"It is difficult to
free fools from the chains they revere."
—Voltaire (French 1694-1778)
Word for the day
Concatenation (n)
A series of interconnected
or interdependent things or events.
Malice towards none
Do the TV channels daily
broadcasting sponsored programs of quacks and suspicious preachers have any
moral right to speak against superstitions and malpractices prevalent in the
society? Also do the newspapers carrying prostitution advertisement under garb
of friendship clubs, massage services etc., should be heard on the matter of
women exploitation?
First random thought this morning
Is it a mere coincidence or the current administration (both at
center and state level) is making serious attempts to correct a number of distortions
in the Islamic practices especially relating to mexploitation of Muslim women,
like Triple Talaq, NIkah Halala, Nikah Mutah, etc.?
Regardless of anything this is a welcome development and should be
appreciated by all.
Making it clear that establishment will not seek to exploit the
issue for electoral advantage, may minimize the resistance from Muslim male
too.
Enigma of inflation
For a common man like me on the street, who is blissfully ignorant
of the principles of economics and public finances, inflation is nothing but an
enigma. The rising prices do hit him hard, but that also lead to rise in his
nominal income and hence social stature. Higher nominal interest rate on his
savings, higher notional value of his house & jewellery; and higher rental
for the spare room on the top floor provides him some psychological comfort, at
the least.
As I see it, for a common man, inflation is more of an income
inequality issue than anything else. For example consider the following:
(a) A farmer should gain
maximum from the food inflation. Given that over 60% population is engaged in
the farming and related activities, theoretically consistently high food
inflation should result in transfer of wealth from non-farm sector to the farm
sector. But this has not been the case in any of the high food inflation episodes
in past seven decades. The gap between rural and non-rural income and wealth
has been consistently widening.
(b) The food inflation
should also benefit the urban middle class. The expense on food for a typical
Indian middle class family is not more than 40% and a typical middle class
household saves 25% of his income. If food inflation is 10%, a 5% rise in
nominal income should be sufficient to offset that.
Besides, they would need sufficient rise in nominal income and
asset prices and interest rates to offset the erosion in real value of their
savings. This perhaps has not happened in past many decades, implying that
nominal rise in asset prices and interest rates has not been consistent with
the general rise in price levels. The wealth is thus consistently getting
transferred from savers to borrowers.
(c) One could argue that
transfer of wealth from farmer and urban middle classes to trader and indebted
industrialist is a function of risk they take.
But if we consider the history of NPA cycles, and exploits by
moneylenders this argument gets weaker. Large borrowers have been consistently
transferring the risk to public sector banks, and hence the common public,
through frequent defaults. The money lenders in informal sector have been
fairly successful in exploiting the household and farmer borrowers, not
allowing any benefit of inflation to them.
The equation in energy inflation (mostly imported or arising due
to state inefficiency) and core inflation is different, but impact is mostly
the same.
In my view, therefore inflation has been a medium of wealth
transfer from common man to the rich. The current raging debate over rise in
prices of food therefore has to be seem from this angle also.
I have been highlighting that at the current productivity level
farming in India is mostly an unremunerative business. A multifold rise in
either farm productivity or prices can only correct this situation.
I would seek readers' view on this problem, before I take up it in
some detail.
No comments:
Post a Comment