Rising Food, Fuel Prices Slow Indian Economy

November 04, 2011
Rising Food, Fuel Prices Slow Indian Economy
Anjana Pasricha | New Delhi

Photo: Reuters: A fruit seller arranges bananas at his stall along a road in Jammu, November 3, 2011.

In India, increasing food and fuel prices have raised worries that Asia's third largest economy may slow down more than expected. The numbers indicate the Indian government's efforts to tame inflation in the past year have not yet succeeded.
The commerce ministry says food inflation last week was over 12 percent - the highest level in the past nine months. This was largely due to rising prices of meat, milk and vegetables.
State-owned oil companies also increased gasoline prices by about 2.5 percent on Friday - the fourth increase this year. The rising food and fuel prices are slowing down the economy. An economist at the National Council of Applied Economic Research in New Delhi, Anushree Sinha, says the impact is already apparent.

"The industrial sector has already been clocking deceleration in their growth. Industry is definitely not seeing the growth it should. Our manufacturing sector is not doing well which is a cause of concern," said Sinha. The loss of economic momentum is primarily blamed on a series of interest rate hikes by the Reserve Bank in the past year. The hikes were meant to ease inflation by curbing consumer demand, but has had virtually no impact so far.

Several economists say the government is looking in the wrong direction. They say food prices are climbing due to changing patterns of consumption in a country where high growth has increased the numbers of affluent people, and raised demand for items like meat, milk and fruit. D.H. Pai Panandiker, who heads the economic think tank, RPG Goenka Foundation in New Delhi, says the government needs to focus on policies that will raise production of these items.

"The government should have intervened to see that the supply of these commodities increases, which it has not done. Milk and the dairies, the poultry farming and all kinds of things could have been given more facilities in order that they expand very fast. That would have been the principle solution to this problem and not really the interest hike," said Panandiker. The government says it is optimistic that the economy will grow at around 8 percent, but several economists are revising this figure downwards to around 7.5 percent.

Economist Sinha says this is not good for a country where high growth is needed to cut poverty. "The problem is, it’s going to impact hugely a large number of people…fewer jobs created, and also incomes being eroded," said Sinha. The rising fuel and food prices also pose political problems for the Congress Party-led government. Both allies and the opposition have attacked the government for failing to tame inflation. The higher prices are also fueling popular anger.
Rising Food, Fuel Prices Slow Indian Economy

Army called in to Manage Load Dispatches to Petrol Pumps

Oil PSUs & Truck Strike :9Jan09 - Part1


Army was called in to manage loading and dispatches to petrol pumps as the Government ordered arrests and dismissals of officers keeping off work. The move cracked the Oil Sector Officers Association, with Bharat Petroleum, the second largest retailer, walking out of the agitation instantly.

Oil PSU execs call off strike following Govt's tough stance

Truckers' strike: States cooperation must, says Chidambaram
Press Trust of India / New Delhi January 09, 2009, 17:30 IST
The Centre today said it is in talks with states to resolve the five-day-old truckers' strike, which along with the PSU oil officers' stir, has affected movement of goods across the country. "The road transport secretary has said we are talking to the states. We will have to take the states with us," Home Minister P Chidambaram told reporters after a meeting of the Cabinet, which reviewed the situation arising out of the strike.

He said the Centre needs to take consent of states since most of the issues raised by the truckers relate to them. The truckers have been demanding putting diesel in the declared goods category, leading to a cut in fuel price, unrestricted import of tyres, a single national permit and reduction in toll taxes, among others. "The issue of service tax exemption has been resolved. The other issue of increase in toll is factually incorrect," he said.

"All other demands pertain to the states. Yet, the truckers go on strike that is against the interest of the people and therefore, steps are being taken by the Ministry of Surface Transport to deal with the matter," Chidambaram added.
Truckers' strike: States cooperation must, says Chidambaram

Comment: One billion citizens held to ransom. The reasons outlined by the media for the strike seems so frivolous compared to the sufferings inflicted on the poor and needy. Shortages and Spiralling prices have hit the common man. Are Politicians and Bureaucrats responsible for governance? The Armed Forces are used like ping pongs to shore up the corrupt bureaucrats who take no responsiblity at any hour of National Crisis. Not a single bureaucrat held responsible for the lost lives or sufferings of the millions of citizens.

