Diversion of crops by the farmers seeking better price for their produce, resulted in scarcity for certain commodities.

There is a sharp rise in the prices of coarse grains because of high demand for meat, milk and eggs from the high-income and middle class groups in the country.

As the general elections are nearing, the Government is under pressure to rein in the inflation to save their Government. So the Government would go any length to bring down the prices even if it means sacrificing growth.

Gnanasekaran Rengan, Madurai

Inflation in primary articles has gone up by 376 basis points within a span of just six weeks. Inflation in the fuel group has spiked by 100 basis points in just a week’s time, taking cues from the global surge in the crude oil prices. Inflation in manufactured products has also surged to its 49-week high of 6.27 per cent in the week-ended March 15, 2008, and has moved up by 206 basis points in the first two weeks of March.

The headline inflation crossed the tolerance level of 5 per cent set by the RBI for 2007-08 during the week ended February 23, 2008, itself. It is now within striking distance of 7 per cent based on the above data one can decipher the following:

There is a need to augment production and productivity in wheat, rice, edible oil and pulses as the rise in prices of these imported products has been a major driver of inflation in India. The country would be able to insulate itself from rise in global commodity prices only if it becomes self sufficient in the respective commodities.

Rise in commodities prices and inflation have become global worries. The price rise in commodities is putting pressure on inflation and thereby curbing growth. For growth to happen in India, we need lower interest rates. But with the RBI having a hawkish monetary stance, and with the Government clear in its agenda on curbing inflation, even at the cost of growth, it is highly unlikely that interest rates will come down in the near future.

Indian voters are known to be merciless when it comes to punishing Governments that are unable to deliver on the price front and things are only going to worsen as the Budget and sixth-pay commission recommendations will result in increased disposable income in the hands of the consumer, which may result in higher inflationary pressures.

Lower interest rates are necessary to spur investment activities in the country and, at current levels, there is a definite slowdown in production and capacity addition plans of corporate India. The IIP data is also not encouraging. These supply side pressures are also contributing to rise in inflation. Though imported inflation has been a major driver, as reflected in the surge in prices of primary articles and fuel prices, domestic factors like high interest rates over the past one year have also resulted in significant supply side pressures along with demand slowdown.

In this scenario, the best bet for the Government would be to reduce tariffs further, better supply-demand management, spur investment activities aimed at self sufficiency and cut back on wasteful spending.

K.M. Shravan Dharmaraj, Chennai

Everything is costlier, these days, including vegetables, because people are greedy.

C.D. Srinivasan, e-mail

Costlier imported goods are also a major cause of inflation on which we have no control, expect to wait for the rupee to appreciate or lower the import duty on various commodities. But we cannot blame the global factors alone for inflation. There are lot of domestic factors such as ineffective supply chain management, poor public distribution system, price cartels and speculative commodity trading. The Government and the RBI must take bold steps to contain inflation, even if it is at the cost of sacrificing growth.

Tamil Selvam, Karur

Responses to Sticklish Issues dated March 24 on ‘New Ad campaign for Banks’:

For private banks: Earn intelligently(service charges). lose diligently (sub-prime).

For public sector banks: Our mission is not complete (nationalisation).

For State Bank Group: Merger is a distant dream and we will dream further.

(R. Swaminathan, Tiruchi.)