Soaring inflation fears

Uncontrolled rising prices are assuming dangerous dimensions and can prove deadly than coronavirus
Soaring inflation fears
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Source: Pixabay

COVID-induced hardships for a common man have not yet ended and are not going to end so easily for times to come. The phase wise outbreak of the virus itself indicates uncertainty to loom large and economic lockdowns are all set to be one among the new virus-induced norms. Apprehensions are holding ground that every new phase will bring a new set of adversities on health as well as economic front.

Even as vaccination has given hope to control spread of the virus, several economic stimulus packages have not been able to infuse confidence among the general public on the economic front. The economy continues to struggle to make it back on track. In this regard, uncontrolled rising prices of essential commodities and other products is assuming dangerous dimensions which has already pushed millions of households into poverty. Precisely, it’s the inflation which is now emerging more deadly than the coronavirus. The skyrocketing prices of essential commodities is contrary to the given situation where wage deflation and increasing joblessness have pushed (and continue to push) households into a distress situation. In fact, those essentially known as staple food items (potatoes & onions) of economically poor sections are fast getting out of reach of the kitchen budget of these households. Notably, potatoes have witnessed the steepest rise of over 92%, followed by onions at around 45%. A comparative analysis of data by the consumer affairs ministry shows that in average wholesale prices, potato prices have gone up by 108% and onions witnessed an increase of 47% in the past one year.

Here some facts and figures are worth mentioning which reveals the deep economic crisis engulfing the common man. India’s gross domestic product (GDP) witnessed the biggest contraction since 1952 and shrank 8 per cent in the year ended March 2021. A section of noted economists have cut their forecasts for the current fiscal year from 11 per cent to 9.5 per cent as rising unemployment and dwindling savings dim the chances of a double-digit growth.

Amidst this entire Covid-induced economic crisis, it’s the poor and middle class sections which are bearing (and continue to bear) the brunt again in the ensuing Covid phases.

It’s also worth noticing that household savings have been witnessing a dip during the Covid crisis. It’s not dip in savings alone, but the falling incomes too have been making the households struggle to keep themselves afloat.

Inflation fears have resurfaced in the global markets and global economists have warned its surge to continue. In India retail inflation has been reported above 6 percent for the second consecutive month. June is the second month in a row when headline retail inflation remained above RBI's monetary policy committee's inflation target range of 4 percent, plus or minus 2 percent.Thus, putting more pressure on the virus-ravaged economy.

Data released by the statistics office showed retail inflation stood at 6.26% in June, down from 6.3% in May even though food inflation accelerated marginally to 5.15%. During the month, prices of eggs, edible oils, fruits, pulses accelerated in double digits. Even transportation costs rose due to fuel inflation, which also grew 12.7% with rising petrol and diesel prices.

Here in India, the inflation fears are directly linked to the surging international commodity prices and supply disruptions which have raised the cost of production for manufacturing companies. A global rating agency while summing up this surging international commodity prices has noted: “Upside risks on inflation are growing from surging international commodity prices. While producers are bearing a greater burden of rising input costs for now, these could get passed on to retail prices once demand recovers. Food inflation could also face pressure from disruptions to the rural economy due to the pandemic’s spread and rising global prices."

Take the case of rising fuel prices. The steady rise in petrol and diesel prices over the past few months has not only fueled inflation concerns, but has also triggered changed spending patterns in households. A report reveals that the fuel is eating the domestic budgets more than the expenses on health. In fact spending on other non-discretionary items, like grocery and utility services has observed a dip to such an extent that the demand for such products has significantly declined. The situation is highly dangerous as the rising petrol and diesel prices have come at a time when most households are already struggling with higher medical expenses and surging commodity prices. The haywire situation is eating up their savings as well as pushing them into debt trap to keep afloat.

Now let’s have a look at the exploitation of the inflation fears at our own place, to be precise in J&K markets. Here the price control mechanism has been thrown to the winds as traders and merchants stamp their own prices on the commodities to rob the consumers of their hard earned money. It’s more ironic that none of us, as consumers, is vocal to resist the skyrocketing prices of essential commodities, be it grocery items, food grains or vegetables.

Let me explain. The rise and fall in prices has a lasting effect on the cost of living of the common man. Cost of living is the price of goods and services required for maintaining an average level standard of living and varies from place to place, and fluctuates from time to time. It has a direct bearing on the prosperity of an individual.

When the cost of living goes up, the social structure of a common man too takes a hit, exposing him more to complexes. As far as essential commodities are concerned, we have two categories. One is the traditional category of essentials and the second constitutes modern living essentials. The immediate impact of price rise is that it limits the access of common man only to necessities. Modern living essentials have become a luxury for him. While negotiating the situation, a common household engages more and more members of a family.

Normally, the price rise is attributed to the factors like rapid growth of population, increase in incomes, rising non-development expenditure of the government and increase in money supply, on the demand side. And on the supply side inadequacy of agricultural output, inadequacy of industrial output and high-priced imports are listed in the price hike. But ours is a place where the hike in prices is not based on economics. It’s the writ of the supplier which runs, pricing the commodities arbitrarily. We as consumers are left with no option but to pay the illogical prices of the essentials as we have no other option before us.

Precisely, the focus on rising prices is nowhere visible here. This all happens under the nose of authorities and it seems they all have lost the sense of smelling the foul of arbitrarily driven price rise syndrome which is engulfing the common man’s prosperity.

We as consumers too have a unique attitude. We vehemently voice our demand for high quality fuel etc., but act as silent majority to uncontrolled price hike. In this system of economics, we surprisingly expect rules of physics to protect us from price rise. The theory of gravity that anything that goes up is bound to come down is not applicable in this context. Here it’s opposite – whatever goes up, will never come down.

However, the war against arbitrary and illogical price rise of essentials needs to be led by the government and not the common man. So far, we haven’t seen anything substantial done to pull common people out of the price hike syndrome. The question remains – who will rescue consumers from the exploitation of traders and merchants who unlawfully hook inflation fears in pricing the essential commodities?

(The views are of the author & not the institution he works for)

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