The Need for a Rare Feat to fix inflation and save the masses from high cost of living.

 Dear Sir,

                         

Apropos your article "Fiscally Fit to Beat Inflation" (editorial page, ET 19th Aug), the economy's strength is reflected in the rupee's value, impressive GDP growth, a strong fiscal balance and stable inflation. Unstable inflation kills the poorest of the poor, takes away the joy of living and leaves them unhedged against the ever-increasing prices of food items and the rising cost of living fuelled by continuous and unstoppable increases in the prices of oil, transport, education, insurance, medical care, and more. Perhaps the only way to fight inflation is to hedge the economy against fuel, food, fertiliser, and fiscal deficit by establishing separate price stabilisation funds. These funds would manage essential, inherently inflationary items whose prices are unfortunately linked to exchange rates dependent not only on poorly managed national socio-economic conditions but also international ones. Geopolitical uncertainties and international price movements of oil and other sensitive commodities like gold and silver, which the poor seldom use for their day-to-day lives, need to be factored in and managed effectively by a meaningful governance system. This would spare people from inflationary price increases on all their consumption items. Taxes should be divided into inflationary and non-inflationary categories. Levies should become extra taxes on non-inflationary items, insulating the majority of the common masses, this should become the standard for fiscal discipline.It is time to revisit the tinkering approach to the taxation policies. Policy reforms should closely associate with inflation/non-inflation, equitable wealth distribution, and sensitive geopolitical conditions influencing exchange rate stability and the movement of goods and services linked to unpredictable tariffs.      

T.V.Gopalakrishnan

Bengaluru 

( Letter Sent to the Economic Times).