Inflation is a cause for concern.

Inflation is really not new to India per se. Indians are generally used to see inflation at 4-5 % in the last few years. But off late the inflation figures are getting dangerously close to 8%, which really pinches the pocket of the common man. The reason for this unprecedented rate of inflation is basically due a combination of facts including faulty government policies, rising global fuel prices and global food shortage. The government has severely failed in containing the inflation of food commodities and having visionaries like Dr. Manmohan Singh and Chidambharam at the helm, it is rather unfortunate to see this day in Indian economy.

But, we must concede that raising global fuel prices is partly responsible for the price rise. Mind you, you need fuel everywhere and agriculture is not an angel. Probably my estimate is that transport (which is directly dependent on fuel) is responsible for a majority of the rise in food prices.

Take my word, the opposition parties like BJP et al are going to cache on this fantastic opportunity and make it one big issue for the general election in 2009. Even at this time as the state of Karnataka votes for its assembly, it has become a major poll issue. Interestingly Margaret Alva from the Congress (North Canara) speaking to NDTV, was trying to defend UPA andindicated that inflation does not impact the common man, as local needs for food are self-sustained. It is obvious that this statement does not hold any water as inflation has deep penetrating powers as the government beings to realize that inflation is not an urban phenomenon alone.

Another major reason for this unfortunate situation is because our productivity in agriculture is abysmally low. For example as Wikipedia indicates (http://en.wikipedia.org/wiki/Agriculture_in_India)

The low productivity in India is a result of the following factors:

• Illiteracy, reforms and inadequate or inefficient finance and marketing services for farm produce.
• The average size of land holdings is very small (less than 20,000 m²) and are subject to fragmentation, due to land ceiling acts and in some cases, family disputes. Such smallholdings are often over-manned, resulting in disguised unemployment and low productivity of labour.
• Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings.
• Irrigation facilities are inadequate, as revealed by the fact that only 53.6% of the land was irrigated in 2000–01, which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth. Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent.

Personally, I have had a terrible experience and directly impacted. For example a liter of Gingili Oil (which is used in lighting lamps and cooking) now costs Rs. 180/-, where as in January it was priced at Rs. 90/- per liter. The same is the case with pulses and cereals.

Government should definitely take radical and out of box strategies to really cull the inflation, failing which it will hit the economy really hard (already telling signs on the stock market) and general trust of the people on the system.