Saturday, June 26, 2010


Oil prices goes up again and this time it’s the blessings of deregulating the prices. Indian government took a great step to deregulate the oil prices 1st time in the history of Indian economy. I was reading economic times when I found a line over their that new oil prices are perfectly affordable for the consumers. These are said by Oil Secretary S Sundareshan. I don’t know by what means he adds up that the prices hike will be within the reach of the common mass of people .
I beg to remind that India still is under developed and the common mass still have to consume half days food instead of full meal. Strangely the government finance and economic department was raising voices regarding inflation. Non food inflation is hovering around 8.9% and food item inflation in 8%, clubbing together it comes to 16.9%.
India needs to increase its interest rates to control inflation. The same old game each time played by RBI. But does increasing the interest rates will reduce inflation. In plain vanilla terms the reply is no never .Increasing the inflation will not pull down the prices. It will be able to suck out excess of flow of cash or liquidity from the market. But we need to figure out does excess liquidity is the prime reason for inflation hovering around 16.9%.Inflation particular in the food items which is hovering around 8% is not due to excess liquidity. It’s due to poor or low production of crops and vegetables. We need better cultivation and focus on agriculture which we are loosing out. Every one is focusing on urban development and industrialization. We need to keep a track of our old and primitive agriculture which is the back bone of our Indian economic development.
We raise ideas and voices regarding new business schemes and entrepreneurship, but why we fail to raise ideas for agriculture its developments. Each year we look into the sky with our eyes set as microscope to find out when the monsoon will take place and agriculture will get a boost up. Why don’t we develop and implement ideas to remove and eliminate the risk of low rainfall. Why the Indian economy have to face the problems of poor monsoon. If this problem is resolved or reduced then Indian economy will be less dependent on monsoon.

We develop ideas to control and bring development for Indian economy but why not for this big problem of monsoon. Moreover we need a deep focus and block the loop holes of our shifting mindset from agriculture to industrialization .Even if we are doing that we need to keep a tab on export and domestic consumption .Either its is low focus on cultivation or more export than domestic consumption. When we will control and bring solutions to these problems then adequate supply of crops will bring down prices and final the government and RBI will be relaxed to have a comfortable inflation number. Pulling out liquidity from the market and when the global conditions are quite abnormal and not up to a healthy market RBI actions will put pressure on the smooth operation of the economy.

Regarding non food item we need to keep tab on price hikes and abnormal gains. Development and growth are good until it block the longevity of the cycle. If prices goes up then consumption will take a hit since if one set raises the voice that India is now having a low aged professionals and employees and more purchasing parity then savings parity have also increased. Savings at early age increases since the age bracket of the government service might increase by another 2 years to 61 but private sector will witness fast and quick retirement solutions. Working 24 hrs will automatically bring old age much before the nature’s law. So the companies of non food items needs to understand that increasing the profit figures annually will finally come to an end when the prices goes up and consumers stop consuming and shifts to low priced goods. Development should come from all corners but if this type of things happens then it will come from a limited section of society and will lead to a downfall of the economic growth.

Now I come back to my earlier discussion which I have shifted from that is oil prices. It have been said that oil prices will follow the suit of global crude prices. Today global crude prices are hovering around 80$-85$.Prices goes up today as you know. Can any one explain what will be the price when crude will be hovering around 140$ like 2008 June.

Will the ministers and the government and any one this planet will speculate the prices under deregulated market. Voices are raised that oil marketing companies are facing loss. I raise a question does they are really making losses If so how and how that loss is being crept increasing each time. Todays losses increase this price what will be the price hike and the loss when global crude will be 140$.Its my earnest request to all my speculator friends please ‘Quote’ the price. My article might appear as a angry testimony created from the oil price hike, but think from inside and then judge it.

We also need to understand that prices are going up but our salaries are not going up. Each year we will find prices jumps by 50%, but our salaries goes up by 10-15% range across the board. Now please calculate how a person will adjust with jumped prices into his expenses, where earning the same salary. How the government justifies the purchasing parity growth in this present continuous scenario. We need a hike in our tax slabs where the consumer will be left with a greater amount of savings and hence then only we can adjust with the increase of prices. But that’s too less for 50% cumulative growth of products. The government needs to look into the matter in a other way round.


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