
Inflation
- a global threat
By S. Sethuraman
Oil
and food prices, soaring to new heights, have
rudely shaken the world economy, already in a
slowdown phase with the ongoing financial market
turmoil and credit crunch related to US sub-prime
mortgage crisis, which has also pushed the
American economy toward a recession. While all
this is having ripple effects on stock markets
around the world, and the Euro-zone is hit by the
spillovers, especially the falling dollar driving
up the euro, as well as the price surge, there
are uncertainties ahead as the US housing crisis
is far from easing and jobs in the world's
largest economy are shed.
It is
not clear how long all this would last and what
negative impact is likely for emerging economies,
especially Asian including China and India, whose
dynamic growth was helping to keep the world
economy afloat hitherto. While the two countries
hope to maintain robust growth, even if it
moderates a little, in 2008, inflation has
emerged the biggest risk factor and even
energy-efficient industrial economies, outside
USA, can no longer absorb the ever-rising costs
of oil.
Inflation
has certainly outpaced other concerns for large
parts of the world, not excluding the industrial
economies themselves. OECD says industrial
country CPI averaged 3.5 per cent, above their
benchmark, in January while in USA it was 4.3 per
cent with core inflation(with volatile oil and
food prices) rising by 3.4 per cent year-on-year,
just above the comfort zone for the central bank
though FED has over the last seven months lowered
short-term rates by 225 basis points to 3 per
cent. Shift in US monetary policy is focused more
on averting a recession.
Whatever
the factors leading to oil prices crossing the
100 dollar a barrel mark in the new year - and it
touched 108 dollars on March 11 - and food prices
doubling or trebling, with rising demand and
grain stocks at record lows, inflation has come
to pose the mot serious threat to economic
stability globally. China and India, major source
of growing demand for energy and food, will bear
the brunt of volatile oil and high food prices,
which have already stoked inflation to 8.7 per
cent and 5.02 per cent in the two countries
respectively in February.
India's
budget, basically aimed at keeping the growth
engine moving at not less than 8.5 per cent, may
be under-cut by the resurgence of inflation,
which cannot be easily tamed in the present
global conditions. China's consumer price
inflation, mainly driven by high food prices in
the wake of severe winter and snowstorms which
devastated farms, had been rising from over 6 per
cent in November last to hit a 12-year high of
8.7 per cent in February.
With
inflation already at nine-month high of over 5
per cent in India, greater external dependence on
oil as well as wheat to offset shortages for the
public distribution system, would push up prices
further via imports. At the same time the subsidy
bill would go up reflecting Government's
inability to make a pass-through even when the
Indian crude basket average has crossed the 100
dollar mark. Other essential imports like metals
and edible oils with double digit rises would
have the same effect on prices.
Finance
Minister Mr. P Chidambaram has acknowledged that
inflation management without disrupting growth
would be the critical challenge in 2008-09 for
both supply side and monetary policy, which is
complicated by the surge in capital inflows as
well as the volatile global markets. China's
Premier Wen Jiabao told the National People's
Congress (Parliament) on March 5 that fighting
inflation was Government's highest priority with
a tight monetary policy. But his price target of
4.8 per cent in 2008 looks out of reach at least
in the first half of the year, given the
unexpected rise to 8.7 per cent rise in February.
After
another double digit GDP growth at 11.4 per cent
last year, Mr. Jiabao set a modest target of 8
per cent for 2008 but economists are confident,
despite the price upsurge, partly seasonal, and
global uncertainties, China would manage to
maintain its growth momentum somewhere between 9
and 10 per cent. "We must keep a watch on
global developments and take prompt and flexible
measures responding to them," Mr. Jiabao
said. For India, it is a difficult 'balancing
act" to maintain growth even at 8 per cent
and yet contain inflation at or below 5 per cent
over the year.
While
India is importing inflation, manufacturers
generally have not promptly responded to the
Finance Minister's appeal to hold the price line
or lower prices for goods covered by the duty
cuts in his budget. The only positive response so
far has been from the automobile industry with
price reductions announced for cars and
two-wheelers. Far from being reluctant to lower
prices (cement and drugs), the producers in some
cases have raised the product prices (steel,
paper) at a time manufactured articles along with
food items are contributing equally to the
current level of inflation. Costly imports of oil
with rise in energy demand and food to supplement
domestic supply can accelerate the pace of
inflation, apart from inflicting huge terms of
trade loss.
Oil
exporters (OPEC) did not agree at its March 5
meeting to increase their daily output of some 32
million barrels a day (mbd), contending that the
market is well supplied when economic growth is
weakening and instead contend that rising crude
prices are due to the falling dollar and
speculator activities. Others attribute the
escalation (to as high as 108 dollars a barrel on
March 10) to a tight supply market, apart from
geo-political developments. The International
Energy Agency estimates oil demand in 2008 at
87.6 mbd, despite the projected lower US and
global growth, and says lower demand there would
be more than offset by demand growth in China and
the Middle East.
IMF,
changing its tune, now concedes recent price
surges cannot be solely demand-driven which
economies could absorb hitherto but by other
factors. But it sticks to its model of lower
demand this year moderating oil prices. Globally,
what is worrisome is the coupling of the oil and
food prices, which, according to a senior World
Bank official, have "devastating
implications for global poverty and food
security".
