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LATEST NEWS UPDATES | Inflation spoils UPA’s report card -Sidhartha

Inflation spoils UPA’s report card -Sidhartha

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published Published on May 23, 2013   modified Modified on May 23, 2013
-The Times of India


NEW DELHI: For a man who prides himself as being the "original reformer", PM Manmohan Singh did not mention the word "reforms" even once in his speech on the ninth anniversary of UPA. And, it was only once that he talked of inflation.

It was hardly surprising given that reforms do not seem to be on his radar in view of the tough political environment and inflation is something that he would avoid talking about given the coalition's track record.

After all, for seven of the nine years that UPA has spent in office, retail inflation, measured by consumer price index for industrial workers, has remained over 6%. Economists would tell you that 6% inflation based on CPI is not as bad as 6% inflation based on wholesale prices. It gets worrisome if it is 7-8%, they say.

In UPA's second term, even 7-8% CPI-based inflation would appear moderate given that it has remained in double digits during three of the last four years. Since January 2012, when the combined consumer price index-based inflation was introduced, prices have increased by at least 7.5%, if nor more and for the past 14 months has remained between 9.4% and 10.9%.

Now, even government economists are wondering if the strategy followed to tame inflation - which was to keep raising interest rates - was correct. "It is a structural problem, which needs many more steps by the government," said an official.

"The last three years have been abnormal. Before that, inflation was not a structural problem even if you look at the wholesale price index for the last 18 years," Samiran Chakraborty, economist at Standard Chartered Bank, said.

Every time inflation went past 8%, it would drop below that level within six months due to steps taken by the government and RBI. "This is the first episode when it has remained over 8% for so long," Chakraborty said.

Another economist at a private bank, who did not want to be identified, added that the problem lay with the agriculture sector, especially investment in infrastructure that's long overdue. Poor infrastructure has aggravated the demand-supply mismatch, the economist said.

As a result, it's not surprising that for most food articles, prices have more than doubled from the time UPA first came to power. Potatoes, chicken and eggs are the only exception. Onion tops the list with an over three-fold jump. For pollsters, it may be something to chew on.


The Times of India, 23 May, 2013, http://timesofindia.indiatimes.com/india/Inflation-spoils-UPAs-report-card/articleshow/20217910.cms


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