Mother of confusions

The common man is suffering from price rise in an unprecedented manner. The intolerable price rise reminds one of the days of the Second World War. Central spokes persons including Prime Minister, Food Minister, Finance Minister and planning commission have been trying to explain in various ways. When prices of pulses touched Rs 100 a Kg, they said the area under pulses crop had decreased. They explained that due to rise in spending power, the demand of pulses has increased. The Government could have imported pulses, but that didn't happen in time. Of late, a Centre-State blame game has started. Even the most knowledgeable Ministers have blamed it on the States.

If we examine the issue, prices generally are not the result of a State's policy. On the contrary, the Centre is responsible for price rise. The transportation cost is wholly monitored and increased by the Centre. Demands and supply factor may be influenced by a State's or Centre's policy, but the Centre has been blaming States for not dealing with hoarders. This has been a habitual response of the Centre.

During the past one year, vegetable prices skyrocketed. Is their price rise a result of hoarding? Vegetable prices doubled or tripled. One cannot think of this as the reason. The general rise in prices contributed to it because of the wrong policy of the Centre. Even vegetable dealers are consumers of another commodity. If at all hoarding takes place, the Government propaganda against hoarders accelerates the unhealthy trend.

A few months back, Food Minister Sharad Pawar forecast that the price of sugar will rise. It is a well known fact that he himself controls a large number co-operative sugar mills and sugar prices climbed up step-by-step towards Rs 50 per kg. I had a chance to see a cartoon on a roadside dhaba. Rates were displayed: 'Tea Rs 5 a cup, don't forget to bring two spoons of sugar.' I am aware of the fact that cartoons exaggerate the fact but they contain the core truth. The price of the whole food basket is enough to give you an electric shock today.

The prices of milk, sugar, wheat, pulse is routinely shocking. If you are non-vegetarian, go vegetarian as meat prices have gone up by 250 per cent. Even egg are Rs 50 a dozen. The UPA Government came to power in the aam aadmi's name. See what it has done to the common man on the price front. Prices of industrial products were comparatively peaceful for some years. Now they too are going to suffer price rise woes. The farmers who perform the role of 'Annadata' are not getting sufficient price for the cost of seeds, fertilizer, labour. All have gone up. Agriculture is not a profitable job. Till a few years back, there was a lobby working for imposing income tax on agriculturists. Do you hear such demands nowadays? There is a Sanskrit Shloka that says 'flowers in the pond rise when the level of water rises. But when the level of water decreases, the plants do not decrease.' That is the character of prices too.

In the past 75 years, I have never seen prices decrease dramatically. By character it remains at a higher level that it has attained. The Food Minister recently claimed in Parliament that price would come down within the next ten days. However, that does not seem possible. The promise of ten days is not going to be fulfilled as first, he is a tactical politician; second, he is not an astrologer to predict so accurately; and third, prices do not follow the constitutional amendment.

When I tried to understand the price phenomena, I got confused by the usual practice of wholesale price index because retailers don't sell on the basis of wholesale price. And the Government seldom uses the consumer price index. Practically, WPI is permanently not in use in the market. Consumer Price Index is nearer to the truth. Further, wholesale price index covers 435 items and consumer price index covers 120 to 360 items. Yet another difficulty in WPI is that it covers a far superior quality than consumer expenditure surveys of purchased item, which are actually purchased by the consumer. Further, the wholesale index is based on quotations from 1918 centres. In contrast, CPI IW is taken from 78 centres while CPI UN MB used to be from 59. Thus, WPI calculations have far more basis. How can you get the real picture if your base is lesser?

While the Government and newspapers give the Wholesale Price Index often, you seldom come across the Consumer Price Index to compare. The WPI cannot lead to the correct picture unless you are knowledgeable about politics of price indexes. Even knowledgeable people can become victims of terminology of economic jugglery coined in order to keep common man in the dark.

Courtesy: www.dailypioneer.com, January 17, 2010