All of a sudden, Indian economy finds itself in a quandary:
on the one hand, the rising inflation is already
hovering around 7% and threatening to shoot up with the high rise
in the prices of vegetables, fruits and onions (around 82%),
calling for demand-side checks—obviously, reining in of
money circulation that is currently growing at 15%
year-on-year, which is of course, growing at a pace lower than the
nominal growth rate of the economy—and on the other hand,
slowing down of industrial production to an 18-month low of 2.7%
in November that is demanding pump priming the economy
to maintain growth momentum at or around 8-9%, plus the
rising concern at the mounting subsidy bills and the
resulting widening fiscal deficit. And, it is the balancing of
these counter-demands that is today challenging the wit of the
government and its policy makers.
Amongst these growth constraints, it is the rising
food inflation that is driving everyone, both the consumer and the government, crazy.
The steep rise of 59% in vegetable prices pushed the food price index to a whopping
18.32%. The rise in inflation is, of course, not
confined to agricultural products alone; it even
spread to mineral and petrol prices which have
gone up by 30.6% and 25% respectively. Nonetheless, as the food articles have a weight
of 14.34% in the overall wholesale price index, any further rise in them is sure to upset
the inflation estimates. Incidentally, global food prices too have gone up by 30% over the
last year, mostly due to the fall in production, which again is
the outcome of changing weather, diversion of land use from
food grain production to biofuel production, etc., and this in itself
is a sure pointer to what is in store for the future. |
