The theory on inflation needs to be relooked. Some random
thoughts on Inflation
“Many of the economic challenges we face today stem from the
neglect of supply side policies over the past decade or more” Augustine
Carstens In Times of India.
At 14.55%, March Inflation hits four Months High In Business
Line
Price Rise, geopolitical woes offset gains after third wave
ended.---- RBI
Is it not time for the policy makers to think
of some practical measures through improved administrative means to contain
inflation? While inflation affects generally all, the fact remains that poorest
of The poor gets affected the worst, the lower middle class suffer very badly
and the middle class also gets hit to a great extent. The only class perhaps
untouched by inflation is the Rich and the inflationary conditions enable them
to become richer and enhance their wealth eventually. Money begets money.
Inflation also has its impact on the family
bonds as the masses having hand to mouth existence are also subjected to
emotional, physical, financial, psychological and social pressures which the
practitioners of monetary theory containing inflation seem to miss out very
badly. Mr Kaushik Bsau is right when he said" Inflation is an emotive matter and it gives rise, understandably,to popular resentment." The theory ‘Too much of money
chasing too few goods does not appear to be fully relevant these days where war
or geo political tensions induced inflation, imported inflation thanks to
dynamics of exchange rates, interest rates, flow of international trade, funds
seeking better avenues of investment also cause inflation when majority of the
population remain poor and do not make any money. Similarly domestic
inflation due to unexpected spread of pandemic disturbing all round growth of
goods and services, faulty distribution of money caused by inequitable tax
policies resulting in a few people accumulating wealth, lack of accountability
and administration in the supply chain bottlenecks all cause inflation of a
different kind where too shortage of money keep people away from demanding even
the essential goods to survive. Demand driven inflation is understandable
provided majority of the population enjoy reasonably good income, employment is
high, production, and storage, transportation, and marketing and distribution
of essential goods among the people are carried on smoothly by provision of
cheap credit and other logistics. The Concept of Maximum Retail Price without
relevance to the cost and the margin of profit, the applicability of GST to
mass consumption goods without adequate justification to the affordability of the people linked to their income levels, non inclusion of fuel under
GST, and all sorts of malpractices at ground level starting from greedy
pricing without any check, hoarding, black marketing and operations of money
lenders abetting all rules and
regulations, corrupt practices, etc add to the supply chain bottlenecks
resulting in high costs of the products. Man made inflation is more than money
made inflation. Unfortunately and ironically, the irresponsible behaviour of
media and not so enlightened public with all sorts of superstitious beliefs to
live a life fulfilling religious sentiments in a competitive spirit get fully
exploited by the market men by jacking up prices, a feature perhaps unique to
our economy. Being an abnormal situation
this sort of inflation needs an abnormal solution.
The honest and the people who
care for ethics and values silently suffer the worst from inflation and its related
consequences. The scenario of suffering due to high and uncontrolled inflation
is more visible and pathetic in poorer countries as the affordability of the
Rich and the Poor to withstand the cruel face of inflation varies drastically
helping the Rich remain unruffled fortunately for them and allowing the poor to
succumb to poverty driven pressures without being even noticed unfortunately. Poorest
of the poor whose ambitions and aspirations are very limited cannot be expected
to appreciate the difference between imported and domestic inflation. Even a
one rupee increase in his expenditure without a matching increase in his income
affects him financially, emotionally and psychologically is a fact which unfortunately
does not seem to be appreciated or understood by the powers that be managing
money and people. All are born equal but many get social and economic status
based on manmade rules and regulations and majority live on hopes and
expectations of Ache DIN which is elusive.
A very large segment of the population has no
money to think of two square meals a day leave alone chasing goods even by
thoughts. Shortage of money with many and surplus of money with a few cause imbalances
in the society in such a way that frustration, desperation and depression
multiply among the people leading to loss of productivity and the linked
vicious circle. People do not have money
and the gap between haves and have nots has been widening without any body’s
concern though freebies rescue some at a very high cost and values to the
society. Corruption plays havoc and those who make money by all possible means
do not suffer from inflation and this segment of population is on the increase
adding to demand induced inflation and miseries and worries to many as to how
to survive, without any hope. Welfare
living is almost forgotten.
The need of the hour is to reduce
taxes for the poor for all their essential consumption goods, enhance
administrative skills to contain all sorts of malpractices seen at various
stages of production, storage, transportation, marketing including disposal of
wastes, reduce corruption, enhance
accountability, reduce black money and enhance tax collections through attractive
and incentivised tax compliance and pursue soft policies encouraging very
smooth flow of supply of all essential
goods and services Public transportation system like Railways can definitely
make the movement of essential goods fast, safe and cheap.
