Inflation worries real but, in our case, it is a passing phase

Lakshmana Venkat Kuchi *

On the economy front, there is no escaping the fact that we are in hot waters, though we ae much better placed than our neighbours – Sri Lanka or Pakistan, and since our fundamentals are strong we are sure to tide over this situation. This too shall pass.

But for the poor and the middle class, and especially the lower middle class, current day crisis with rising inflation, and an apparent stagnation or lesser growth prospects are definitely not good news.

Earlier we were anticipating a good growth year, and the international rating bodies as also institutions like the World Bank and IMF had predicted high growth rates. The same entities have cut down growth to 7 percent or even less at 6 percent amid rising inflation. The wholesale price index stood at a record high at over 15 percent and prices of essentials are shooting up, causing untold misery to the people across the Nation.

Cooking gas, oil, petroleum products have all risen sharply burning a hole in the pocket of the common man and woman who are finding the going extremely tough. When viewed globally, inflation in India is not alone as most countries are facing the same issue, to varying degrees, arising out of two years of Covid-19 impact and now the effect of the continuing Ukraine war.

Prices of essential commodities, services and manufactured goods have been soaring over the year or so. The Ukraine war has only accentuated the inflation problem that has the entire world in its grip. Disruptions in supply chains is having its overall impact on the economic situation of the world, but the developing Nations are suffering more.

Along with this the continued slide of the Indian Rupee, for sure, is a concern for the Government and the RBI has stepped in with measures to shore up the currency amid fears that the American dollar may yet appreciate in the near future on account of factors that are global in nature.

The worrying thing is that inflation is yet to peak, according to some experts who expect the conditions to remain same or deteriorate further for the next two months before things begin to get better.

What is more worrisome is that along with steep rise in prices, there is significant fall in demand for goods and services and this combination is something that takes a lot of effort, from the Government, private sector and the people as a whole to get out for a recovery to take place.

There are some signs of hope, a rise in GST collections, increase in number of jobs, and the visibility of a resolve from the Government to get things under control.

For starters the RBI raised the repo rate and then Government stepped in with ban on wheat exports, as the price of wheat began to rise in the domestic market. The supply chain shocks owing to global factors has made wheat a much in demand commodity worldwide, and many Nations are asking India to honour the past export commitments it has already made.

Of course, the Government has made it clear that the previous commitments would be allowed to be honoured, but fresh export agreements were out of the question till the situation eased.

It is understandable that for the first time since 2014-15, wheat output of the country has fallen by three percent, but the good news is that India has adequate buffer stocks, higher than that required to meet domestic requirements.

On the edible oil front there is some good news with Indonesia announcing the lifting of its ban on export of palm oil, which could ease the supply side shortages on account of which the edible oil too was witnessing a huge spike in its retail prices. Already the announcement has led to the beginning of the easing of edible oil price in the domestic market.

But overall, for individuals, the situation is becoming tougher and tougher with each passing day, and every increase in prices of commodities is adding that much pressure to the already disbalanced household budgets.

From what one sees happening, I wonder whether there is a greater danger of people falling into individual debt traps as many have stagnant income or have lost jobs and livelihood for whatever reasons. People are being forced to take more loans, some for running household expenses and education and health, and this at higher interest rates.

The Government is looking at rationalising import duties on commodities, like metal, that could lead to reduction in input costs for the manufacturing sector. The Government and ruling party leaders expect global fuel prices to fall once the Russia-Ukraine war is over, and are sure that it will ease inflationary pressures on this count.

From its side the Government said it was continuing its pro-poor measures to directly help the people with low income and those below the poverty line. Free distribution of food to 90 crore people and continuation of social welfare schemes such as PM Awas Yojana (low-cost housing), Ayushman Bharat (health insurance), PM Kisan Samman Nidhi (cash aid for farmers), Ujjwala Yojana (free gas cylinders and stoves), Mahatma Gandhi National Rural Employment Guarantee (unemployment allowance) etc are some of the steps that the ruling party expects to help the poor people cope with inflation.

Well, for the Central Government and the BJP, which is ruling in many States, inflation sure poses a challenge. Especially so in poll-bound Karnataka which is having local body elections within a few weeks and the general elections to Assembly next year.

For sure, any electoral impact of inflation can be seen in the local body polls with the Congress in Karnataka going hammer and tongs against the State and Central Governments for the steep hike in prices of essential commodities and questions the exorbitant prices of petroleum products and that of LPG.

Congress is tweaking the daily life stress of the common man into its political narrative that is appealing to some of the masses, who identify themselves with the crisis they themselves are facing on account of price rise and loss of livelihood during Covid-19. Some are yet to find equivalent livelihood options or jobs that they had before Covid-19 struck.