“Fall” is different this year

IT is during “Fall” that we have been visiting America and are able to savour the “fall colours” for which this country is famous. Manhattan offers beautiful walks, not only in the Central Park but along Park Avenue, Fifth Avenue, Lexington Avenue etc.

Central Park is a riot of colour and along various Avenues it is the spectre of well-appointed stores with latest in clothes, jewellery and assortment of items for the rich and the famous. From Gucci to Cartier to Brioni, to Louis Vuitton or you name it, they are all there, though at a huge price, whereas Lexington Avenue offers more modest shopping.

But this year we have been late in coming, and colours in the Central Park have lost their myriad hues and wear a drab wintry look. However, there is “fall” of a different kind. It is the “fall” in the economy.

All those stores for the rich and others for not so rich are shorn of customers and wear a deserted look. Many have put up notices for discounted sales, while some others are simply down and out and ripe for outright closure and great picking.

The newspapers make gloomy reading with layoffs in thousands by the day: Industry after industry seems to be going under. No one appears to know how all this came about. There is a recall to the Great Depression of 1929 and we learn that Bernanke, Chairman Federal Reserve Bank of America is an authority on the Great Depression and will surely fix the economy.

They say that perhaps “sub-prime lending,” in housing is the villain. But Greenspan, the previous Chairman of Federal Reserve Bank, was an authority on housing finance. So also were a bunch of CEOs, each an expert in his field, drawing fat salaries and millions in bonuses, whose companies have gone bust.

America too has the largest number of Nobel Laureates in economics. But now
we are told the economics is not a precise science. No two economists agree
on any one economic issue. The debate often turns to free capitalism versus
controlled economy.

The motor car industry is on the brink of collapse and is in dire need of resuscitation in the form of bridge loan (whatever it means) of 25 million dollars. Oil prices had shot through the roof and the great American gas guzzlers had lost their attraction and now when the oil prices have come down there is no credit available and there is little money in the wallets.

Law makers are not enthused with this fat demand of 25 million dollars. So uncertainty prevails as it does in most other areas. Auto manufacturers should have been working on fuel-efficient vehicles rather than on gas guzzlers. is the refrain .

Much hope is being pinned on the President elect, Mr Barack Obama, and his team. But the new Presidency is still many weeks away and much more “fall” may occur. Nor does the President elect have a magic wand to restore sanity and economic order in a jiffy.

The way Roosevelt handled the 1929 depression is now the subject of much study. But no two situations are ever exactly alike, so we wait out for the current financial turmoil to run its course.

Even if we are late for the “fall colours” this year, the Fall is there, though of a different type where the colours are missing but it does offer great bargains and is a shopper’s paradise. All you need is a fist full of dollars!

Lt Gen Harwant Singh (Retd)
“Fall” is different this year

Energy war: India and China face off in Central Asia

On the streets of Tashkent and Dushanbe, Bollywood numbers incite local people to break into impromptu jigs. And in the war-torn dustbowls of Afghanistan, American workers are building schools and hospitals in the middle of non-stop gunfire. The Indians are doing the same, at the risk of their lives. This is the soft side of the story — efforts to woo the Central Asian Republics.

The hard truths of the world's sudden love for the region are hidden behind the barbed wire fences and camouflaged battle gear. In the past few years, military bases have cropped up across the region. The Americans have several bases in Central Asia, including Afghanistan. The Russians, Nato and Chinese too have established military posts in the region. Even India can claim to have set up an air defence unit in Tajikistan.

Already branded villains of this scary scene, the two Asian countries will continue to guzzle more oil to feed their booming economies, even as demand for oil would fall in the industrialized world. In a report last week, the International Energy Agency (IEA) spoke about two future scenarios — the growth of "long-term demand led by China and India..." and "the supply threats, including increasing conflict...."
Energy war: India and China face off in Central Asia
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