Even lemon can burn holes in the pocket once in a while. Seasonal factors do intervene to push up prices to abnormal levels. The nation was outraged to see reports of lemons being sold for Rs 200 to Rs 300 a kg in many parts of the country but the story of prices wasn’t restricted to one item. The Wholesale Price Index suggested abnormal inflationary pressures on the common man. The data released by the government suggest inflation reached a shocking high of 15.08 per cent in April, up from 14.55 per cent in March. A double-digit inflation for several months indicates a crisis. The Narendra Modi Government will have to acknowledge the crisis and deal with it upfront, without any obfuscation or blame-game. The situation has become far more complex because of global uncertainties which pose both political and financial challenges.
While lemon caught the attention of the nation, most essential items have become very costly, getting out of the reach of the poor and lower-middle class. Reports from some parts of the country suggest tomato has moved ferociously towards the 100-mark within a few days of being available for Rs 30-40 a kg. Apart from fruits, most vegetables are selling at prices the common man cannot afford. This, at a time when petrol, diesel, and cooking gas cylinders have already strained the household budget. Other essential items like wheat, rice, edible oils, pulses, and spices have also witnessed a sharp increase in prices, ranging from 40 to 90 per cent. Fast-moving consumer goods companies are raising prices or reducing the size of the packets. Soaps, shampoos, biscuits, and toothpastes which are by no means luxury items have become costlier. These companies cite a spurt in input and transportation costs to justify their moves. Average monthly household expenditure has increased by Rs two to three thousand, adversely affecting the savings of middle class families. Less said the better about the poor; reports suggest they have drastically reduced consumption and are surviving with basic minimum. Nutritional deficiency accentuated by food inflation hits the children hardest and will pose new challenges on the health front in the coming years.
The Reserve Bank of India woke up late but its off-cycle intervention to hike the repo rate demonstrates the worries on the inflation front. More tightening measures are expected as inflation isn’t going to ease immediately. If the Russia-Ukraine conflict continues, wheat prices are bound to bring tears into the eyes of the poor. Consumer Price Inflation of 7.8 is scary. This has exceeded the upper limit of the RBI’s tolerance band. Experts fear CPI inflation to hover around 6.7 per cent for several months now which means the RBI’s concerns are going to further increase now. In such an atmosphere, people avoid spending and even private investment becomes difficult. This vicious cycle makes the recovery more difficult. The government too has obviously realised the need for intervention as inflation had really begun to hurt the people hard. Prime Minister Narendra Modi did well to ask the Finance Minister Nirmala Sitharaman to cut the excise duty on petrol and diesel and provide some relief to the consumers. Even Ujjawala beneficiaries have been given a relief of Rs 200 on cooking gas cylinders. But these measures may not be enough as the pressure is overwhelming and incomes of over 85% of Indian households have fallen in recent years. It is also indisputable that the government woke up late and missed the opportunity of spending more during the Covid period to rev up the economy.
The government will have to redefine its priorities and keep economic revival on the top of the agenda. Tokenism won’t do. Half-hearted responses won’t do. Attempts to hide the crisis through diversionary tactics will be the worst strategy because this is a problem which has to be solved at the earliest. The government needs to deploy all its resources and energies on this task. A massive employment-generation campaign is required, in addition to giving cash to the poorest to boost consumption. While the Prime Minister’s push to Make-in-India was a critical policy initiative, it doubtlessly failed to achieve the desired objectives. Manufacturing sector is crying for attention. Services have their own limitations and the economy will get a real boost only if all sectors start looking up. Some extraordinary measures to revive small and medium enterprises may do the trick. The fear of Covid’s fresh wave has receded and now is the time for the government to put its best foot forward.