Rising prices are wreaking havoc on middle-class family budgets. Vikas Kumar and Niharika patra analyse how
Sadhna Singh gets perplexed, mystified, exasperated and even infuriated when she watches news on TV or reads the front pages of her newspaper these days. She is sick and tired of Baluchistan, the fight between Anil and Mukesh Ambani, the antics of participants in "Rakhi Ka Swayamvar" and the statues that UP Chief Minister Mayawati is erecting. She is terribly disappointed with the media; she never had any hopes from august members of Parliament anyway. “Rising costs of grocery has completely damaged our monthly budget. It is really difficult to maintain the same standard. Our monthly saving is now nil," says this agitated bank employee even as she struggles to identify one ‘cheap’ vegetable.
There are literally millions of consumers, homemakers and families across India who share the rising desperation of Sadhna Singh. For them, all the stuff that comes out in newspapers about the rate of inflation falling below zero is a bad joke inflicted upon them in poor taste. School teacher Rajarshi couldn’t care less about the subtle differences between the wholesale and the consumer price index; it is ‘price’ that is killing her. But as former RBI Governor Bimal Jalan says, we should focus on the consumer price index rather than the wholesale one while talking about consumer inflation. And that index is galloping ahead at double digit rates.
Most of them still think that Prime Minister Manmohan Singh has the experience and the wisdom to stem the rot; but they can’t help wondering why Mr Singh is not paying more attention to such ‘bread and butter’ issues. Reality for them is the relentless rise in prices of goods and services that account for the bulk of a middle-class family budget. And the price hikes in many cases are incredibly high. Fond of cauliflower and capsicum? Be prepared to shell out Rs 80 per kg. Think you can increase the ‘nutrition’ quotient in the diet of your child by adding more Arhar Dal? You need to be ready to shell out close to Rs 100 per kg. Have a sweet tooth? Well, sugar is touching Rs 30 per kg.
It is not just the normal day to day food items that are wreaking havoc on middle-class family budgets. Thanks to the largesse doled out by the Sixth Pay Commission, the amount of money they have to pay as school fees for their children has virtually doubled – often with retrospective effect. And unlike their luckier ‘government employee’ counterparts, an overwhelming majority of those working in the private sector have not seen a pay hike for more than a year. Says Rajarshi, "I have two sons and their school fees have now doubled. I don't know how will I pay all this." Rajarshi and her husband really don’t know how to tackle this situation. So, middle-class Indians like Sadhna and Rajarshi who used to save about Rs 5,000 per month have now seen their savings dwindle to literally nothing (See table).
There is more bad news for them in store with the monsoon being far from normal. Says JP Malik, Department of Economic Analysis and Policy at RBI, “It is simple economics. The problem is because of the supply-demand gap which has happened because of the trouble in monsoons. Pulses and cereals have suffered more because they are more dependent on monsoon water”. But poor monsoons alone cannot be blamed for the incredible rise in prices. There is something rotten in the supply chain related to food products in the country. The farmer in the village still gets less than Rs 10 for every kg of cauliflower that he can harvest and sell. By the time you buy it from the market, it costs at least Rs 80 per kg. This is a clear sign that the trader and the middleman are making hay while the farmer as well as the consumer suffer. Add the complete absence of modern cold storages in rural areas despite many pious announcements from myriad policy makers.
It is not as if the people at the helm in Delhi are not worried and not paying attention. In fact, there was a detailed and intense discussion during a recent meeting of the Cabinet Committee on Economic Affairs where ministers Pranab Mukherjee and Sharad Pawar (whose ministry is responsible for food distribution and prices) had a ‘frank’ exchange of views. According to Congress insiders, both UPA Chairperson Sonia Gandhi and Prime Minister Manmohan Singh are paying close attention to this ticking time bomb.
