That key members of the Union Cabinet met to discuss prices would normally be hailed as a sign of responsive action on the government's part. But Tuesday's meeting was greeted more with cynicism than with appreciation.
It did not help that the meeting was inconclusive and will convene again Wedesday, but more germane is the perception that meetings and debates lead only to yet more meetings and debate. What is missing in public perception is the will to act.
This gap must be filled, and no amount of spin or media management can achieve that only purposive action can. The monetary policy part of what requires to be done can be left to the RBI.
The government's focus must be on what it alone can do. A current account deficit in excess of 3% of GDP is a sign of excess demand in the system, to which the fiscal deficit is a contributor.
Reducing the fiscal deficit will ease the macroeconomic contribution to inflation. Slashing fuel subsidies, paradoxical though this may sound, is the easiest way to achieve this.
Sections of the vocal middle class will howl, with the Left as their most vociferous champion yowlers, transporters will threaten to go on strike, as if they bear the additional cost of fuel and don't pass it on to consigners and the BJP will live up to its role as the Opposition. But the government should do what is right and not take the path of least resistance. The government must also act to augment supplies, particularly of farm produce.
To this end, action must follow on both short-term measures and long-term ones. Expanding and empowering the cooperative sector in growing fruits and vegetables and promoting farmer companies are key organisational challenges.
In this, the primary initiative must be nonstate, like Amul's was, under Verghese Kurien. For that, key individuals must be identified and empowered.
Political parties and farmers' organisations must mobilise rural producers into purposive, collaborative action.
Investment in storage and supply chain management must be precipitated in a time-bound fashion. If all this is not done, political stock will fall, even as prices soar.
Posted by Pushkar Raj Chandna,CEO & MD at YASHAD CONSULTANCY PVT. LTD.|12 Jan, 2011
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Former Jt Secy Ministry of Finance