Bring Down Food Inflation - Let the people be happy and Motivated

                                      Bring down Food Inflation -Let the people be happy and motivated.

                                                       Annadatha Sukhi Bhava. 

 President-elect Donald Trump says Americans not being able to afford groceries will be a relic of the past. “They’re going to be affording their groceries very soon,” he said Thursday before ringing the opening bell at the New York Stock Exchange, where he was honored as Time’s “Person of the Year.”

 The  belief  Annadatha Sukhi Bhava is in practice for ages and this is considered to be the most satisfying and fulfilling experience of  both the giver and the taker of food  equally. "Nothing can substitute feeding of hungry" is true to the core and this only can help the people to remain motivated emotionally and in all other respects.Very high Food Inflation, Taxes and other Charges do not make living Comfortable for majority of the population. All their happiness, peace and contentment are first attached to food first and then only they think of other comforts like shelter, clothing, medical, pursuit of education, travel for social visits, for pleasure, sight seeing, pilgrimages etc etc. The whole life should not be left only for calculating subsistence and existence levels linked to income and cost of living. Majority have to come out of that situation and dream of a developed world and reaching their minimum standard  standards of life.

The Government in power and other authorities have moral, social, economic and emotional responsibility to keep the food prices under check by all means and make food available within the affordability of all. The  first and foremost objective of  both Fiscal and monetary policy should be to ensure that the food items are produced /imported  adequately at minimum cost and available to all within a reasonable price. Politics cannot and should not interfere in the pricing of food products and should not dictate terms in the production, storage, transportation, distribution and  their reachability to all. Politicians can have all welfare policies but the administration has to necessarily execute the policies in such a way that they do not affect the sentiments and urge to have  two square meals for the entire population irrespective of their incomes and affordability. Basic Need cannot be mixed with Luxury. The economic policies consisting of  Monetary and Fiscal Policies determine the generation and distribution of wealth based on the economic and social conditions of the entire population taking into consideration the availability of natural resources and other potentials of the country apart from geopolitical conditions of the whole universe, play a key role in regulating the food inflation, cost of production and giving the momentum of growth and keeping the population happy, motivated and aspiring for peace, safety and all round progress. Many of the ills of the economy emanate from poverty , very high food prices and high cost of living. Widening inequality adds fuel to fire.  

The success of democracy should be judged on the availability of food to all always and at reasonable prices without any linkage to affordability. It is easier said than done as the very administrative set up essential to ensure the availability of food to all at affordable prices unfortunately remains manipulative, corrupt, inefficient, exploitative and greedy beyond any justification either morally, ethically, legally and empathetically.

The  high inflation not only widens the gap between the Rich and the Poor, but it also affects the poor physically, financially, psychologically, emotionally and socially. High inflation in the absence of affordability  among majority of the people  to survive unfortunately takes away the very  happiness and welfare among the masses but adds to the very existential crisis which is not desirable in Nation's interest and long term stability of the economic progress and its continued sustenance. It is very apt to quote here the Kantar's Report that appeared in ET dated 6/12/24 which says"Urban middle Class Household Shrink, Rich Club Sees Big Jump. Incomes not able to keep pace with inflation. One needs to introspect and find ways and means to find some tangible solution to avoid such situations in the long term interest of the economy and welfare of the people.  

Removal of taxes and levies, malpractices prevalent in the form of corruption both in kind and cash in the production of  agricultural goods and  all logistics related services in the procurement, movement, storage  marketing , distribution and final destination of these to  people all around will definitely go a long way in reducing the food prices and making the people happy and motivated. Any sacrifice made in containing food inflation will prove to be a great boon to boost the economic growth and ensure universal welfare of people. Time for all authorities concerned to think afresh and coordinate policies and their successful implementation keeping the objective of ensuring food products at affordable prices and their availability irrespective of seasonal variations including political manipulations. Any cost to bring down the cost of food to majority of the people cannot be considered as cost , as the benefits that can accrue from this to the economy and the Government can definitely outweigh the COST.      

