The good news from the Reserve Bank’s mid-quarter monetary policy review is that inflation is moderating, though still too high for comfort. It is significantly above the 5-5.5 per cent that prevailed in the early part of this century. The latest figures indicate it still hovers around 8.5 per cent. While these are just numbers, the underlying truth is that millions of people continue to be victims of this high inflation. Among them, though, workers in the organised sector are comparatively better off — in the past two days the government has doled out significant benefits to them in the form of a higher interest rate on provident fund, which will benefit 50 million workers, and also raised its employees’ dearness allowance, to compensate to some extent for rising prices. Those with deposits in banks will also benefit as the banks are expected to hike their deposit interest rates. The banks will have to raise interest rates anyway, and not just due to the signal sent by the RBI on Thursday, both in order to meet their credit requirements and also to compete for people’s savings, which might now begin to flow in a substantial way towards the EPF, where interest rates are hugely attractive compared to the negative real interest rate from banks.
While the organised working class as well as the rich stand to gain, what will happen to the 79.71 million workers employed in the non-agricultural sector? Of these, 39.74 million workers are in rural areas and 39.97 million in urban areas; 70.21 million are full-time workers, while 9.5 million get part-time work. They constitute around 92 per cent of the country’s total workforce, and contribute over 60 per cent to the net domestic product. They also contribute three-fourths of the savings of the household sector. There are also millions of others in the unorganised sector who are totally unprotected from the vicissitudes of rising prices. Who will provide them a cushion against high prices? They are left to the vagaries of rising prices — their pain, suffering and deprivation are not reflected in the 8.5 per cent inflation figure, and there is little or no official attention directed at their plight.
In the overall inflation figure, food prices are the highest at around 14 per cent. All that the government says is that food prices will moderate because of the good monsoon. We have been hearing this refrain since last year, when food prices hit the roof. Everybody in authority — from the finance minister to the honchos of the Planning Commission — kept insisting that prices would moderate once the rabi crop comes in, which later got shifted to the kharif crop, and still later to a good monsoon. A whole year has passed. The sad truth is that nothing that the RBI has done or can do will really impact food inflation significantly, a point which was conceded by the Planning Commission deputy chairman on Thursday.
Besides the routine excuses trotted out on why food prices are high due to the demand-supply position, bad crops, high global prices etc, what is not talked about is speculation, hoarding and some wrong government policies — by the agriculture ministry in particular. There is only a half-hearted attempt to increase the area under irrigation, or increase the cropping area for pulses. It is a shame that a trillion-dollar economy has to depend solely on the monsoon to feed its people. Is all this talk about food security just a pie in the sky dangled before an unsuspecting people to show that the government cares? But then, what does one say of a government that would rather have `50,000 crore worth of foodgrain rotting than distribute it to the poorest of the poor in 150 districts of India.