Inflationary Pressures on Our Plates

Are more prestige projects, light rail and public infrastructure expenses the right priorities under current clouds of uncertainty when our public finance resilience is already under pressure?

By Jan Arden

There’s no hiding the fact that inflation is exerting a harrowing effect on the living conditions of the lower to middle classes and particularly the elders and widows who depend on the state pension. Many are reported to have cut down on unnecessary pleasures, delayed their house plans, reduced their outings or social interactions, and even trimmed down on their food plates or their medication.

The people fighting price rises by trying to buy nothing – BBC News

Even government MPs are aware that the electoral promise to increase pension from about Rs 6000 to Rs 9000, duly implemented after the 2019 elections, has been considerably eroded by the currency depreciation of some 25% against our main trading currencies and the steep rise in logistical costs of maritime freight coupled with higher prices for pharmaceutical, agricultural and food produce internationally.

The pandemic was already heralding a new era, which the current NATO-Russian confrontation, with its own lot of miseries and tragedies, has only compounded. Government lavish lifestyles, bred by taxes and borrowings, should already have taken a steep hair-cut; juggling with contracts to friendly businessmen at central and district levels should also have borne a cost-conscious reduction accompanied with greater transparency. Furtherevery effort to reduce our dependency on costly foreign imports would have been in order.

A state of soporific slumber

Sadly, for our institutions and politico-administrative elites, who are heading the country’s affairs, there seems to reign a state of soporific slumber when year-in and year-out, the Report of the Director of Audit or that of the Public Accounts Committee based on the former’s unsavoury findings, detailing hair-raising wastage and even questionable practices, remain, after the usual fortnight of media, observer and opposition outrage, essentially “lettre morte”.

There was a time perhaps when our political class or our top public sector mandarins were imbued with lofty development ideals, with decision-making that bore in mind the larger national interest. More recently, the simple respect for public procurement procedures even under emergency pandemic conditions and even more, when billions of our hard-earned and hard-saved paisas are being forked out, has been under the radar.

Many illustrations could be served out in case studies or lectures to aspiring cadres. A recent and vivid example is the Ministry of Commerce’s handling of the Covid procurements through the State Trading Corporation what with the billions of rupees worth contracts, advance payments and the Pack & Blister sidekicks during 2020-2021. With our fabled independent investigative agencies turning a steadfast blind eye, nothing it seems will disturb those who, like bank majors, are “too big to fail”. A gentle wrist-slap here or an early retirement on full pension there for a couple of subordinates cannot surely be the answer.

That tandem is obviously incomplete in our tripartite development philosophy, as we cannot forget the private sector and, in particular, conglomerates and their once respected chambers. Many have been too glued to their personal horizons during the pandemic, recipients of government fundsand assistance, one way or another, to offer credible voices.

We suspect they too know the real state of the economy, the scarcity of foreign exchange affecting their businesses, the lack of a global vision to get the economy to new heights and the added international uncertainties are worrying. Are tourism and the real estate sector, backed by massive public spending in drains and infrastructure, going to constitute the pillars of a viable and sustainable future they fret in private, but can we really expect more politely worded decibels from them? Do they have the time, gumption and resources to frame alternatives, when the authorities seem more interested in feel-good forecasts and projections?

Trade and economic repercussions

If we thought the ebbing away of the pandemic’s worst might bring relief to our inflationary pressures, the events in Ukraine, whether caused by Russian intolerance of NATO intrusions at their doorstep or the misplaced arrogance and confidence of the Ukrainian President, are obviously having tragic consequences locally but also trade and economic repercussions far and wide across the globe. The effects are likely to be longer lasting than could have been predicted on the basis of disruptions in Russia or Ukraine.

We could quote any of a number of commodity market analysts both locally and internationally. Rabobank, for instance, predicted in Nov 2021: “It is highly unlikely that food prices will go back to the five- or ten-year averages in 2022, as commodity prices are now supported by inflation in the general economy, including high shipping costs (astronomical for containers), energy and fertiliser prices, as well as a shortage of labor in many countries.” Since then of course we have had the Ukraine bolt from the blue.

Our milk powder, edible oil import and processing abilities at previous cost levels are bound to be at risk. Animal feed processors will be facing the music with higher costs and procurement difficulties for corn or soy meal in coming weeks or months and cannot do otherwise than pass the buck down to consumers or to the numerous small and large poultry, cattle and other farmers in-between. Poultry, a major domestic consumable, and imported or locally produced meat, will therefore face rising costs. Our ubiquitous dholl-puree may reach Rs 20 in less than no time as cooking oil, cereals and pulses and labour costs take their toll, while the pain maison may soon be blowing holes in family budgets. If we add the cumulative effect on those elderlies forced to buy pharmaceuticals and drugs unavailable in public dispensaries or hospitals, the social impoverishment of countless families goes beyond the statistics of inflation rates. And we can understand those that demand some form of monetary compensation now.

The coming budget would be the best opportunity for our Finance minister to heed the angst in thousands of families by raising the pensions to an intermediate level of Rs 11,000 pending the promised raise for 2024. Are more prestige projects, light rail and public infrastructure expenses the right priorities under current clouds of uncertainty when our public finance resilience is already under pressure? Can they be toned down or staggered in time while real social difficulties are addressed?

* Published in print edition on 25 March 2022