Every one is talking of inflation which is going up day by day .The inflation index indicator is at 11.05% but for a common man who goes out to shop the effect thats being felt is more ,way more .For every item weather its food or medicine the cost has gone up 30-40% .
Today the finance minister appeared in the TV saying that people should be calm,he has been saying that for months now.The RBI has hiked repo rate by 0.25 and CRR 0.50 basis points in the previous months and is planning to raise more.The dichotomy here is that the finance minister is at the same time saying that the inflation is beyond his control and is saying he will control it.control it how?? The duty of the monetary authority is to maintain price stability and they them selfs have set the target at 5% as within comfort level,now its more than twice that and what have they done till now??? They are paid to anticipate the inflation and take corrective measures not fall behind the curve and shut the door after the horse has fled.RBI has woefully failed in its duty.Neither its monetary policy nor the governments fiscal policy has has any effect on the raising prices.
Now they have pinned their hopes that in the months after the ending of the olimpics the crude demand is china is going to go down and on half baked theories that traditionally there is an economic slowdown after the olimpics,which will cool the oil prices.Well if it happens well and good but any sensible person can see that if at all it does its just going to have a very marginal effect on the demand.The price of crude is simply not going to cool off any time soon.You can witness the strong support for the curde in the $130 range in spite of china and india both raising the oil prices and also after repeated announcements by the saudi government that its going to raise the production.
Even if there is going to be any marginal drop in the crude prices we will have to wake up and realize that we are going to live in an era of high energy prices,instead of closing our eyes against the reality and blame the speculators who are the usual punching bags in such occasions.The finance minister should understand that apart from looking very brilliant his price band theory will have no practical application in the real world.The deviation of price on either side will have serious political implications.
So what what can we do in this stage? Reducing dependency on energy and energy conservation is a totally myopic approach to this problem.Reducing dependency on oil and aggressively generating alternative sources of energy is the only way.The funny fact is that when the government is paying out 60000 crore to the farmers to wipe out the outstanding debts ,apart from making some noise it does not have a solid and well thought out energy policy.Apart from setting up a few solar powered lamp post what is the effort from the governments side to improve the renewable and alternative energy sources? to develop the technology and to spread it?
We all should understand that developing new,clean and renewable of energy and development of the technology is as important to human race as eradicating any deadly disease.Its vital both because of the global warming aspect and the effect that scarcity of oil has on the economy in general and mainly on the food prices.Its time for us to act because if not the outcome will be nothing short of a disaster.