“Achche din,” Enroute!…

The “Achche din” slogan of the ruling party BJP was more received by the people of INDIA as days of lower prices… every leader in the opposition is making mockery of the slogan… but, very few are praising lower inflation (the CPI) at around 7.3% which is lower than the target (8%) set by the Urjit Committee Report to be achieved by the year 2015. The CPI inflation is not only lower but it is also achieved earlier than the set time-period… It’s an achievement because it has been a trend since around 1970s that inflation remained near 10% in the face of all supply-side bottlenecks which are the result of same types of (lenient) policies… The recent drop in prices can be largely attributed to the strict stand of the new government at the Center that made hoarding a non-bail-able offense and released lakhs of tones of food-grains to the market… Moreover, the right policy in the external (international) sector (exports/imports)... Lower import-tariffs and higher export tariffs which are expected to increase the domestic-supply has done their job a little… It is equally important to press local suppliers not to indulge in hoarding by importing, increasing supply and lowering prices to keep expectations of higher prices by hoarders down… On the expectation of lower prices suppliers will hoard less… The present government at the Center is using all right tools to tackle supply which lagged behind due to rise in wages/incomes and demand due to expansionary policies of the past government… Public expenditure created a lot of demand in the economy… The government should counter inflation from all the sides because it is entirely possible to tackle domestic demand, improve supply-side, and lower prices… And, this is supported by the evidence of the most developed World, Japan, the US, Europe… They are trying to reinforce positive inflation expectations but the supply-side is so good that prices refuse to respond and price-stability has become the “new” normal… It is definitely and entirely possible to keep prices stable… Improvement in the supply-side will undermine effects of rising employment and income in a developing-economy… And, since the interest-rate is high, and the private-sector is waiting for it to come down, it is responsibility of the government to improve investment and supply to the economy… Supply-side can definitely be improved… We need a lesson or two from the developed World…