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Economy

Inflation touches 8.56% (Monthly)

The figures for January are out – the inflation at the Wholesale Price Index (WPI) level is now 8.56%.

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The Primary Articles Inflation (Read: Food) is also going up (reported weekly):

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The RBI knows now that raising interest rates isn’t likely to help. But that’s all they can do really – the solution needs to be political. A number of things I’ve heard – anecdotally – suggest the situation won’t get better very soon:

  • NREGA is exacerbating it. Most harvest season hires are temporary workers, who now have permanent paying jobs with NREGA and therefore don’t want to bother harvesting. Farmers have reacted by reducing crop acreage; supply shortfalls will increase when the pattern applies country-wide.
  • Sharad Pawar talks his shop – people loyal to him take cues from what he says and raise prices when he suggests any commodity is under supply stress.
  • The middlemen in the food supply chain, politically very strong, have been hoarding; and the politicians are helping by not flooding the market with the FCI stored resources (of which 40% are wasted!)
  • There was a drought last year, which constrained supply. Not much of a drought, but it doesn’t take much to fuel a panic.

To me, food is a very small portion of my monthly expenses, about half of the rent I pay, so even a 30% increase isn’t going to kill me. But it hurts the poorest of the poor; while as a nation we don’t give a rat’s ass about our poor, it is simply inhuman to let them starve while we consider stupid things like raising interest rates. Even if they don’t starve, the high prices of certain items makes them undernourished as they can’t afford what’s nutritious. It’s not yet too bad – but it’s progressively getting worse. With oil prices set to increase (read: diesel is used to transport most food) this WPI looks like it’s only headed one way: UP.

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