By Biranchi Narayan Acharya

Edited by Michelle Cherian, Associate Editor, The Indian Economist

Inflation, over the years became a buzz word for even the ordinary people of India. Forget about great economists, for the last two decades, even ordinary people made the reign of inflation, a major issue. Although Manmohan Singh’s UPA-1 Government fared really well, rising inflation was still an important issue for the common man. Thus, Dr. Manmohan Singh promised to curb inflation within hundred days and the public trusted the economist prime minister while re-electing his government.

But since then, inflation never settled, rather it increased uncontrollably. The economist Prime Minister and his spokespersons continuously cited many excuses, such as global recession, oil price increase, bad monsoon, natural calamities and many other economic terms that are beyond the understanding of common public. By the 2014 general election Narendra Modi again took the issue of inflation menace and promised to rein it in. The public, this time too, trusted Narendra Modi and elected the BJP government to power.

But the question is, if an economist prime minister could not control inflation, how can a simple politician like Narendra Modi do so? Does he have the economic expertise to tackle this unceasing economic problem?

Before coming to the first part of the question, let me answer the second part. Controlling inflation is never an economist’s job! It’s really a political issue and can only be controlled by a politician who has the intent!

Let’s understand what inflation is. From the economic point of view it can be defined as ‘the percentage change in the value of the Wholesale Price Index (WPI) on a year-on year basis. It effectively measures the change in the prices of a basket of goods and services, in a year’. But let’s understand it in layman terms. Inflation is the result of too much money in the hands of the public, for too few goods. More simply it can be said that when spending is huge and returns are less, then inflation occurs!

In the Indian economy, the spending is very high compared to the earning (in terms of everything). That’s why, the inflation menace remains uncontrollable! For example from the year 1990-91 to 2013-14, government spending increased by around 33 times whereas the GDP just increased about six times! That means that there is an imbalance between government spending and its earnings or asset building! It has nothing to do with global conditions, natural calamities although those have some effects which can be reined in! It is entirely the failure of Government policy making that leads to such imbalance!

Let me give a small example. For a ceremony, a person required a nail costing Rs.1….He telephoned the secretary, who in turn asked to take approval of the President through the proper channel. Then a requisition was made, the person hired a rickshaw to go to the secretary for recommendation and then approval from the President. After that he went to market and purchased the nail, went back to ceremony place and fixed it. The bill of nail purchasing amounted to Rs 100/- including all expenditures. This is the cause of uncontrollable inflation! Too many systems and too little delivery!

Over the years, Indian governments have made various systems, committees, GOMs, EGOMs, departments etc. which has led to a large number of government personnel but limited governance. Thus, deliverance of simple governance is very costly and is one of the main reasons for the inflation menace.

Second, the policies of the Government should be placed under the scanner. If the government spends mindlessly without ensuring the end-product, how can the balance can be maintained? If 20 lakh crore rupees are doled out to the corporate sector as tax exemption, without checking the quantum of employment they generate, then this is definitely wastage of government money! If you spend on providing subsidies and the intended beneficiaries are not benefited, isn’t the government money wasted? For the sake of votes, governments declare many subsidies and sops but never implement any mechanism to ensure that the beneficiary is the real benefactor! Isn’t this a waste of money? If billions of rupees are spent in the name of the public for employment generation, community development, upliftment of the down trodden and yet no asset is being built, no development is visible at the ground level, then it is just a waste of public money! If such wastage of money will be allowed, then how will the government control inflation? Isn’t this indiscriminate wastage of money, the reason behind inflation?

Fortunately, India now has a Prime Minister in Narendra Modi who realizes that inflation is not an economic issue, but a political issue. He sticks to his formula of minimum government and maximum governance. He has outlined his agenda firmly, ensuring that authority goes along with responsibility and accountability.

India is a developing nation. That’s why it is also a borrowing nation. What is required now is to lower the borrowings. To lower borrowings, our country must start earning. For India to start earning it is required to ensure that the government aids are reaching its true beneficiaries and beneficiaries use these aids productively. For example if there is a subsidy, the subsidy should directly reach the benefactor without being siphoned away midway and then beneficiary is uplifted. If tax-exemption is given to the corporate sector, it is necessary to audit how much employment they generate and how much infrastructures is built. If you give aid for education, ensure real education is imparted to the real benefactor.

These are really governance things. That means good governance, accountable administration and responsible policy framing are the answers to all such menaces which include inflation. Being a month in office, Narendra Modi has exhibited the strong resolve to work in this line. Hence, one should be hopeful that Narendra Modi will not only curb the inflation menace but also build the nation in such a manner that it would become a strong, stable and prosperous country in the global stage!


A civil engineering professional but also is keen observer of current affairs, politics, socio-economical issues, spiritual & cultural issues. Contributed lot of articles in various web-based on line magazines & well appreciated also. In free time, transforms in to activist mode in educating & awaking people on the meaning of democracy, citizen duty to society, nation & Constitution. Love to debate in any issue with open mind. Contact email id-achary.bn@gmail.com

Posted by The Indian Economist | For the Curious Mind