Saturday, May 10, 2008

Why is current increasing inflation good for India?

We always think inflation is bad. Increasing inflation is worse. Inflation make things expensive and cost of living goes up. But just like there is good cholestrol and bad cholestrol, there is good inflation and bad inflation. This time around the inflation that has almost doubled in last few months in India is good inflation. Why is that?

This time around, the increasing inflation is mainly due to increasing food prices. I often wondered as to how is it that i used to be able to purchase a loaf of bread for Rs. 8 about 5 years ago and even today while prices of petrol, car and other items keep increasing. Also input item prices for farm production kept going up but food prices remained pretty much the same. That made me wonder as to everyone talks about India being an agricultural economy and still in 2008, 60% of Indian population is employed in farming or dependent on farming for their livelihoods. Now if bread loaf price or milk price is same for last 5 or 10 years, would farmers not become poorer and poorer. It always made me sad.

Since last few months, I am seeing milk and food prices go up. I am very happy. There were some protests by political parties about increase in milk price by Re. 1 but no one would protest increase in car prices or school fees or price of other products. I am so glad that the political parties coy to instigate people to protest against milk price increase by a mere Re. 1 did not work. If milk price will not increase for 10+ years, how would farmers and others dependent on animal husbandary for their livelihoods ever come out of poverty? That Re. 1 increase is not going to make any difference to pockets or milk consumption or spending capacity of 35 crore middle class Indians but it is going to make a big difference in helping alleviate poverty among the bottom 26% of Indian population. Can't we even let go of some Rs. 30 a month to eliminate poverty in India??? Please note that after farming, 2nd largest section of Indians are dependent on animal husbandary especially selling milk.

So the food price increase this time is GOOD. It means better prices to farmers for their produce. Better prices for produce means, farmers make some profit and in some cases more profit than before. Bottom 60% of India gets richer and this 60% includes most of the 26% below poverty line population in India. So I am ecstatic. Are you? If you are an India, you will be and will stop protesting this increase in inflation but start rejoicing it.

Critiques will say, food price increase is not being passed on to farmers, middle men, merchants and others are making merry while farmers are getting nothing. They are wrong. Even when milk prices went up by Re. 1, farmers got Re. 0.50 out of it, which is a lot. If you don't believe me go ask the family that keeps 1 or 2 cows or buffalo. This food prices increase is percolating down to farmers. I can say that as i am also a farmer and i am fetching better prices for my produce. So critiques beware.

Pl check with the farmer you know, milkman you know and send me comments.

Ask the politicians to get off the case of inflation this time. Again they are trying to instigate the public to get election gains for upcoming Lok Sabha elections in 2009. India, let us celebrate our farmers getting richer, our cow rearing families being better off, our poverty reducing. Let us stop politicians from stopping Indians coming out of poverty.