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It has happened after 40 months. Inflation has touched the 7% mark. Minerals and staples like vegetables, rice, wheat and edible oils, all have taken a northward climb.

The reason cited is that the demand for staples and vegetables has increased and the supply has not been as forthcoming as expected. The agricultural output has reduced, due to not upto the mark monsoons in certain sectors and bad throughput in other areas. Climatic changes have also effected yields.

The demand has increased manifold!

So naturally inflationary pressures are natural outcome of such a situation. A supply shortage does fuel inflation.

For once, I beg to differ. Differ albeit only in the argument. Perhaps over-supply has fuelled inflation!

I argue thus by looking more closely at the argument of increase in demand. What has fuelled this increase! Increase in population or increase in appetite? Are Indians eating more than last year? Perhaps. But can it trigger an inflation of this proportion?

The growth of the packaged and processed food sector could be the reason for the spurt in demand. The amount of purchase that now corporates make should be viewed cautiously. The government was quick to curb export of edible oils and staples but can it really curb the export of processed food? A lot of food is now being exported to other countries because Indian food is cheaper.

Its important to note that the budget made provisions for reduction in import duties of wheat and edible oils so that import would become easier however, this has not helped in anyway because the international prices of these products are already twice that of India.

Now, some may argue that the percentage of processed food that is exported is very low. It can’t impact the economy so as to spur inflation. Agreed. But look at the spurt in malls across India, and these places have hoarded tonnes and tonnes of staples in every brand name. I mean, if the malls are holding so much of stock, how much will the factories that process these staples be holding. Naturally, a lot of staples has vanished from the market in huge quantities to meet the projected and anticipated demands of the malls and super markets.

People are buying branded staple at higher prices, why should the wholesaler and the local retailer play fool and charge much lesser. The prices have shot up.

The same applies to vegetables. Reliance goes to the farmer, supplies fertilisers and other nutrients and promises the purchase of the entire produce. Rest of the story is only predictable.

RBI has not induced monetary measures, though some measures have been resorted to to suck out excess liquidity, but it can’t use that method for the danger of higher interest rates harming and slowing down the growth of the economy in the long run. Since economies worldover are slowing down, and India too is facing the brakes, any interest rates measures may trigger more worrying times for the economy.

So the only hope now is a good Rabi produce. But I really doubt if that will rub off the inflationary pressure. There are hundreds of malls and super markets across the country, waiting to kickstart. They will suck out the rabi produce and fuel more inflation. The situation is alarming because the entire globe is facing a food crisis.

Do you think the government at the centre would risk a situation like this if it could be averted? General elections are on next year and many states are gearing up for elections too. The UPA constituents already feel the noose around their necks.

Looking very minutely at all these, I only hear sirens and alarm bells. The Bible predicts that in the end times traders will sit with their merchandise on the streets for the want of buyers. They will cry for someone to come and buy their goods. Are we not preparing ourselves for that.

The Bible says much more. It is a life changing text book. It holds and has secured my destiny. You should read it too.

Tags: Bible, Demand, destiny, elections, excess liquidity, growth, Increase in Price, Inflation, malls, merchants, money supply, over supply, processed food, Rabi crop, RBI, reliance fresh, staple food, super markets, Supply, traders, union budget, UPA, wheat

This entry was posted on Tuesday, April 8th, 2008 at 11:15 pm and is filed under Articles, Economy, Geo, Thoughts, Troubles & Problems. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.