On prices and inflation

Inflation is the talk of the town; every person worth his/her name is jumping into every channel to put his/her viewpoints particularly now with the FDI tirade in retail just being afresh. Yes, these were exactly on the expected lines; only that there is much talk and no suggestion of tiding over the problem. Similarly we have forex being the buzzword with the media honchos showcasing and dabbling with the figures however incorrect and far off from reality they may be. With political patronage towards these topics, dissection of metrics involved in inflation and forex outflow is being done to the nth order. I present certain layman aspects on these topics based on certain observations.


a) As a well-to-do paid employee (thank God) of a decently large organisation, I am not bothered about the rate of a kg of potatoes whether it is INR 14 or 15 or 20 for that matter. All lazy souls like me who cannot make it to the main market have to tide and be happy with whatever rate the local vegetable shopkeeper sells. The point that I am driving is not the laziness (that also is a point, which I shall cover under some other topic) but the sheer comfort of bearing with the price hike even that of essentials. The local retailers have known this trick and have been escalating prices like anything without any reason. It is a known fact that along with hundreds of people who stay in a Crore plus apartment today, also stay peoples who work for them and who are not that well-off. Encouraged by buyers who agree to paying higher prices, these sellers keep on increasing their prices. The supply-demand principles do not hold good anymore; whereas Say’s Law only predominates. These artificial (read for-no-reason) reasons are never attributed by any FM but am sure that contributes to inflation.

I am sure the government knows very well that people like me are not bothered with the prices; but yes a common man is affected. Imagine the plight of a salaried employee with a salary of INR 5000-6000 p.m. (there are atleast 4 scores whom I know in the city where I stay personally).

b) I have observed one thing about the office going habits. There are people who just come to office, keep their cars and also go home almost at the same time. They could very well initiate carpooling and do away with some petrol. I am sure that may not contribute to forex payout largely but yes, some contribution would definitely reduce Mr. FM’s forex outflow. I am aware of a public sector organisation; all whose employees come from a particular complex but they do not practice carpooling and come to office individually. Until and unless all practice it as a habit, it would be very difficult to contain the petrol / diesel related forex outflow. This is a simple thing but goes a long way in saving few liters of oil bill.

c) Another important component of forex outflow for Mr. FM is because of the gold purchase. A small question based on a small observation. How many of married souls have used more than 25% of the gold which they would have received during their marriage. Most of us would have never touched the same but definitely would be purchasing yellow metal to cater to the requirement in the marriages and other functions of their relatives and friends. The idle stock would be lying in some idle lockers of many banks.

We have had RBI Dy. Governor commenting on the import of gold and advising people not to buy gold for investments. Similar views were also opined by FM and PM during Sep 2012. I am sure if some of the people change the habit that is mentioned, not only would the import bill of the government reduce but the prices of gold in the local market would be bit reasonable. Infact such acute is the problem that govt. is mulling ideas to attract people to secondary markets and other investment avenues instead of gold. I am sure the macro problem would be huge otherwise the controlling honchos of the country wouldn’t have been envisaging such ideas and plans.

These are certain points which normally would not be catching the eyes of the FM. The readers would appreciate that the summations of the facts and repercussions is immense. On a personal note, it does not matter whether someone advices or not but as educated souls, we must strive to think about the financial status of our nation and contribute selflessly however miniscule the same may be.

Private-Public dilemma

Almost each sector in the country today has government (read public) and private participation. You talk of the major sectors i.e. banking, telecom, mining, education, heavy industry, small industries, research & development, petroleum and mining, one would observe presence of govt. owned institutions and privately held institutions. In some like heavy industries, mining and education we had private and government (directly or through majority stake) players from long times while in some we just saw participation of private players in the last few years / decades.


Argument has always been that competition would always benefit the masses but overtime we have seen the following

a) Confusion has started creeping in after so many years of de-regulation. We have got plethora of examples. Private organisations in the name of competition have started violating the basic rules of the games across all industries in which they were earlier not present and were allowed recently. Be it mining, banking, insurance et al.. I need not give specific examples across any of these sectors. There was no necessity for positions like Ombudsmen in the bygone eras.

b) Salaries in the private sector are high but the attachment to one’s organisation is higher in the public sector organisations. No doubt there is a factor of safety and continuance in public sector organisation but higher salary in the private peers is increasingly touching enviable levels. There is rampant attrition amongst private institutions because of the mentality of employees for higher pay and better job environment. There is a also a flow of professionals from public sector institutions to private sector institutions in the same sector. Thus one sees there is sheer turbidity and dynamism because of these differentiations. The question arises is the customer really benefitted in this flux and changes.

c) We started with the notion that all that is private is competitive and better. A petty large and important industry today i.e. banking has seen a sleuth of good public sector banks having better balance sheets than private peers. There are certain public sector organisations like ISRO, DRDO and BARC which still attract better talent and also harness their talent. Engineers of these institutions are considered to be the very best; be it in any discipline of engineering.

d) Private players have a much shorter vision. We have examples of surprising measures being taken in the name of cost cutting by various private institutions, usage of physical network of BSNL by private telecos, advertisements of hospitals and education which were unknown hitherto, insurance is no more solicited (only) but sold and window dressings of many private banks being dissected by analysts.

e) With so many players in some sectors, excessive competition is distinctly visible in some sectors. Finance Ministry had to intervene to stop public sector banks from vying against each other in offering better FD rates to cash rich PSUs.

On a suggestive note, certain degree of maturity is required from each of the players in each of the sectors. Instead of targeting higher share of the pie, cant all players think of ways and means of increasing the size of the pie. Whats more worrisome is that with the existence of certain degree of dynamism in the system, the onslaught of reforms as slated and proposed by the government will further complicate the things. I am not a pessimist but as I mentioned, maturity is a rare commodity amongst thinkers and with a long term vision things can settle down for sure.