Price Rise and Inflation - Revisited

Dear Friends:

In your latest inputs on What's not working well from a Central Government standpoint, Rising Prices/Inflation was one of the items.

Though through the Government's positive step of linking fuel prices with international prices has enabled us to save on fuel costs, they have not exactly translated into lower prices of commodities.

To that order, we are re-visiting our recommendations submitted to the PMO and Minister of Finance in last July.

Please review the submission below and share any additional inputs you may have. Do identify your input as an Issue, Root Cause or Solution as a Prefix.

Thanks and we look forward to taking your inputs and submitting a revised whitepaper to the PMO and Ministry of Finance on this subject.

Rajendra Pratap Gupta

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Curbing Price Rise/Inflation (Issues, Root Causes, Solutions)


Key Issues Identified:
1. Lower petrol/diesel prices not translating into lower price of commodities
2. Expensive fruits/vegetables, food grains and milk.
3. Price of LPG having more than doubled over the last couple of years
4. Electricity rates have sky rocketed
5. Very high interest rates on loans as compared to other countries
6. Expensive medicines that keep getting costlier
7. Ever increasing cost of school education

Root Causes Identified:
1. Hoarding
2. Too many taxes are being imposed which makes the product to end customer expensive
3. Export of essential food products which results in price increase for domestic customers
4. Increase in production and operations cost
5. Electricity consumption has gone up
6. Resources are not utilized to the optimum level
7. Lack of cold storage facilities to store fruits and vegetables
8. Middle men in almost all supply chains
9. Setting up alternate sources of energy is expensive
10. Crude is imported in large quantity
11. The ‘market’ is allowed to decide the prices of many basic need items
12. Cultivable land is being eroded which means the supply is getting shorter
13. Costs of agricultural inputs has increased
14. No minimum fixed price on the farmers yield
15. Lot of wastage from farm production due to transport, handling, storage, etc.
16. No effective laws to prevent schools/colleges from increasing fees  

Solutions Identified:
1. Develop and implement a strong anti-hoarding policy and law for essential food products and commodities
2. Work with States to effectively implement and execute this policy law with strong punishments for offenders
3. Exports of essential food products should be only allowed after ensuring enough availability for domestic customers
4. The existence of the middle men and commission agents should be controlled
5. There should be government regulations on deciding the price of essential food products and commodities
6. Classify petroleum products as goods of special importance with lower CST/VAT applicable on petrol and diesel
7. The Public Distribution System should be revamped
8. Agricultural land must be given a ‘protected’ status and should not be allowed to be used for anything else
9. Conversion of cultivable land for other purposes - commercial, residential and industrial - should be prohibited
10. Adequate storage facilities should be developed in villages and near farms to reduce spoilage in supply chains
11. Ensure trucks
12. More expertise should be provided to the farmers to help them increase their yields
13. Reduce agriculture’s dependency on monsoon through development of new alternate sources of water that are shared community resources.
14. Schemes like MGNREGA, Indira Awaas Yojna, Food security bill, Sarva Shiksha Abhiyaan etc which are sources of rampant corruption and burden of exchequer which are doing very little good to common people should be abolished
15. Interest rates on loans need to be brought down
16. There should be a law governing the yearly increment of school/college fees
17. The demand and supply gap should be narrowed by increasing supply and lowering demand (where possible)
18. Export deficit needs to be brought down
19. Stop food grains trading on commodity exchanges
20. Alternative energy (Solar, Wind, etc) should be used on a larger scale more