Feel the pinch

May 3, 2008

Visiting the chana wala once a week is a ritual. So there I was last week to have the spicy chana. “Bhaiya paanch rupaye ka banana,” I said. He got busy preparing it and said, “Madam, paanch nahin abhi saat rupaye ka hai.” “Kyun pichle hafte to aapne paanch ka diya tha?” “Kya karein madam, sab cheez ka daam badh gaya hai. Toh hamko bhi 2 rupaya badhana pada. Mehangai ka zamaana hai madam.” Those chanas left a bitter taste in my mouth.

Now many of you reading this may argue that one can’t be complaining about two rupees. But its not just the chana. My milkman has increased the rates by 3 rupees a litre. The Udupi hotel down the lane has increased prices of dishes anywhere from 3 to 10 rupees. The corporates have found another method of conning people. They have not increased the prices; but have reduced the quantity of goods in the packets. Every food item in the market seems to be competing with the Alphonso mangoes these days in terms of prices. And all these prices have a ripple effect. Now my Bai is threatening for a pay hike.

Every other week we highlight the continually rising inflation rates on the channel. Most of the general public doesn’t know what does 6.3 or 7.57% of inflation mean. But by now, all of us know how exactly is it pinching our pockets. In a developing economy like ours, food items constitute about 50% or more of the consumption basket. So the inflation that we are now facing hits us even more because it’s mainly affecting food prices. Well-known columnist, Swaminathan Aiyar argues that this is why most developing countries are going for import rate cuts and a cap on exports. And Mr. Bush thinks we are deliberately eating more (well I thought Kareena’s size zero was in vogue!) and depriving his countrymen of food. Well, Mr. Bush let me tell you that with the current prices, we are all on a forcible diet; and even then our budgets are going haywire. But one can’t expect Bush to understand, because developed countries like the US generally face what is known as monetary inflation; which can be easily curbed by controlling the money supply. Unfortunately, in the current situation such a step by our government could prove to be a further disaster. An interest rate change or any change in money supply, would severely affect production, reducing the supply and further pushing up the prices. Even though I am not an expert in economics, I have this sinking feeling about the rising prices and completely agree with Mr. Aiyar.

Having just started earning and living on my own last year, this inflation has certainly taught me how to set my priorities. But what I cannot digest is the gaping hole of around 500-1000 rupees in my already meager savings. And it is just the simplest economic equation that lower savings means lower investment. At the moment, it seems like we are all set for the economic situation called stagflation (recession coupled with inflation). Yes, I am being pessimistic. But the ‘aam aadmi’ centric Mr. Chidabaram doesn’t seem to be perturbed. Maybe it is because he doesn’t buy chana!



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