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.