Ok. Inflation sucks. Guess what they are attributing inflation to? Food demand and a growing class of consumers whose per capita consumption is growing faster than supply. Sounds like a reasonable explanation no? Actually, it is all hogwash. Demand growth is not the culprit in the current inflation equation. The problem is a supply-side one. And the supply side issues have been created by esteemed idiots sitting in the ministries of economics, agriculture and other defunct organisations. At this point let me slip into a story.
Ramu was a village simpleton and a labourer employed in agriculture. His master was a landlord who grew rice and paddy. For many years, all the landlord had to grapple with were unreliable monsoons, pests, price for his produce and of course the shark moneylenders. Then came a new devil. It was called NREGA. The government's new agenda to prove it's retardedness. Not to mention a new revenue stream for the corruption portfolio. Meanwhile, all was well for Ramu. He stopped working in the agricultural fields. Why would he need to? NREGA was providing him with a better source of income for digging up the soil and creating empty pits. He always wondered what those pits would be used for but never understood the purpose of making them. The landlord offered other labourers even more wages to stick to the farm but not too many were interested when there was NREGA to fill their pockets. Those who stayed back got more wages for their work. The prices of food commodities went up because of wage inflation and reduced supply. Monsoon was blamed. Moneylenders were blamed. And the black cat which crossed the landlord was also blamed for pushing up inflation. The NREGA policy makers realised the damage under NREGA was not enough. They felt linking the wages under NREGA to inflation would speed up their goal of looting the public even faster. Now wages would rise faster in rural farmlands, pushing prices higher and reducing supply even more. Masterstroke. So, in this way, the food inflation got out of hand. Now the Government is looking at grappling inflation with serious intensity. It has resorted to PR and confidence building statements to reduce the inflation menance. They are also considering re-indexing inflation to show a lower % change. Very ingenuous ways to tackle inflation. Polcy makers all around the world have an important lesson to learn from the Indian experience. Letting inflation slip out of hands is not the important part in all this. At the end of it all you just need to make positive statements which are farthest from the cause and also issue impossible inflation reduction targets for the future as outlooks. Neat work!
