India Insight

Why should the government control inflation?

A labourer pulls a plastic sheet to cover sacks of paddy from rain at a grain market in Chandigarh January 13, 2010. REUTERS/Ajay VermaThe ‘reform agenda’ understood as ‘market-oriented reform’ or giving more space to market mechanism in food and fuel economy seems to have been held up.

The government can not be seen to be doing away with subsidies just as prices are up. Its hand is stayed for now.

But is that enough for say the gross national happiness?

Food and fuel inflation has been in the news for a while.

The government has no short-term control over supply side issues causing price rise like a bad monsoon leading to a low harvest or floods, but it can control the rising demand by reining in liquidity.

It is guarded on doing so for fear of stifling growth.

Is that fair to the poor?

Prolonged inflation redistributes income in favour of the rich (who possess non-monetary assets) as the value of money, whatever little of it may be held by the poor, goes down.

In the text-book understanding of things, it should be bad politics in a country still debating the definition of the “poverty line”.

Less profit is not loss

The times they are a changin’, and indeed they have. For better or for worse, I am not sure, but what has changed is the way we look at making money from money.

Call it what you may — credit crisis, crisis of confidence, financial tsunami, meltdown — erosion of wealth is never good news. And rattled markets often lead to political turmoil and even shift in power.

So what is happening in the markets, economy, and banks; well, with anything to do with the art and science of making money?

from Money on the markets:

Less profit is not loss

The times they are a changin', and indeed they have. For better or for worse, I am not sure, but what has changed is the way we look at making money from money.

INDIA STOCKS/5PCTCall it what you may -- credit crisis, crisis of confidence, financial tsunami, meltdown -- erosion of wealth is never good news. And rattled markets often lead to political turmoil and even shift in power.

So what is happening in the markets, economy, and banks; well, with anything to do with the art and science of making money?

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