The only way to contain food inflation is to have a different approach by creating a' Food Inflation  Neutralisation and Stabilisation fund ' under the auspices of Reserve Bank , NABARD and the Banking System to administer  effectively the supply chain management of the sensitive food commodities particularly, Tomato, Potato and Onion and other vegetables and fruits , involving state Governments. The production and supply chain management keeping the influence of cost as the main factor in inflation control should be made more transparent and free from all possible manipulations by any force at the ground level. The need to activate RBI Local Boards in the matter is very  paramount It is high time MPC and RBI local Boards coordinate and think of some concrete measures to contain the food inflation which remains broadly undefined and defiant.  Man-made inflation cannot be controlled by the Monetary theory policies alone is a proven fact as inflation inter- alia is also a creation of poor administration with active support of unhealthy politics and tolerance of unethical and all sorts of malpractices. RBI has been providing the best of accommodative policies for years and has strengthened the financial and Banking system stability perhaps unheard of so far, but still the inflation continues to be a major challenge, stumbling block in the economic  growth which cannot be allowed any more to realise the dream of India becoming an advanced economy by 2047. The peoples' aspirations to see India as a welfare nation can be  fulfilled  only by adopting and adhering to some very dynamic and untried policies and approaches. No advanced economies suffer from very high inflation and the standards of Life have some enviable quality.

 Loka Samastha Sukhino Bhavanthu starts with food for all at affordable prices. Once this is taken care of,  all other  challenges for economic development are within our reach with all our  own natural and best of human resources.    

 TVG Krishnan

( personal Views).  

Inflation Control Why not have a different approach

 Monetary policy Why not have a different approach to contain Inflation.

Dear Sir,

Apropos your editorial RBI’s not too much behind the curve, (ET 7 Dec) the fact remains that RBI has done its best to retain the policy rates unchanged and maintain its accommodative monetary policy neutral, despite the continued persistence of high  food inflation and not so encouraging economic growth as targeted.Two members of the MPC had a different view on policy rates is itself an indication that  seeing the historical trend in containing the inflation which is beyond the fiscal and monetary measures a unanimous view on Price Stability and economic growth cannot be  sensible/ possible / practicable. However, as a matter of great relief RBI cut the CRR rate by 50 basis points  in two tranches, to neutralise its  neutral policy stance and provide some comforts to  banks and economy by easing the availability of liquidity to expand credit to the needy segments of the economy.Even though CRR cut itself is inflationary ,the overall approach of RBI seems to be obviously limited to contain the food inflation which remains defiant and unresolvable easily by monetary policy alone. It is time to seriously introspect  by policy makers to identify the causes of continued persistence of food inflation year after year which requires it to be tackled diligently, politically, fiscally, administratively and monetarily.

T V Gopalakrishnan

Bengaluru

( Letter sent to ET on 7th Dec )

Block Oxygen to this circulation.

 

This refers to  your editorial Visible Withdrawal  Symptoms of ATMs (Dec 4),   The informal economy , corruption , and offer of cash at  election times fuel  the withdrawal of cash through the ATMs. Since digitalisation has picked up considerably among the retailers, the poor, lower and middle middle class  the need for ATMs particularly for small denomination notes  will  decline.With  the requirement of high denomination notes rising  because of real estate deals involving black money and other reasons , there is a need to review  maintenance of  ATMs at a high cost.  Gradually eliminate black money and  high denomination notes through better fiscal , monetary and other administrative measures.    

T.V.Gopalakrishnan

Bengaluru.

( This letter appeared in ET dated 5th Dec 2024.) 

Manage Food Inflation Differently.

