Depression and home issues
S. Madhusudhana Rao
Reserve Bank of India Governor Raghuram Rajan’s warning that the world is heading towards Great Depression-like days has sounded alarm bells across the globe. Since he was one of the few economists who had foreseen the 2007 global economic meltdown two years ahead of the monetary crisis, Rajan’s prescient words can’t be ignored. It is a different matter, though, an IMF working paper has not agreed with his view.
What Rajan was referring to at a London Business School conference on Thursday was the ‘dark period’ that started in the last quarter of 1929 and continued until the late 1930s. A US Market crash had triggered the worst global economic downturn thus far and led to a cascading effect on other major economies.
“We are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth. And, I think it’s a problem for the world. It’s not just a problem for the industrial countries or emerging markets …” Rajan has observed. Whether the world is going to slip into Great Depression or not, what is depressing for the Indian Middle Class is prices of essential items amidst signs and warnings of an agrarian crisis.
Despite tall claims made by the government that the double-digit overall inflation rate has come down to a single digit after the BJP government came to power, an average household’s expenditure on provisions, vegetables, milk, etc. has been galloping, at least by a couple of hundred rupees every month. Despite the hole in the pocket is getting larger month after month, the government relies upon whole sale price index to defend its claim that consumer inflation is under control. But at retail level, as consumers we know, every essential item –from rice and wheat to dals, fruits and vegetables –is going beyond the reach of common man.
However, the refrain is market prices are keeping pace with money availability in the hands of consumers. We can’t take it as a yardstick to measure wild price fluctuations for the simple reason that the percentage of high-salaried employees is very low compared to low and middle income groups which constitute a majority among buyers. The spiraling prices are hurting these segments of people who form the backbone of economy.
One of the reasons for the downfall of Congress-led UPA government last year was prices going out of control. But for a few months post-parliament polls, the upward trend has begun again and picked up speed at an alarming rate.
Reasons are inexplicable. Shortages or no-shortages, prices are just spiraling. Shortages are generally attributed to natural causes, self-imposed curbs and large-scale hoarding. But if prices are going up amidst plenty and bumper harvests, something is amiss. Either we are being made to believe that all is well or blatantly misled.
A pointer is farmers’ suicides, an issue that keeps opposition pot boiling. The core issues that are affecting the farming communities across the country have been widely debated and dozens of reports prepared. But little has been done to alleviate the suffering of poverty-ridden, crop-hit, loan-laden farmers. Sadly, they continue to commit suicides as they find no other way to extricate themselves.
Farmers’ problems are pan-Indian, though solutions may differ from state to state since the troubles are precipitates of a single or multiple factors. These include low remunerative price, high labour charges, poor crop yields, exorbitant input costs, unseasonal or heavy rains, pests, and the like. If they are not addressed with due diligence, both farmers and consumers suffer.
Already, there is a growing feeling among agriculturalists that farming is no longer remunerative. On the outskirts of urban areas, land owners eye real estate business rather than cultivation. As a result, arable land is diminishing at an alarming rate. Hyderabad and Bangalore are only two examples. And, in Andhra Pradesh, thousands of acres of fertile land go into the construction of new capital city Amaravati.
These land shrinkages may not impact farm production immediately. But in the long run they do make a difference, particularly when shortages hit the consumers and prices start pinching them. An obvious way out is food and commodity imports or boost output. Our tendency to seek short-term measures more than remedying the farm sector ills is well-known. A case in point is our periodical onion crisis which is looming large now.
When the RBI governor raised the spectre of global economic crisis, which is bound to hit us in many ways, it is worth for the government to look under its nose.