Oil
importers find it hard to budget for energy costs
and volatility has also hurt economic growth,
investment and trade, says Mr. Graeme Wheeler,
the Bank's Managing Director. It has also
increased fertiliser and transport costs and
stimulated bio-fuel production. In the US, for
example, a quarter of the maize crop -
representing over ten percent of global output -
went into bio-fuel production this year.
Together, higher energy prices, drought, and
rising demand have led to a 75 per cent increase
in the price of staples since 2005, he noted.
(IPA)
.
Delimiting
the electoral boundaries
By Saumitra Mohan
The
exercise for another delimitation of the physical
boundaries of the electoral constituencies for
various legislative assemblies and the national
Parliament has been underway for quite some time.
It is learnt that the final recommendations have
already been submitted to the Government. It is
not before long when the same would be formalised
through a parliamentary enactment and subsequent
presidential notification.
Delimitation
literally means the act or process of fixing
limits on boundaries of territorial
constituencies in a country or a province having
a legislative body. The job of delimitation is
generally assigned to a high power body. Such a
body is known as Delimitation Commission or a
Boundary Commission. In India, such Delimitation
Commissions have been constituted four times i.e.
in 1952, in 1963, in 1973 and in 2002.
The
Delimitation Commission in India is a high power
body whose orders have the force of law and can
not be called in question before any court. These
orders come into force on a date to be specified
by the President of India in this behalf.
According
to Article 82 of the Constitution of India, upon
the completion of each census, the allocation of
seats in the House of the People to the States
and the division of each State into territorial
constituencies shall be readjusted by such
authority and in such manner as the Parliament
may by law determine.
Pursuant
to the enactment of a Delimitation Act by the
Parliament, the Central Government constitutes a
Delimitation Commission which demarcates the
boundaries of the Parliamentary Constituencies as
per provisions of the Act.
The
Delimitation Commission, set up under the
Delimitation Act, 2002, for the redelimitation of
all the Assembly and Parliamentary Contituencies
of India (except Jammu & Kashmir) on the
basis of 1991 census, has been carrying out its
task for the entire country since the year 2000.
As
soon as the delimitation order of the
Delimitation Commission is finalised, the
existing constituencies will cease to exist and
would be replaced by the new constituencies, that
is, redelimited constituencies. This would
necessitate reworking of the finally published
electoral rolls and recasting them in conformity
with the newly redelimited constituencies.
The
present delimitation of electoral constituencies
is based on the 1971 census figures.
Notwithstanding the above, the Constitution of
India was specifically amended in 1976 so as not
to have delimitation of these constituencies till
the first census after 2000.
The
84th amendment in 2001 provided that until the
relevant figures for the first census taken after
the year 2026 have been published, it shall not
be necessary to readjust the allocation of seats
in the House of the People of the States as
readjusted on the basis of 1971 Census and the
division of each State into territorial
constituencies as may be readjusted on the basis
of the 2001 Census.
So
far, the Constituencies carved out on the basis
of 1971 census have been continuing. After the
census data for 2001 was released on 31st
December, 2003, a new delimitation exercise was,
therefore, necessitated to bring the
constituencies to conform to the new figures.
After
almost three years of painstaking work, the
Commission, which was constituted in 2002 and
began its work in the middle of 2004, has almost
completed work in all the states barring four
states in the north east.
The
Centre, in fact, the deferred the delimitation
exercise in four north-eastern states and
Jharkhand due to unresolved problems
of shifting the rural seats from urban seats by
approving amendments to the Delimitation Act 2002
and has reportedly decided to promulgate an
ordinance soon. It is believed, the amendments to
the Delimitation Act, 2002 would take care of the
concerns expressed by the delimitation exercise
in Assam, Manipur, Nagaland and Arunachal Pradesh
due to the situation prevailing there.
The
Delimitation Commission in the meanwhile has
concretised its proposals and has redrawn the
boundaries of Lok Sabha and Assembly
constituencies. Work has been been completed in
513 of the 543 Lok Sabha constituencies and 3,726
Assembly constituencies in 25 states resulting in
a net addition of ten seats for Scheduled castes
and scheduled tribes in Parliament and 68 in the
Assemblies.
Accordingly,
the next Lok Sabha elections are likely to be
held in redrawn constituencies once the President
notifies the recommendations, an exercise that
has already made many politicians unhappy. The
Delimitation Commission Chief Kuldeep Singh, a
retired judge of the Supreme Court, also concedes
that there would be some politicians who will be
unhappy over these changes in constituencies, but
feels by and large political parties are not
opposed to the exercise.
If
many politicians do not feel happy about the
exercise, there is a reason for that. After all,
every politician has been contesting and getting
elected from the same constituency every five
years for the last 30 years. He or she knows who
his voters are and is, thus, familiar with the
necessary details of his/her constituency. Since
the limits of almost all the constituencies have
been redrawn, the typical Indian politician is
definitely going to be inconvenienced in more
ways than one.
Hence,
his/her dislike for any change in his
constituency. But the exercise is too important
to be left to personal likes or dislikes of
individual politicians. The newly redelimited
boundaries of constituencies better reflect the
electoral realities on the ground and no petty
political considerations should be allowed to
influenced their enforcement.
One
just hopes that the redelimitation of electoral
boundaries coupled with the other electoral
reforms would further reinforce and consolidate
the foundations of our fledgling democracy. Now
that the Prime Minister Dr Manmohan Singh has
also declared that the next general elections
shall be held as per the newly redelimited
electoral boundaries and the there has been an
overall consensus on such an exercise is itself a
testimony to the strength of our democracy. -
(PTI)
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