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Finance Minister P. Chidambaram on Wednesday said the Government of the day pays the price for higher inflation. His comments assume significance as rising prices were a key factor in the recently concluded Assembly elections.
“It is common knowledge that the Government of the day will pay a price for high inflation, especially if inflation persists over a long period of time,” Chidambaram said in his inaugural address at the Delhi Economic Conclave here.
It may be recalled that after the poll results, the UPA Chairperson and Congress President Sonia Gandhi had referred price rise as one of the factors for the defeat. The headline or wholesale price inflation is at 7 per cent while the retail inflation is over 10 per cent. These are driven by high food prices, especially prices of fruit, vegetables, meat, fish, eggs and milk. Onion prices last month touched Rs 100 a kg in some States while potatoes and tomatoes also burnt hole in the pocket. Pulses and edible oils also witnessed sharp spikes in prices.
Often it is said that higher support prices for agriculture produce and increase in rural wages are the key factors for higher inflation and these should be suppressed.
But rejecting such an argument the Finance Minister explained “I believe that farmers who grow these commodities are entitled to fair and remunerative prices so that they do not abandon farming and they continue to produce the foodgrains that are required by 1.3 billion people.
“Likewise, the UPA Governments have, through MNREGA, influenced rural wages. I believe that that was also the right policy. The landless labourer and rural workers are entitled to a fair wage.”
He admitted that monetary policy alone cannot cool the food prices, though it is an effective tool to contain overall inflation.
“The answer to inflation, therefore, especially inflation in food articles, is to increase supplies and to radically transform the manner in which commodities and food articles are stored, transported, distributed and sold in the various markets, especially urban markets,” he said.
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