And a ticking time bomb it is. One major reason for the UPA – and particularly the Congress – coming back to power was a strong perception among voters that the regime was genuinely concerned about the welfare of the aam aadmi. But rising food prices have a nasty historical habit of destroying the relationship between voters and ruling regimes. Sadhna and Rajarshi still have implicit faith in Manmohan Singh. But that faith is being tested at the moment.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Sadhna Singh gets perplexed, mystified, exasperated and even infuriated when she watches news on TV or reads the front pages of her newspaper these days. She is sick and tired of Baluchistan, the fight between Anil and Mukesh Ambani, the antics of participants in "Rakhi Ka Swayamvar" and the statues that UP Chief Minister Mayawati is erecting. She is terribly disappointed with the media; she never had any hopes from august members of Parliament anyway. “Rising costs of grocery has completely damaged our monthly budget. It is really difficult to maintain the same standard. Our monthly saving is now nil," says this agitated bank employee even as she struggles to identify one ‘cheap’ vegetable.
There are literally millions of consumers, homemakers and families across India who share the rising desperation of Sadhna Singh. For them, all the stuff that comes out in newspapers about the rate of inflation falling below zero is a bad joke inflicted upon them in poor taste. School teacher Rajarshi couldn’t care less about the subtle differences between the wholesale and the consumer price index; it is ‘price’ that is killing her. But as former RBI Governor Bimal Jalan says, we should focus on the consumer price index rather than the wholesale one while talking about consumer inflation. And that index is galloping ahead at double digit rates.
Most of them still think that Prime Minister Manmohan Singh has the experience and the wisdom to stem the rot; but they can’t help wondering why Mr Singh is not paying more attention to such ‘bread and butter’ issues. Reality for them is the relentless rise in prices of goods and services that account for the bulk of a middle-class family budget. And the price hikes in many cases are incredibly high. Fond of cauliflower and capsicum? Be prepared to shell out Rs 80 per kg. Think you can increase the ‘nutrition’ quotient in the diet of your child by adding more Arhar Dal? You need to be ready to shell out close to Rs 100 per kg. Have a sweet tooth? Well, sugar is touching Rs 30 per kg.
It is not just the normal day to day food items that are wreaking havoc on middle-class family budgets. Thanks to the largesse doled out by the Sixth Pay Commission, the amount of money they have to pay as school fees for their children has virtually doubled – often with retrospective effect. And unlike their luckier ‘government employee’ counterparts, an overwhelming majority of those working in the private sector have not seen a pay hike for more than a year. Says Rajarshi, "I have two sons and their school fees have now doubled. I don't know how will I pay all this." Rajarshi and her husband really don’t know how to tackle this situation. So, middle-class Indians like Sadhna and Rajarshi who used to save about Rs 5,000 per month have now seen their savings dwindle to literally nothing (See table).
There is more bad news for them in store with the monsoon being far from normal. Says JP Malik, Department of Economic Analysis and Policy at RBI, “It is simple economics. The problem is because of the supply-demand gap which has happened because of the trouble in monsoons. Pulses and cereals have suffered more because they are more dependent on monsoon water”. But poor monsoons alone cannot be blamed for the incredible rise in prices. There is something rotten in the supply chain related to food products in the country. The farmer in the village still gets less than Rs 10 for every kg of cauliflower that he can harvest and sell. By the time you buy it from the market, it costs at least Rs 80 per kg. This is a clear sign that the trader and the middleman are making hay while the farmer as well as the consumer suffer. Add the complete absence of modern cold storages in rural areas despite many pious announcements from myriad policy makers.
It is not as if the people at the helm in Delhi are not worried and not paying attention. In fact, there was a detailed and intense discussion during a recent meeting of the Cabinet Committee on Economic Affairs where ministers Pranab Mukherjee and Sharad Pawar (whose ministry is responsible for food distribution and prices) had a ‘frank’ exchange of views. According to Congress insiders, both UPA Chairperson Sonia Gandhi and Prime Minister Manmohan Singh are paying close attention to this ticking time bomb.
And a ticking time bomb it is. One major reason for the UPA – and particularly the Congress – coming back to power was a strong perception among voters that the regime was genuinely concerned about the welfare of the aam aadmi. But rising food prices have a nasty historical habit of destroying the relationship between voters and ruling regimes. Sadhna and Rajarshi still have implicit faith in Manmohan Singh. But that faith is being tested at the moment.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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