The root of inflation has gone too far

Sudhansu R Das
The RBI in its recently published Annual Report has stated the human face of its financial policy can be buttressed with greater thrust on effective financial inclusion. The Annual Report points out the most serious consequences of inflation is its adverse distribution impact on the poor, people without social security and on pensioners. The report
also says the trickle down benefit for poor is also reduced.
There is lot of buzz in the economist and political circle to tackle inflation head on. The pressure is on the RBI governor to loosen his grip for better money flow into the market in order to keep the growth going for some more years.   Prime Minister Dr Manmohan Singh believes higher growth can only reduce poverty.
Haunting inflation has made UPA government worry about 2014 election while the opposition parties are all out to make it a poll issue. In the process both miss the clue to address inflation from its root. Prices of essential commodities for mass consumption have reached all time high. Mr Duvvuri Subba Rao’s using his repo, interest rate change and CRR etc to check inflation are like giving homeopathy to a Haathi. The root cause of inflation actually lies somewhere else.
Various state governments are giving some coarse rice and food grains to poor people at Rs 2 to Rs 3 per kg. NREGA provides daily wage to poor people in spite of leakage. When a person receives wages and food grains for little work, he develops idleness and does not contribute. Over the years many voluntary organizations have developed subsidy trapping skill with sleek paper work and little work on the field level. This leads to poor infrastructure and skill development. When work is not done and money is distributed to people, it results into creation of idle energy which does not allow any entrepreneurship to happen. It triggers a negative behavioral change among people. When people show up their ill gotten wealth through lavish spending in social functions it affects young generation who lose faith in the system. This disease has become deep rooted and is eating into the very vital of the work culture and is one of the main reasons for food inflation.
In Berhampur district of Orissa agriculture is no longer viable as land owners hire labor from the market place at Rs 250 to Rs 290 per day for five hour work in a day. The land owner has to bring them in a tempo to the work place and drop the labors there after the work is over.  When input cost becomes high many farmers leave farming and sell their land.  More than 30% agriculture land has been sold in Berhampur district. Over the years Berhampur has witnessed large scale migration of agriculture labor to Andhra Pradesh, Mumbai, Punjab, Gujarat and Kerala. Balasore, Cuttack and Jagatsinghpure were once the rice bowl of Orissa. Today productive agriculture land on both sides of the National High Way No 5 were sold for real estate purpose or for showing tax free agriculture income.
It happens to all Indian states where agriculture lands near big cities with easy market linkage were sold out. Many state governments earn 40% of their revenue from the sale of stamp duty on land sale. In spite of Supreme Court directives, agriculture lands are being sold across the country for non agriculture purposes.
If farmer cannot have the margin after taking into account his family labor input why he will do farming. Orissa meets its food grain need with the supply from its neighboring states. The state is not even self sufficient in vegetable production in spite of so many rivers. Industrial affluent from industrial belt in Pune city has contaminated ground water of villages in 100 kilometer radios.  Untreated water is supplied to villages through canals. Today villagers buy aqua guards for pure water and other health safety measures which erode their income.  India produces millions of drinking water bottles and plastic pouches which are thrown on roads, rail track, rivers and in agriculture fields after use. Malls across the country generate millions of tonnes of non biodegradable packs which have become potential threat to environment and agriculture.
The major inflation maker is our non inclusive democracy. When political parties collect donation from corrupt people to win election, they simply allow the unscrupulous people to lay their hands in the nation’s monetary affairs. For the next five years they keep looting the public money. All kinds of scams actually originate from non inclusive democracy. Medicine, food, cement and milk get adulterated before the very nose of the elected representatives. Road is repaired ten times in a year.  Cables are laid down many a times. Unwanted infrastructure projects are sanctioned. Water bodies vanish from urban centers or get contaminated.  Direct and indirect taxes are collected from people to compensate the loss and leakage. Monetary policy can only tame inflation in a nation which has inclusive democracy.


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