 

This refers to the news report "Centre-RBI disagreement deepens over inflation and rates cuts"that appeared in BL dated 20th Nov 2024. The best and only way to contain food inflation is to have a different approach by creating a' Food Inflation  Neutralisation and Stabilisation fund ' under the auspices of Reserve Bank , NABARD and the Banking System administering effectively the supply chain management of the sensitive food commodities particularly, Tomato, Potato and Onion and other vegetables and fruits , involving state Governments. The need to activate RBI Local Boards in the matter is very  paramount . It is high time MPC and RBI local Boards coordinate and think of some concrete measures to contain the food inflation which remains  broadly undefined and defiant.  Man made inflation cannot be controlled by the Monetary theory policies alone is a proven fact as inflation inter- alia  is a creation of poor administration with active support of unhealthy politics and tolerance of unethical  and all sorts of malpractices . RBI has been providing the best of accommodative policies for years and has strengthened the financial and Banking system stability perhaps unheard of so far , but still the inflation continues  to be a major stumbling block in the economic  growth which cannot be allowed any more to realise the dream of India becoming an advanced economy by 2047. The peoples' aspirations to see India as a welfare nation can be  fulfilled  only by adopting and adhering to some very dynamic and untried policies and approaches. 

T V Gopalakrishnan

( Sent to Hindu Business Line ) 

Manage Inflation Differently         

Apropos the news item Food prices have nothing to do with Managing Inflation,(ET 15/11/24) the Commerce Minister's call  to  the RBI to Cut rates saying that it is an absolutely flawed theory to consider food inflation while deciding policy rates, makes a lot of sense in Indian context. The food inflation inter alia  is basically man-made taking advantage of political uncertainties, nature's  failure, ineffective governance , lack of financial discipline particularly at state levels and play of dirty politics to exploit the situation gambling on price sensitive commodities adding to inflationary pressures. A strong administration and prudent management of Fiscal Areas of the Central and State governments can to a great extent manage and contain the food inflation with sensible  supportive policy changes  in the production, export, import, procurement, storage, and smooth distribution of agro based commodities. Perhaps a very closely coordinated approach  involving  NABARD , Local Boards of RBI, Commercial Banks, RRBS , Cooperative banks  and Agricultural departments of both Central and State Governments can definitely play a key role in containing the food inflation. In this context, even setting up an Inflation Neutralisation and Stabilisation Fund  under the auspices of RBI  can be seriously thought of to tackle food inflation particularly vegetables like Onion , Potato and Tomato. The food inflation  which is a creation of administrative failures basically cannot be allowed to distort the twin objectives of Monetary policy  Viz Economic Growth and  Price Stability and make the dream of the PM to make the  nation to be an advanced economy by 2047 unrealistic.WE cannot afford to lose the battle for want of a nail .

  

            

T.V.Gopalakrishnan

Introduce Inflation Neutralisation and Stabilisation Fund and implement Moral Law to control Inflation

   Introduce Inflation Neutralisation and Stabilisation Fund and implement Moral Law to control Inflation. 

Retail Inflation surges to a 14 month high of 6.2% in October ( TOI dt 13/11/24)

Retail Inflation at 6.2% Dims Early Rate Cut Hopes (ET dt 13/11/24) .

The  Country being very vast, having  very huge population with different beliefs and faiths, poverty , illiteracy, infrastructure bottlenecks continues to suffer from multitudes of political, economic , social and technological problems and there is an urgent  and paramount need to fix the issues in such a way that the vision and dream of the PM to make it an advanced nation by 2047 is realistic and achievable by all means.The country is really rich by all means in terms of wealth in different forms, highly talented human resources, enviable heritage, culture, and unfathomable civilisation, knowledge , natural and  artificial intelligence with its high tech oriented human resources. Above all, the choice of democracy to run the country is a great blessing and sure way of reaching the top of the world not only in the development of the economy but also in providing the much wanted universal peace for the humanity and  the enhanced quality of life enjoying the powers and resources  of nature and the superpower of the creator of the whole universe.       

