| At Tuesday's crucial Congress Working Committee meeting to discuss the party's options over the Uttar Pradesh crisis, more than half the allotted three hours were spent on another issue-the sharp upswing in prices and the political fallout of inflation-than on whether to topple the Mulayam Singh Yadav Government. When Finance Minister P. Chidambaram tried to defend himself with homilies on the global economy, one member cut him short with the remark, "We are worried about the local sabzimandi, not what is happening in New York or London." It was a telling statement. The joke doing the rounds is that next week will witness an "Onion Budget", instead of the Union Budget but it is a serious crisis. You may well wonder that amongst all this good cheer about the Indian economy how has this party pooper problem of inflation cropped up. When I was learning economics in college many decades ago, I recall inflation being simply defined as too much money chasing too few goods. Apparently, this still holds true as is evident in the current crisis. With our economy growing at an unprecedented 8-plus per cent for three years in a row, there has been almost $20 bn in FII flows into capital markets, our forex reserves have been rising at an average of $25 bn a year and foreign direct investment has surged to $12 bn. With so much money flowing in as investments and rising incomes from the booming corporate sector, it is not surprising that inflation has touched 6.7 per cent. In fact, as capacities are created and supply situation improves, competition will drive inflationary pressures down and prices will even out. However, our desi version has not one inflation but two kinds of inflations-there is the industrial one which is the usual kind in a growing economy and the other is the unacceptable rise of around 40 per cent in prices of primary goods like foodgrain and vegetables. For over a decade now agricultural production has been stagnant. Very simply, we do not produce enough for the population. Since the Green Revolution, there has been little focus on agriculture. Over a third of the vegetable and fruit produce gets wasted in the fields. There is an urgent need for restructuring agriculture with investments, new technology and a new direction. The fact that some retail chains are paying farmers higher prices and yet charging consumers less is proof that we also need to open up retail to establish distribution and storage links. Governments prepare for both good times and bad times but the current price rise suggests that while India is marching into the 21st century and conquering markets, economic governance is stuck in the 19th century. Every crisis in India is a call not for new controls that the Left is clamouring for but for more reforms. Nobody knows this better than our prime minister, Dr Manmohan Singh. Index
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