Will government’s anti-inflation measures help?

GN Bureau | January 14, 2011



After three years of runaway inflation, the government has come up with a concrete plan to curb inflation which is nothing more than an old wine in an old bottle. Nothing new or innovative in it. For example, the five short-term measures are: state-owned agencies to sell onion at Rs 35 a kg and continue to sell edible oil and daal at subsidized rate, crackdown on hoarders, restrictions on imports to be lifted and exports to be curbed. All these measures are already in place, with little impact so far.

As for the long-term measures, the government intends to set up mobile markets to farmers to eliminate middlemen, computerize PDS, review supply of essential items and set up an inter-ministerial group to review overall inflation. Again, nothing new or innovative. Two committees, with members of even higher profile (one under the cabinet secretary and another under the PM), exist to regularly review inflation-related situation. The only worthwhile suggestion that finds mention in the report but not spelt out as an actionable measure is to increase agriculture production as the real solution.

On the other hand, it may be argued that if these measures are implemented effectively and in a time-bound manner they will achieve the desired result. The problem does not lie with the nature of the plan but in putting the plan into action and it is here that the government is often found floundering.

 

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