The acceptance and successful functioning of democracy established since the country's independence is a sure sign of health and strong foundation to nurture the economy with a very dynamic Legislative, redoubtable Judiciary and very competent Executive set up.However, with such a strong background, the nation’s social and economic progress cannot be said to be impressive to match its potentials.The country lags behind in performance despite the presence of strong Institutions, very dynamic markets and varieties of products and services without, however, fully benefiting the nation and its population. Somewhere something is amiss and adequate attention has not been given to identify where the shoe pinches. The age old saying that  “for want of a nail the battle is lost” is what is being experienced and this needs introspectiion in depth and quick workable solution.By any stretch of imagination, the nation cannot afford to miss the target fixed for being an advanced economy by  2047 and the economy should not derail from the fast track it is already on. From this angle a few thoughts / ideas that come to mind can perhaps be thought of for serious consideration and sensible implementation.These can be broadly categorised into Data collection and analysis,Innovation and Research in all segments of the economy, Viz, Investment, employment,Production,Marketing and distribution, and enhancing the quality of Governance at all Micro and Macro levels.The evaluation of performance should be based more on quality  than on quantity except in the creation of employment of human resources.The need to have a relook at the Economic Policies and suitable enunciation of fiscal and monetary policies keeping the 2047 objective in view is paramount and expeditious reforms have to be introduced to attract all round investments from everywhere, massive employment and production, generate  enormous wealth and equitable distribution of wealth inevitably reducing inequality, resulting in  lower cost of production and affordable level of inflation ensuring growth. If there is a will there's a way and the benefit of democracy i.e. participative management by the people can only be had and enjoyed by all with prosperity everywhere and welfare for all in every sense. 

The culture of freebies in a developing economy having  democratic set up only smacks of lack of credibility, inability of the people who offer and who accept freebies to think, act and adhere to the principles of democracy. It is only an admission of illiteracy of the people and prevalence of poverty due to failure of the policies pursued. Freebies make people not only lazy but also develop devils workshops bringing more harm to the society and creating avoidable hurdles in the economic development.Freebies culture just to win votes costs the economy very badly in terms of fiscal indiscipline,social and moral hazards eroding the values and ethics, the very health of electoral processes devaluing the very sanctity of vote and election of best leaders, indirectly providing opportunities for persons having criminal and other unworthy backgrounds to come to power by hook or crook. 

Apart from all the fiscal and monetary measures in force which have their own limitations to contain inflation IN GENERAL AND FOOD INFLATION IN PARTICULAR the additional measures can be administrative measures like preventing corruption, black money generation, malpractices in the procurement, storage, transportation and distribution of perishable and other price sensitive commodities having  INFLUENCE ON inflationary impacts, expectations, EXAMPLE POTATO, AND ONION. THE ONE solution THAT CAN BE THOUGHT OF, THOUGH A BIT DIFFICULT IN POLITICALLY SENSITIVE STATES IS THROUGH CREATION OF A FUND ‘INFLATION STABILIZATION AND NEUTRALISATION FUND’  AND SMARTLY AND DIPLOMATICALLY USE THE FUND TO CONTAIN THE MAN MADE INFLATION DILIGENTLY BY SPECIALLY SET UP CELLS  UNDER THE AUSPICES OF THE GOI / RBI. THE  CELLS CONSISTING OF GOVERNMENT, RBI  STATE GOVERNMENT OFFICIALS AND MEN OF EMINENCE PROVEN IN TERMS OF PROFESSIONAL AND SOCIAL WORK can be set up in centers where the pressures of inflation is suspected to emerge. THESE CELLS WITH THE BACKGROUND OF EXPERTS AND MARKET INTELLIGENCE INPUTS ON BLACK MARKETING, MANIPULATIONS OF SYSTEMS AND PROCEDURES,INITIATION OF INNOVATIVE AND CORRUPT PRACTICES TO CREATE ARTIFICIAL DEMAND AND SUPPLY INCLUDING KNOWN SEASONAL DEMAND AND SUPPLY OF ESSENTIAL FOOD ITEMS CAN HELP TO PREVENT CREEPING INFLATION TO A GREAT EXTENT. THE FUND CREATED BY THE GOVERNMENT AND RBI CAN TAKE CARE OF THE UNDUE INCREASES OR CRASH IN PRICES SEEN IN SOME PRICE SENSITIVE  COMMODITIES AND NEUTRALISE THEM WITH CAUTION AND DILIGENCE AND ALSO PROVIDE INPUTS AND  SUGGEST  WAYS  AND MEANS  TO THE MPC AND THE RBI WHY AND HOW PRICE INCREASES AND INFLATIONARY AND DEFLATIONARY CONDITIONS EVOLVE AND WHAT BEST CAN BE DONE TO MODERATE INFLATION BY MONETARY AND FISCAL MEASURES. Local Boards of RBI and the Offices of NABARD can be more proactive and in coordination with the state Governments can think of some administrative measures and develop some checks and balances in controlling the undue speculation in such sensitive commodities involving unscrupulous traders, profiteers and even banks by providing ineligible credit facilities. A caution list of black marketeers, profiteers, prepared using inputs from various sources would be of great help.   

