It is quite some time since inflation - which triggers rise in prices of all commodities - has been let loose and strangulating people's lives. An evidence and result of the government's apathy was the off-cycle meeting of the Centre's Monetary Policy Committee (MPC) held on Tuesday and Wednesday and its decision to raise the interest rates. It was in the middle of the process of the common man slowly overcoming the Covid-created crisis that a burden has been put on his shoulder again in the form of interest rate hike which is sure to stunt economic growth. In the period between January and March 2022, the inflation rate in the country was above six per cent- RBI's upper tolerance threshold. The inflation during March this year reached 6.95 percent, a record of recent times. Although the MPC meeting of Wednesday did not release the inflation data of April, unofficial data put it at 7.5 percent. Taking this too into account, independent economic experts surmise that interest rates will have to be raised further to hold inflation in check. And that will make daily lives further unbearable. The scale of price rise based on Wholesale Price Index during March was 14.55 per cent, the highest in four months. Inflation based on Consumer Price Index (CPI) was 6.95 percent. And in the retail sector there has been consistent shooting up of prices. Although the RBI blames global factors like high crude oil prices and the Ukraine war to justify the repo rate hike, it is as clear as daylight that the governance mishandling by the government is the major reason for the country's economic indices not staying within control. In October 2020, inflation had reached a record 7.61 percent which was the highest in the preceding six and a half years. During the same period, food price index reached 11.07 percent higher which emptied people's pockets. In May 2021, annual retail price inflation reached 6.3 percent. Inflation in rural sector of 6.48 percent overtook urban inflation of 6.04 per cent that year.
The economy getting got out of hand was also a backlash of reckless reforms such as the note ban of 2016, the hasty transition to the Goods and Services Tax in 2017 and the Covid lockdown imposed overnight in March 2020. With the sudden demonetisation of denominations of 500 and 1000 in the name of wiping out black money, every person in the country had to go through unprecedented misery. That step of reform which totally failed in its declared goal, resulted only in depriving people of their purchasing power. The result was severe cash crunch. The switch from the prevailing VAT regime to the GST model, with the slogan of One-country-One-tax, in actual fact resulted in a regression. Despite five years from implementation of GST in a country of diverse economic activity and countless market transactions, the mechanism is still crawling. That was followed by the onset of the Covid crisis. Rolled out thoughtlessly and in the least scientific manner, the abruptly imposed GST blocked the supply chain of all essential goods which soon transpired as the main cause of inflation.
Even as big boasts like Make in India and Atmanirbhar are touted, over the last one year the country is estimated to have lost 8.8 million jobs. As per the study of the Centre for Monitoring Indian Economy (CMIE, private investment fell steeply during 13 years. When crude prices were nosediving in the international market, the government was not passing its benefit to the people; on the contrary petrol-diesel prices were hiked as a policy which amounted to fleecing the people and turning a major factor that sent inflation north. Despite the fact being known that fuel price rise will snowball into price rise of every commodity, the Centre has shown neither the flexibility nor the compassion to end the fleecing by daily price hikes on petroleum price, or offering some relief to people by lowering the heavy taxes on them. Even amidst the depletion of people's purchasing power without employment and income, the government is trying discredited methods for building a communal divide. It is clear that the focus of the government is on such divisions among people rather than on straightening the economic sector. The burden of blindly implementing the same globally applied economic yardsticks fixed by IMF and the World Bank - both controlled by the US - also falls on the people's shoulders. The latest move to raise the repo rate as an attempt to tame inflation is also a sleight of hand. The real therapy needed is on that government should get its administrative act together.