Our Reserve Bank Governor is a well known academic , accomplished, competent and committed person. So I am sure when he tweaks the interest rates now and then, it is after a great deal of thought and analysis and for the benefit of the common man.
...Like me and many of you readers.Only, the non pension drawing retired commoner sect that I belong to , prays fervently for the benefit to trickle down faster! Last evening , my laundry shop upped the rates by another 25% . Over the past year the charge for a pair of trousers has gone up from Rs 25 to Rs 50. Walking past the grocer, I watched with a sinking heart at the figures displayed on little cardboard squares stuck amongst vegetables. How could anyone afford those prices I wonder?
But they do...in this part of the Hyderabad , home to the yuppy sect, shopkeepers are busy, restaurants active and Movie complexes thriving. It is the same in our elder daughters' city in Gurgaon or the younger ones' at Bangalore. Perhaps in many more cities. If I recollect teachings from my Economics class ( taught to me by another venerable academic also once a Governor of the RBI), there really is far too much money chasing sellers in urban India. Its value , therefore, decreases- which is alright if you earn enough . How about the elder folks who do not earn , or the unorganized labour fighting for a days work to earn Rs 300?
Remember we are in the midst of a recession- which is an economics buzz word to mean that business is generally dull and production of goods like cars and washing machines and services like hospitality and tourism are not growing. People like you and me are buying less and spending less on travel and eating out.If that is the case , why are prices so high? In most of the developed world , US ,Europe and Japan prices have remained flat for years now, and growth almost absent. In our country,we have a intriguing situation of a recession coupled by inflation. The economists have conceived a word for it -stagflation , a stagnating economy coupled with inflation. Wish they had conceived a solution instead!
Seriously ....are the ridiculous prices of vegetables and fruits justified? What has caused these sudden surge of prices? Has production fallen so steeply? Are the onion and tomato farmers going around in Mercedes Benzs' now that they have made a killing with their produce? We know the answer.
Just as we have answers to control the prices of fuel that hits the common man hard as his travel costs adds on to his food bill. It needs a compassionate, committed bureaucracy to understand the pain of the common man, not one that is protected from the inflation with the perquisites of a government job. We are witnessing the gradual widening of the gap between the poor, constrained by the limited earnings and the rich that is wallowing in the money being sucked into their wallets.Government have been printing ever larger amounts of money ( the economists call it quantitative easing) , and almost all of it is going into the vaults of a few rich traders, industrialists, corrupt officials and politicians with their hanger ons. Is it rocket science to trace the hidden money. Hardly ..
Till that search and compassion is in place, what we need to do is to use our scarce savings judiciously. A mix of investments in Government Bonds, an odd Mutual Fund and yes a portion in gold. The temptation to invest in land and buildings ( beyond the one that you certainly need to live in) is best avoided.