Time has come to seriously think of something
more than traditional, rhetoric and initiate concrete measures in the equitable
distribution of income rather than equitable levy of taxes from those who earn
and those who do not earn. The affordability of a single person earning even
around 2.50 lakhs and his struggle to survive with two or more family members
including school going children caught in the ugly phase of inflation even for a
few days and persons earning in lakhs and crores with multiple avenues to
multiply incomes with or without taxes needs to be clearly recognised, realised,
and factored into while making policies and implementing measures to contain
inflation. Those who earn even Rs 2.50 lakhs per annum, the standard of life
for them has no standard in these days of high inflation is the reality and
hence there is a paramount need to have a comprehensive taxation policy benefiting
the people, the Government and the economy by factoring to bring in under tax
net all segments of population and sectors. While GST seems to be a wonderful
option but excluding items like fuel from GST need to be reviewed and changes
brought in early to rationalise tax rates and simplify tax collections for
enhanced compliance. There seems to be
no relationships between the outflow of money towards taxes from a poor man’s
income and the outflow of money from a rich man’s income towards taxes. The
money left with the poor for procuring very essential consumption goods needs
to be considered while rationalising the taxes under GST, Direct taxes and
other levies.
At ground level, majority of the masses do not
differentiate between Fiscal and Monetary policy or imported inflation and
domestic inflation. Their only aspiration is to survive I.E; eat to live, coexist
with others and enjoy a peaceful, happy contented and safe life. By force or by
design they lead a simple life and add values and ethics in the society. Simple living and High thinking preached by
high and mighty is perforce practised by majority without thinking and they are
by nature, following simple living. A blessing in disguise. Inflation should not spoil very simple aspirations
of the majority of the people and they should not become poorer and poorer
because of adverse effects of inflation.
Money is what money does. However,
it cannot and should not be the cause of suffering for many. Inflation caused
by money and its mishandling by a few ignoring the welfare of many needs to be
tackled through very strong Governance System, sustainable, highly need based
and result oriented fiscal and monetary measures in tune with the aspirations of
the majority of the people. Interest in life has a direct link with real rate
of interest is a reality and the need to protect real interest rate from high
inflation rate is paramount. Health of the economy and health and wealth of the
people cannot be exposed to the dangers of any form of inflation for want of
effective and meaningful governance system.
Inequality widens faster if not
checked in time. The fiscal and monetary policies if not aligned and aimed at
growth and price stability simultaneously, inflation gets incentivised as a
little poison to spoil the food. All said, the Country is fortunate to have all
the potential with best of human resources to skilfully manage other resources abundantly available
in the form of natural resources, technology, brain power, support systems like
good culture, values, ethics and all ethos needed for making the economy a
super power. The Readiness to move forward without any negative thoughts and
actions is all that matters.
To end this write up, I would like to quote
our famous Cartoonist late Mr R K Laxman on the issue of price rise that “True,
our reforms have caused inflation, unemployment, increased debt, and sent
prices soaring. But you will be happy to know that we have taken all these into
account. We had to increase the prices on account of the fact that the cost
went up because we put up the prices which was due to our hiking the prices”. (The
best of R K Laxman pages 50,51)
As the taste of pudding is in eating, the result
of various measures to contain inflation is to be judged from the happiness of
the people in procuring very essential consumption items for survival within
their affordability.
Dr T V G Krishnan
( This article appeared in Money Life on 28/04/2022).
Very good move badly needed by the suffering customers. The banks have simply forgotten that they survive because of the customers. Customers seem to have given up the expectation of any improvement in service leave alone getting improved service. Having been appointed Retired Senior Officials particularly from RBI it is hoped that they would do full justice to the assignment allotted and come out with some solid and practical suggestions to improve the services and rationalise the service charges. The Fast Eroding TRUST in BANKS and their Services can be regained only if banks care for customers ,understand the customers,and are able to extend services based on their expectations, needs and capabilities to appreciate the gaps now seen particularly in the Tecnological advancements in banks and Customers abilities to cope with to get the services. Ignoring Customers emails and sending standard replies without any intentions to act seem to be the trend in most of the banks and from this angle the customer gets a feeling that they can very well go in for Crypto currency transactions as no identity is known as to with whom they are dealing.The digital world has completely taken away even the very little rapport the customers had with banks is the sorry state of affairs. The time given to the Committee however, is totally inadequate as the committee members should have some interactions with customers who are suffering and the banks to experience themselves the issues faced by customers without revealing their identities.