Low Inflation is the key to ensure fast, equitable economic development and welfare for all.
Control high Inflation,bring down the cost of living and cost of production, reduce the inequality and realize the dream of the nation to be the most advanced Economy by 2047. High Inflation Kills the economy, people’s enthusiasm to live by honest means, tarnishes the image of Policy makers and administrators of the Nation and shatters the dream of all aspiring to make India, the most advanced economy of the world by 1947. Inflation in moderation not only helps economic growth but also enhances respect for values and ethics, happiness and brings in the desired welfare for all. This is evidenced in almost all advanced economies Viz, USA, Australia, Japan, China,New zealand, Canada etc. The analysis based on data is intentionally avoided here as the policy makers, administrators and the well off categories in the society have the wealth of knowledge and information and they may definitely be aware of the ground realities among the vast majority of the people and their standard of life.
Inflation remains and continues to be the main enemy of the average prople the so called common man in particular as of today. They lose their sense of thinking, judgment, adjustment to sentiments, emotions and life surroundings and calculations without any end and finally to anything to survive peacefully, comfortably and happily. Happiness linked to their earnings and survival are only for a few. For the majority of the people, fighting inflation throughout life, makes living in misery and destined to destiny unfortunately man made mostly. High Inflation also is a challenge to all Policy makers,politicians, administrators,sociologists and all well wishers of welfare of the people anywhere and everywhere.Very high Inflation is perhaps welcomed only by tax evaders, black money holders, anti socialists and those bad elements who believe and survive exploiting the society by any and all means taking full advantage of complexity in taxes, laxity in governance and playing with sentiments of different faiths diligently. This number is insignificant but is poisonous to spoil the food.
By theory,inflation means, too much money chasing too few goods but by practice in an inflationary condition,what happens is that too few goods chase very few lucky people who have all the money and affordability and leave those who have no affordability at lurch. Very high inflation takes the very charm of Life. Smart politicians in power make merry by offering freebies at the cost of taxpayers and the establishments are compelled to tolerate all corrupt practices making the position of governance vulnerable. Unfortunately a large segment of the population who respect values and ethics is caught in between as they cannot afford high prices to chase the goods and indulge in malpractice to survive the very high inflationary conditions by sacrificing a lot and miss a decent and dignified life. Not only can they fight high inflation but they cannot think of surviving THE HIGH COST OF LIVING as food, shelter and clothing apart from health, travel, insurance, electricity, water, social life cost unimaginably prohibitive. Factors responsible for uncontrolled creepiing inflation not susceptible to regulatory measures also cause to increase the money supply and velocity of circulation of money, Increase in currency circulation due to official money supply, black money, official build up of forex reserves, Inflows of foreign exchange both official and unofficial,digital payments and increased rate of circulation of money, corruption and corrupt practices all around, increase in real estate transactions and attendant black money, unaccounted and unnoticed illegal payments both in formal and informal economies in varieties of details not being captured apparently by any means anywhere.Neither the Government, nor the RBI can have a track of all these except some broad parameters in the absence of meaningful governance and data collection,data analysis and enlighened public and sensivity of all concerned with administering the economy. India’s forex reserves almost doubled from $382 billion in June 2017 to $704billion in September 2024 a performance par excellence by any reckoning, but has brought with it the inflation pressures is also a fact which cannot be ignored while fixing the inflation target.
The food inflation which fortunately gets the better attention of the authorities though remains unbearably high for average people, also seems to be not properly assessed to the shocking surprise of the people as the official claims on inflation control do not seem to be reflective of ground level realities. Unethical pricing,under the guise of inflationary trends and smartness of traders and vendors to exploit mercilessly to make fast bugs also add to the desperation of the people.Technically speaking, all unfair trade practices and very high prices should attract the provisions of the Consumer Protection Act, but the people left for themselves to survive cannot afford to waste money and time to fight unfair trade practices and high inflation in Consumer Court.
The Goods and Services Tax came into effect in July 2017. The Government of India introduced the GST mainly to replace the multiple taxes and have a single tax system.The GST, which replaced several indirect taxes, is a comprehensive, destination-based and multi-stage tax that is levied on every value addition.In simple terms, the GST is an indirect tax that is levied on the supply of all goods and services. It is ONE tax that is applicable all over India. (As per the GST act) An invoice bill from a provision store indicates MRP,GST, CGST, SGST and IGST.For instance in a bill of Rs797 for total 8 items purchased on 2/10/24, total taxable value is indicated as Rs 740.15 and the taxes levied are indicated as 56.84,28.42,28.42 and 0.00 respectively towardsGST, CGST, SGST and IGST.This means for an essential provision of Rs 740.15, GST alone comes to Rs 56.84 which works out to 7.68%. This Rs 740.15 Is paid from the tax paid pension income. If this tax amount can be used for quality food by a common man, the health, happiness and emotional quotient can definitely improve, bringing benefit to the nation’s economy.
