INFLATION: Can It Be Controlled In The Present World Scenario?
Inflation seems to be surging to unprecedented high levels encompassing the whole world and giving an ironic touch to the very meaning of growth. All that economic growth and development that garnered a lot of praise during the past few months is fast turning into mere pathos. Rising price levels are taking a toll on the world with the common public witnessing a nightmarish experience in living their simple lives within their budgetary requirements. The situation seems to be deplorable and is expected to worsen in the near future. Can this problem of inflation be controlled in the present world scenario? This remains the most prized and high voltage question being popped before our world leaders who are really finding it difficult to balance the equation of growth versus inflation.
The rising graph of inflation has had its place in the front pages of all national dailies of the country in the past few days. Inflation rates of as high as 7.33% have been recorded in the past few weeks. But if we closely analyse the situation then the problem is not just unique to India but it has become a global issue with India still enjoying a fairly decent standing as far as curbing the high rates of inflation are concerned. India's price index could be the envy of its neighbours and other friendly nations. Myanmar is facing inflation to levels of 20% while in Sri Lanka the price index has crossed the 15% mark. The condition of Zimbabwe seems to horrible and pitiable with inflation levels of as high as 1000%.Even the developed countries are finding it difficult to curb the growing spate of price-rise with Switzerland's price index hitting 2.6%,a new high in the country's history since the past fourteen years. So it seems no country has managed to escape the painful whip of inflation in the past few months.
The commodities which have suffered most severely due to inflation and are in a way solely responsible for the surging price index are oil, food and fertilizers. The name of the commodities itself suggest the magnitude of their importance to the common man. Oil prices have already recorded 115$ per barrel in the past few days and the problem seems pretty grim for the future as well, with world oil reserves fast getting sucked up and there is a misfortunate absence of new reserves. The fertilizer scene seems to be worse. The world price of urea, which was only 175$ per tonne in 2004 rose to a whopping 415$ per tonne in early April, 2008.The major exporter of fertilizers of the world which includes Russia and China have increased export duties to a level that in a way has inhibited the export of fertilizers. Panic has swept through the world market. India had to import 1.8 million tonnes of wheat in 2007 at prices 50% higher than the domestic procurement price. Even the domestic procurement price has shot up to 11%.Prices of oil, food and fertilizers do not show any signs of deflation in the near future making life really difficult for the common man.
The government is gung-ho in curbing inflation as the next year is an election year which is going to decide the fate of the present government. As far as curbing rising oil prices are concerned the government has tried its level best in this regard but the ways of covering the losses of oil companies through bonds has only deepened the fiscal deficit of the country. Forecasts of a good crop harvest in the near future in India and USA also show some positive signs with food prices expected to ease up a little though the change is feared to only negligible. The Reserve Bank is doing its bit to curb inflation by allowing the rupee to appreciate in comparison to the dollar to cut the cost of imports. Even import duties on several items have been cut to a great extent to ease the cost of imports. The other measures taken by the Reserve Bank include increasing the cash reserve ratio to 0.5 but this has had very little effect. The government seems to have taken recourse to providing subsidies to the companies to cover their losses but these measures will only widen the fiscal deficit jeopardising the country's interests. So the measures that have been taken by the government seem thoroughly inadequate as they have hardly created any serious impact to reverse the advance of inflation. The only solution seems to be proper fiscal and monetary measures besides those that have already been taken but that will be on the cost of shortening down the economic growth story of the country.
History is testimony to the fact that neither growth nor recession can go on forever. Everything has a definite time-span prescribed for it. Only human beings can increase the longevity of this cycle or cut it short by their sheer prudent ways and measures. Presently the world is experiencing a recessionary move with inflation being the prima-facie and it's up to the world population and its leaders to take recourse to measures that can curb the trend. New oil wells should be discovered to cover the shortage of oil reserves and ease up the growing oil price rise. There should be recourse to cleaner sources of energy like nuclear energy on a mass scale to ease up the pressure on the fast depleting non-renewable resources.
New scientific method should be adopted and research should be given a top priority to usher in another green revolution to cover the acute shortage of edible crops. Governments of all nations should bury their internal squabbles and come together at a common forum to discuss and device new measures to cut the growing fangs of this behemoth monster of inflation which has created a woeful global scenario of unprecedented magnitude.
-Animesh Choudhury