Like Mutual Funds are subject to Market Risk, Inflation in a developing economy  is subject to Policy risk and Administrative risks  including unfortunately ethical risks as our educational system seems to have failed to promote value system, adherence to laws of the land in letter and spirit.The nation has to necessarily build up the data to capture the wealth creation, wealth concentration, wealth distribution, by having the statistics on population, details of  employment in organised and unorganised sector, people having stable sources of income with all particulars like agricultural activities, non farming activities, professionals of all kinds, people having different and multi sources of income and their tax paying capacity, tax compliance and tax evasion and methods of avoidance or evasion of tax etc. The need to have the data on the poorest of poor is a must to decide on freebies or tax concessions.The concept of freebies should never be in the dictionary of democratic system as it may distort the policies and bring in all sorts of malpractices in political, economic and social life. In this context the Finance Minister's philosophy, approach and intent brought out in the context of Digitalisation ie use of public money to create Digital infrastructure (ET dt 10/11/24) seem to be very apt and need to be fully explored  by all who deal with Finance. To quote the FM “our philosophy is for every Rupee we collect as tax, we should create assets..I should account for every Rupee so that it does not get frittered away.” This approach  to account for every Rupee should be practiced in letter and spirit by all Institutions, Corporates, Professionals of all kinds and even High net worth Individuals.The freebies in Vogue in  some states at the cost of the Public Finance  definitely cannot create any national wealth and help the nation and its people in any manner. The objective of Public Finance should always be to benefit maximum people resulting in mass welfare.The thrill of joy can be  there only if Public Finance is used  for all to enjoy. This should be identifiable and transparent. Greed of a few  for power and money cannot take away the happiness  and welfare of the majority in a democratic set up.       

 

The other areas where some serious changes can be thought of are: 

1 Income Tax Act 1961 Needs an urgent review and very exhaustive Reform to capture very comprehensive information on individual tax payers. The basic data such as Name of the Person and Pan Number.Address Permanent and Mailing address,Employment, Profession, Self  employed, details of assets and liabilities etc. should reflect in the Return. The returns should cover Sources of Income like Salary, wages, Rent, Interest, Dividend, professional fees, etc., Assets owned Movable and immovable with details and Values Details of Bank accounts and Aadhar Card No. number of  dependent Members and their details in brief, details of Credit cards, Debit Cards , UPI , etc The returns can be made compulsory for all either by way of compliance by the tax payers or by the different authorities through a system constructed based on needs.The very purpose / need for returns itself can be decided based on the alternative modes of collection of taxes.The wealth held by individuals and others in various forms in the country and abroad has to be captured smartly, intelligently, systematically and fruitfully to benefit the economy through change in economic policy, fiscal and monetary policies. Time is very ripe to have a total review of income tax return and introduce a self contained return so as to reflect the wealth creation and wealth distribution in a very comprehensive manner ensuring high level of tax compliance without any force but without any scope for evasion.Tax compliance should be a matter of pleasure and satisfaction and should not be a curse and headache.         

2 Reduction on inequality. The presence of  formal and informal economy widely seen in the country needs to be studied in depth by the authorities to get an idea about the fundamental reasons as to why the informal economy is growing and the issues that are getting generated and affecting the policy making process badly. Digitalisation has been observed to be a  tremendous success and with this background   the removal of physical currencies and attendant costs, administrative  headaches , corruption and black money hoardings can be a very viable and sensible option to be seriously considered and implemented. 