The GST no doubt is innovative for all its merits and is good and simple. But, in practice and realistically, it seems to be highly inflationary in its implementatin and largely perceived as the Government's Smart Tax to augment resources free of hassles.Though the GST is in operation since 2017, it has turned out to be inflationary and the cost of production and the overall cost of living have increased considerably. The GST collection which amounted to Rs 95633 crores in Sept 2017 though increased to Rs 1.73 Lakh Crores in sep 2024 (almost doubled ) has perhaps benefited the Government to contain the overall deficit, the cascading effect of such an increase has to naturally reflect on the products and services impacting the ultimate consumers whose income levels cannot definitely have doubled and have to bear the brunt of GST.Thus the inflation on food and non food items and cost of Living have increased making the majority feel let down and the perception of the people that GST is inflationary in character is just and justifiable, calling for an in depth examination of the rates and rationalization of the rates to acceptable and convincing rates. Willy-nilly , the GST instead of emerging as a benevolent, egalitarian, and equitable tax benefiting the people all around, has in reality turned out to be an inflationary,inequitable,cash rich resource and widely undesirable / unacceptable among the masses and consumers of very essential goods and services. Besides, as envisaged this tax has not removed many other taxes directly and indirectly levied although some taxes are said to have been subsumed in GST. AS the proof of pudding is said to be in eating, the proof of all merits of GST is yet to be established with conviction and acceptability by the people and perhaps by the Authorities as well, as the Inflation since introduction of GST with high rates irrespective of mass Consumable goods alongside all other major taxes in vogue continues to be a big challenge despite very accommodative and sensible monetary policy and unheard of success seen in the digital transactions possibly eliminating a big chunk of currency notes at retail levels in particular notwithstanding the fact that the Pandemic Covid19 has destabilised the measures though.
The inconvenient truth in containing ground level inflation faced by people at lower and middle class is that the policy makers and the authorities conveniently forget at policy implementation that the fiscal policies and monetary policies have got a cascading effect on the prices of mass consumption goods and they go beyond the capacity of many .The food inflation in particular has crossed all limits of tolerance of majority of the poor and a very large segment of the population at the lower end of the rung struggling to survive leave alone understanding the need to fortify the food, improve the health and enhance the quality of life.The result is visible in the poor health of the people without adequate nutritious food intake.GST with all its merits has only added fuel to fire and the quantum leap seen in Digital Transactions has only oiled the smooth flow of money and increased money circulation adding to not only inflation but also to the identification of black and white money. This is amply evidenced from the number of people filing Income
Tax returns assessed at 8.18 crore out of 140 crores of people in the Assessment year 2023-24 till 31/12/23. This is claimed to be an improved status in the filing of returns. The ever widening inequality seen in the country remains an unexplained proof that tax compliance leaves ample scope for improvement. While demoralization of people takes place through high cost of living, the divinity is also seen side by side through motivation and very high sounding promises and initiatives coming from all around enhancing aspirations of the people but with limitations for achievements. A maximum of 20% of the population may perhaps be able to enjoy the fruits of economic development whereas 80% of the population have to depend on food security, subsidies, freebies and other support systems .
Taxes devoid of inflationary impact are rare and other levies recognised and unrecognized at various points of services and sales also add to inflation which by all means seem to go unnoticed perhaps by policy makers and administrators who are associated with inflation control .The fact of the matter is that inflation estimated at 3.65% for August / september and talked about by RBI as somewhat benign does not reflect the actual increase in prices of vegetables, fruits, staple food items like wheat, rice, bread, roti, grains and oils.Even the prices of salt and Mirchi are becoming prohibitive. The day to day expenditure on only essential food items does not convince the people that inflation is under control and manageable.Increase in wages, salaries, or dearness allowances etc cannot be a compensation at all to meet the real inflation at the ground level. On the contrary it also adds to inflation as the demand from a segment of the people increases for the available commodities. The average person feels the pinch of inflation and swallows all make believe statements emanating from all around . It is time the authorities reach these people , understand inflation and arrive at policies.
Apart from food inflation, the overall inflation and the Cost of living have multiplied by leaps and bounds which go camouflaged from policy issues but adversely and very severely affect the cycle of savings, investment, employment, production, Marketing , Storage , Distribution, Transportation and Consumption. While fiscal policies and monetary policies, if well coordinated and implemented successfully and sensitively to each other's merits and demerits, can to a great extent help contain the overall cost of production and cost of living. The full benefit to the public at large and the Economy in general and the Country in particular can be envisaged and made a reality only if the Legislative, Administrative and Judicial system work in very close tandem keeping the objective of making the economy most advanced by the year 2047. Time is short and the task is huge.Readiness is all that matters.
Welfare for all can be made possible only if food inflation is in moderation, fortified food is ensured to all, right to affordable education is guaranteed for everyone, laws of the country are respected and enforced equally for all without fear or favor and complied with by all citizens, effective governance and accountability in the whole nation turn into a reality and the fruits of economic developments and achievemnts are distributed fairly equitably and the entire humanity feel proud of being counted in letter and spirit and become part and parcel of the nations’ success all around. Existence of poverty and unhappiness among a big chunk of the population and enjoyment of affluence by a very few cannot go well with an egalitarian society. Noble thoughts, noble words and Noble Actions need perfect coordination from all those who matter in developing the nation. It is very apt to quote here Mahatma Gandhi, father of our nation, that “economic equality means that everybody should have enough for his needs.” High Inflation cannot deny the rights of the people to lead a dignified and minimum standard life. Is it not time to relook into the food inflation and cost of living and relate them to various varieties of taxes by policy makers in a VERY COORDINATED manner and make life comfortable for all segments of the population, by understanding and rationalising all taxes realise the dream of being an advanced economy by 2047. LET US MAKE IT AS PEOPLES’ MOVEMENT AND SEE THAT THE NATION ACHIEVES IT COMFORTABLY AND ENTHUSIASTICALLY.
T V Gopalakrishnan
Views are personal.
( This article is published in Money Life on 7/10/24)
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