Despite the widening distance between official predictions on inflation and its actual trajectory New Delhi's pundits do not tire of predicting confident, and often blasé, time-lines for its downtrend. Last year, every prognosis went wrong, including the Prime Minister's belief in a fall by December; this year, the Deputy Chairman of the Planning Commission asserted in February that inflation would fall to 7 per cent in six weeks. That same month, the Finance Minister, wishing to be more precise about the kind of inflation that would fall but unwilling to put a date on that possibility, simply announced that food inflation would fall “in some time”. The Prime Minister, no less, put his imprimatur on the predictive quality of his officials by fixing the deliverance date for March, despite the acknowledgement of global factors adding to inflationary pressures. The government, he intoned, was taking care of things.

We are lurching towards May — traditionally the month for temperatures and prices to soar — and, sure enough, this year it is going to be no different; while the Wholesale Price Index (WPI) is around 8 per cent, food inflation has fallen to around 9 per cent but fuel and power are still in double digits. The government may blame global trends for the fuel price spike but it cannot do so for power shortages that raise the price of this vital ingredient for households and producers. What should worry policymakers more than anything else is the view from the bottom up, the sense of the price situation among the citizenry. A survey by the Reserve Bank of India on the inflationary expectations of households that it conducts periodically, revealed a more pessimistic view of the trajectory of the price rise than that held by policymakers in New Delhi. The survey conducted between October and December 2010, admittedly a period when prices rose very high, showed that the respondents did not take as sanguine a view of inflationary dips as policymakers were airing in New Delhi: in fact, the percentage of respondents expecting an increase in general prices over the next three months and for the entire year “has been rising for the last three years.” What is surprising is that householders and other respondents expected the high prices of food and non-food products to linger well into 2011.

Surveys of this sort reveal microscopic subjective judgements on real events. Their value lies in the hidden lesson of the wide divergence between policy-makers and ordinary people on the efficacy of policymaking; New Delhi's unbridled optimism is at variance with such entrenched scepticism. That should worry the government.

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