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This is an archive article published on April 23, 2008

‘Govt should have anticipated price rise’

With inflation riding on high prices to touch 7.4 per cent, the government has cut down on exports and announced a slew of duty cuts. Last week, an expert panel on futures trading said in its draft report there was no conclusive proof to show that futures trading is linked with inflation. Should the government have done more? Or is this simply a global phenomenon over which the government has no control? CITHARA PAUL talks to CPI leader D. Raja and SANDEEP SINGH to Subir Gokarn, chief economist, S&P Asia Pacific, to get both sides of the debate.

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What, according to you, is the prime cause of the current inflation?

The root cause is the result of the neo-liberal policies followed by successive governments. It is also because the UPA government failed to correct the wrong financial policies of the previous NDA government.

But the government’s argument is that the current inflation is a global phenomenon.

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That is the easiest way out for the government. It can easily shake off its responsibility by saying that it is an international phenomenon. But it is not true.

In fact, the government should have anticipated the way things would play out in the international arena. And they should have resorted to prudent fiscal measures to avoid such a situation happening here. If the government had done this, we would not have had to face this plight.

So what do you think the government should do to handle the problem?

There are both long-term and short-term measures. In the long term, the government should attach more priority to agriculture. There lies the solution. At the same time, the government should resort to short-term measures to contain the price rise. An effective intervention in the PDS, coupled with more direct procurement, would ease the situation a bit. The Left has also been asking for a ban on forward trading. But the government has not heeded so far. Such a step would have had a dramatic effect in arresting the price rise.

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What according to you is the role that states should play to tackle the situation?

The states too have their share of responsibility. Effective interventions at the micro-level can improve the situation. But

the primary responsibility is with the Centre as they are the ones who decide the policies at the macro level.

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