But the danger is, this would be temporary, lasting but a couple of months. The Agriculture Ministry is largely accountable for the sorry state of affairs; yet, the UPA Government must own up collective responsibility for neglecting the obvious weaknesses on the farm. How best to maximise crop output in the ensuing kharif season must now become its priority.

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