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Sunday, February 11, 2007

How to solve inflation in India?

"The rise in India's inflation rate is due to strong growth and robust consumer demand..", FM P Chidambaram said. The common man is confused. He has been having the same amount of Moong Dal (pulses) whether the economy was growing at 9% or 3%. What he is wondering is who are these voracious Moong Daal eaters who have invaded the country over the last three years? I believe Shiv Sena knows the answers (Bangladeshi immigrants of course)

The wholesale price index (WPI) is at 6.58%, the highest reading since December 2004. There are frequent debates about whether the inflation rates indicate anything meaningful. For instance, food items have only 22% weight in the index, while it is close to 80-100% of the expenses for a third of our population. I would also like to see two different baskets: one for goods sold in air-conditioned stores and one for non-aircon stores. My guess is that anything sold in India in air-conditioned is witnessing annual inflation of 20% or more. Even few years ago, I wouldn’t occasionally mind buying a formal shirt with tags sporting non-Indian names (Sir Allen Solly, Mr. Van Heusen). Back then, these shirts would be at most Rs 800. The same shirts cost upwards of Rs 2000 and is a culture shock to me; naturally my wardrobe now shows tags with Indian names only (Ramji tailors, Deshapriya stitching). Price of a humble Dosa (Thosai) is upwards of Rs 90 in some self-service shopping-mall food-courts in India. And of course, who can forget the mythological “Sweet corn”, costing Rs 30 and upwards for a fist-sized serving at a 9 sq. ft. stall in a shopping mall. Price for a 2,000 sq. ft. (186 sq. m.) apartment with a cheap-looking concrete floor and flimsy wooden closets and no view (other than neighboring apartments) has become $1.5 million in South Mumbai. But may be view of a South Mumbai apartment itself is worth that much.

RBI’s reluctant efforts to curb inflation by raising interest rates have been unsuccessful (though it says that it takes time). So what’s the solution? Here are my recommendations:

  1. Put curbs on the Bacchan family’s quest to cover all temples in India to pray for happy marital life for Aishwary-Abhishek. Believe me it puts a serious strain on agricultural goods.
  2. Control effigy burning; once again too many effigies are burn nowadays. Every burnt effigy also means loss of the clothes used to wrap it, sets of shoes used to garland it and fuel
  3. Reality show contest for farmers; we have American (Pop) idol based shows for almost everyone: cricketers, singers, actors, quizzers. Let’s have one for farmers too, asking them to produce the cheapest Daal and Garlic.
  4. Rename foreign sounding tags by government decree. If we can rename Bombay and Bangalore, we can surely rename Allen Solly to Ali Saleem and Park Avenue to Rajeev Chowk. Once the brand appeal goes, prices will fall too.
  5. Establish regulatory bodies like TRAI for transparent and fair pricing. A pre-paid card for mobile costs the same whether its Airtel or Hutch, sold in a mom-and-pop store or a supermarket; why should sweet corn and Dosa (Thosai) be any different?
  6. Fire people publishing such high inflation numbers. Argentina recently fired the longtime manager of the consumer price index at national statistics agency and then lowered inflation numbers by half.

1 comment:

Anonymous said...

LOL :)