On the contrary, this will certainly have an impact on the middle and low-income group's monthly or daily expenditure budgets. Such a measure will also have some negative effect on the hire-purchase sector and lease finance, which is very much desirable under the current circumstances. One can't have the cake and eat it too. Inflation control measures will certainly bear some restrictive impact on consumer demands which, in turn, affect supply and growth. To put a curb on wasteful expenditure or making consumers to temporarily hold back their purchase decisions is a key objective of the central bank's monetary control policy at a time of high inflation. Why is RBI sitting tight and not doing anything to control the money supply?

Behind the government's and RBI's sloppy action on inflation control is, obviously, the pressure from industry which always thrive under the cheap money policy. Industry barons, businessmen, high earning bureaucrats and corporate executives, the upper middle class, the traders' community, well-placed professionals, etc., who now constitute a good section of the society in terms of their sheer total number, are least concerned about the prices of food articles or those of the industrial products of common consumption. Unfortunately, the poor are forced to pay for the conspicuous consumption and the reckless lifestyle that the rich indulge in. Ironically, inflation inflates corporate earnings in a situation when the price rise fails to contain demand as it is being noticed in the case of India. As such, the rich benefits from inflation which is factored in their gross income while the poor suffers. This is somewhat peculiar to India where the rich and the upper middle class today constitute around 20 per cent of the population, totaling some 25 crore or more. This huge number with deep pockets makes inflation control really difficult without strong monetary measures by the central bank. Small measures are not going to bear much impact on controlling inflationary pressures.

Dr. C. Rangarajan, former Reserve Bank governor, who now heads the economic advisory panel in the Prime Minister's office, is believed to be for an immediate monetary action to halt any further rise in the inflation rate. But, there are others, who are more inclined to tow the business and industry line that gives higher weight to economic growth than to general price increase. This section of more vocal growth-friendly bureaucrats and politicians, who have been pooh-poohing the public concern about the increasing inflation rate since the end of last year, wants the government and the RBI to go slow on anti-inflationary measures. Some of them have been constantly and intentionally forecasting without any logic that prices of food articles will ease off next month or in next few weeks while they keep on rising. They do not understand that this type of wrong forecasts make the common man lose confidence in official statements and claims.

For instance, this year's early meteorological forecasts of 'normal and timely arrival monsoon' appeared to be more government-engineered than real as the summer monsoon is still elusive in most parts of the country and farmers are unable to prepare land for timely sowing. The idea behind such official forecasts is to allay the farming community's agony about rainfall at the beginning of the season which is linked with food production, rural income, agricultural commodity prices and inflation, in general. This year's monsoon is already delayed by a fortnight. The agriculture ministry was quick to issue a statement quoting the met department that the normal rainfall was still possible. Indian farmers are not fools. The fear of another delayed monsoon is leading to further hoarding of food grains, pulses and edible oil and, thus, pushing up the inflation rates of essential food items. Monsoon delays often cause inadequate and uneven rainfall and lower kharif production. Poor summer monsoon even affects rabi crop because of low water retention in the top soil.

Economists are generally in agreement that high food prices bring spiraling impact on overall inflation. Cheaper import of essential food items may provide only a temporary relief. When a country of India's population size and demand level enter the international market for import of basic items, commodity prices are bound to shoot up. Therefore, domestic inflation needs to be fought locally as well with measures from both the government and the central bank. Expenditure on luxuries, including their imports, would require drastic curtailment. The public distribution system should be strengthened. Wasteful government spending must stop. Lending and borrowing rates of banks must be jacked up to protect the value of money in terms of its purchasing capacity. Unfortunately, on the government's part, the sense of urgency and seriousness to tackle the problem of high inflation seems to be missing. While the wholesale price index (WPI), the indicator of the general rate of inflation, in May reached 10.16 per cent, both the government and RBI are still on the wait-and-watch mode. The June inflation rate should be even higher.

Curiously, RBI is not feeling much uneasiness about it. The country's monetary regulator merely said the current inflation rate did not exceed RBI's expectation. Could it mean RBI is comfortable with the current double digit inflation rate? This must be the most careless and atrocious statement on the present high level of inflation coming from India's central bank. “If things change fast, there will be more measures (from RBI) depending upon the environment,” RBI's deputy governor K. C. Chakrabarty was recently quoted as saying in public. Was RBI's concern about the environment restricted only to business and GDP growth? Or, was it also considering the possibility of a social unrest? If at all, how fast RBI expects things to change and to what direction? The public sentiment against the government inaction to contain price rise is reaching the boiling point as retail prices of most essential items are fast shooting up. At the retail market, the weekly inflation rate for food articles is moving up at the rate of 20 to 30 per cent. The common man's patience is running dry. And, the trust in the government machinery is fast thinning out. The 'environment' is getting really scary. (IPA Service)