FORGET RATE CUT; PRAY THERE IS NO HIKE!

about 2 years ago
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By Ruma Dubey

Sometimes, we get so carried away by the work surrounding us that we stop paying attention to what is happening on the ground. Take a visit to buy the monthly food grains and vegetables; you will know aate-dal-ka-bhav, literally!

For someone who is earning around Rs.5000 -7000 per month, life has become a huge struggle. It’s all about making ends meet and taking care of the basic necessities of life. Saving for the future? What is that?

The data on inflations tells us the same story. Retail inflation or CPI came in yesterday at a 7-month high at 3.58% and today, Wholesale Price Index (WPI) was at 3.59% v/s 2.6% in September. Higher food and fuel prices have led to this surge in prices.

Though the prices of dals have come down, the other day-to-day food items costs have increased. Milk costs around Rs.40 per litre. And vegetables are becoming a luxury. The ubiquitous onion costs around Rs.40/kg while potato remains affordable at Rs.20/kg. Tomato is Rs.40 to 60/kg. Let us not even get into the costs of fruits but be assured, banana is unaffordable to the poor man too! Even the poor man’s food – the cutting chai costs Rs.5-7 and vada pav is Rs.8 to 12!

So if the common man on the street, for whom the Govt machinery says it works for, was spending Rs.2500 per month on food six months ago, today his outgo on the same food or probably lesser, has increased. Most are today living on just the basics – rice, milk, sugar, oil, wheat and dal. And yes, there are the ‘ration shops’ which provide food grains at subsidised rates. Thankfully, in India education and medicines are subsidised or else, we would have a nation of hungry, illiterate and sick children.

While this is how inflation has affected most of the people but for many, it remains a figure which comes out every mid-month. And it is based on these figures that RBI decides whether to hike or lower interest rates. Talks have already begun of how these two low rates now make it almost a certainty that RBI will not reduce rates on the 6th of Dec. Let us hope and pray that fuel prices do not surge further or else, we will have to start expecting a reversal of rate cycle – a rate hike!

And then on the other hand, we have the stock market which celebrates every time there is a price rise of commodities, or news of crop shortages. Research houses and FIIs who are akin to predators, recommend buying into commodity stocks, especially those in food grains as soaring prices would improve the earnings. The debate, whether to focus on growth or on controlling costs is never ending. The stock market is essentially capitalist where every adversity is an opportunity and surely, it would want the RBI to pursue only growth. 

The struggling-to-survive man on the street, the woman haggling with the vendors to save a few pennies more and the elderly having to do away with healthy fruits simply because they are unaffordable, all point in one direction – we need to keep a very close watch on inflation once again or the price rise will itself become the monster and eat away all the growth, whatever little achieved.

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