The denomination of notes of Rs 100 and below can be allowed till such time all transactions are covered by online payments. Coins are practically absent in circulation and people can be asked to surrender if any are left by chance. Since,even beggars are seen using QR codes  for  receipts and UPI modes for  payments, the relevance of coins in the system and their minting and circulation do not serve any purpose.Some seigniorage costs can be very well saved if coins are withdrawn

Digitalisation has found great acceptance among the masses and it is the most appropriate time for the GOI and the Reserve Bank to be more dynamic and proactive to capitalise the trend  and encash the opportunity to withdraw high denomination notes of Rs 500 and Rs 200 and bring out the black money held in different forms like currencies  and commodities.The need to eliminate corruption and black money to cleanse the financial system and minimise the inflationary expectations and inflationary conditions is very paramount to maximize the growth potential and reduce the widening inequality in the economy at the earliest to strengthen the momentum of growth.The chaos seen in the society because of the presence  of black money and corruption can be minimised if not altogether eliminated if digitalisation can be further accelerated with adequate checks and balances to prevent misuse and abuse using technology.       

4 Resource Mobilisation  by the Govt without having any inflationary Impact. 

STT revenues earned by the Government have no inflationary impact on consumption items. The approach of the Government to raise resources for development should necessarily be  without affecting the prices of goods and services consumed by the majority of the masses, Some of such transactions that are not price sensitive and not touched by ordinary masses can be real estate transactions beyond a cut off limit, high value commodities like Gold, silver, diamond beyond a cut off limit, Professional fees collected by highly skilled professionals like Advocates, Doctors, Architects, high level priests attached to major  temples, etc. Part of temple collections, Churches and mosques can be earmarked for economic development and the Government should have powers to levy them without giving room for adverse and religious linked biases, favors and criticisms. All human beings are equal before the laws of the country and the fruits of the economic developments should be equitably distributed among the people.

Gold Reserves: 

The country is reported to be having 27000 tonnes of Gold as family holdings apart from gold held by the Reserve bank and other miscellaneous financial institutions, temples, churches and other gold related business establishments. This gold holding is a biggest non performing asset and as such some serious efforts should be thought of converting this into a productive and very fruitful asset to benefit the economy and the people in a very sensible manner without having any impact on the inflation aspect.Likewise the GST also needs to be revisited to ensure that it does not have any possible cascading effect on the mass consumption goods and services. The authorities need to be extra conscious in having policies and levying of taxes without having any impact on the commodities and services consumed by the masses thereby expecting freebies, and leaving any  room  for other malpractices to be in vogue .         

The whole Governance can be said to be a success only if the people are happy enjoying a peaceful, comfortable, contented life free from anxieties of economic and emotional needs to survive somehow. Continuous and perennial inflation which is man made out of greed, mismanagement and  immoral acts cannot have any fiscal and monetary policy remedies is also a fact which needs to be recognised, understood and acted upon appropriately. This is nothing but the Moral Law which is Supreme and Divine and can ensure all  good for humanity. One has to aim and work for it .

Sarve Jana Sukhino Bhavanthu. 

TVG Krishnan.

( personal Views) 

Affordability of People, an emerging Concern. an

 Affordability of people , an emerging concern.

Apropos your Editorial Give Urban Spenders A Nudge to Spend (Nov1), though, the economy is poised to grow as per RBI, GOI and even IMF, the fact remains that the affordability of the  people particularly those in Urban areas cannot afford to give a boost to consumption demand and aid the the growth of the economy as envisaged in the background of high inflation,  economic policies in vogue and uncertainties on political stability and geopolitical situations. The real wages have been on the decline for quite some time without adequate compensation from the employers, fiscal and monetary policy authorities and even from the  so-called free market forces of demand and supply. It is high time the  authorities wake up  and see the realistic position at the ground level and attune their fiscal  and monetary policies in such a way that the salaries wages, interest  on savings, factor the unabated inflation with the support of very effective administrative measures including the persuasion and moral -suasion approach wherever necessary to ensure that the economic growth envisaged is on right track and the flow is very smooth and equitable.          

T V G Krishnan