People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 28

July 20 , 2008


UPA Govt's Anti-People Policies

Responsible For Price Rise & Inflation

The UPA government's commitment to the Bush administration to somehow push the nuclear deal through is in sharp contrast to its utter callousness and failure to tackle the major issue of skyrocketing prices of essential commodities, which drastically affects the poor, as well as all sections of working people. With an ever-increasing rate of inflation, presently at 11.89 per cent, the working people of India have become victims of what can only be termed the most massive pickpocketting exercise in recent years.

Around 93 per cent of India's workforce is in the unorganised sector with no fixed income leave alone any compensation for price rise and 77 per cent of the country's population is surviving on less than Rs 20 per day. Pensioners and senior citizens, single women and widows, those with a limited amount of savings find that inflation has drastically reduced their real income. The standard of living of middle class families has deteriorated with their having to cut down expenditures.

As it is, India has the largest percentage of malnourished population in the world. Now with rising prices in essential commodities and specifically food items, malnourishment and undernourishment is increasing. Inflation is going to take a heavy toll of our children's health.

According to data collected from different centres in the country the average increase in the prices of some essential commodities are as follows:

Retail Prices: 2004 and 2008


Price in 2004

Price in 2008

Percent Increase


Rs 13 per kg

Rs 19 per kg



Rs 8 per kg

Rs 13 per kg



Rs 9 per kg

Rs 14 per kg



Rs 23 per kg

Rs 34 per kg



Rs 32 per kg

Rs 42 per kg


Mustard Oil

Rs 54 per litre

Rs 77 per litre


Groundnut Oil

Rs 85 per litre

Rs 122 per litre



Rs 15 per litre

Rs 20 per litre



Rs 105 per kg

Rs 118 per kg



Rs 33.7 per litre

Rs 50 plus per litre

Above 50%


Rs 21.7 per litre

Rs 34 plus per litre

Above 60%


Rs 241.49 per cylinder

Rs 300 plus per cylinder

Above 58%


Rs 7 per kg

Rs 10 per kg


The CPI(M) and other Left parties had suggested concrete steps to bring down prices. A major set of demands relates to universalising the public distribution system, to give farmers a better price, to stop private procurement and to increase more essential commodities at controlled prices through ration shops. It is the wrong food policies of the UPA government, which led to the initial rise in the prices of wheat, which shot up to 18 rupees a kilo in some places. Why? Because even though there was no shortfall in production of wheat, the government allowed private procurement of wheat by multi-national companies and corporates. When there was no wheat for the ration shops it imported low quality wheat at almost double the price it paid to Indian farmers. But even that has not brought wheat to the homes of the poor. There is an acute shortage of wheat and rice in the ration shops.



In the name of APL and BPL the poor are being divided.  The APL cardholders do not get any wheat or rice. The BPL cardholders also get less than their quotas. The UPA government just like the erstwhile BJP government, has been giving concession after concession to big capitalists amounting to an average of over 2 lakh crore rupees a year. But when it came to ensuring a universal public distribution system the Manmohan Singh government refused on the plea that there was no money. Foodgrain allocations to the states were slashed by as much as 137.6 lakh tonnes in 2006-07.

The steps suggested by the CPI(M) would have protected the poor and working people from high prices of food items and it would also have had an impact of bringing down prices in the open market. By refusing to accept the CPI(M) proposals the government showed that it is not with the aam aadmi.

The second important demand the CPI(M) had made was to ban future trade in essential commodities. This anti-people measure was introduced by the BJP government in April 2003. Through this measure, speculative capital played havoc in trade in commodities like wheat, sugar and pulses pushing up prices. Under pressure from the Left parties while futures trading in 8 commodities (wheat, rice, tur, arhar, potato, chana, soya oil and rubber) have been banned, futures trading in other essential and agricultural commodities has continued. The recommendation for ban on futures trade in all such commodities has actually been made by two parliamentary standing committees consisting of representatives of all parties including those in the UPA. But this step which would have brought down prices has not been taken by the UPA government.

The third important demand of the CPI(M) was to reverse the price hikes of petrol, diesel and cooking gas cylinders. Because of the taxes imposed by the central and state governments on these products, the actual price the consumer pays is much higher than the cost. Various duties and taxes constitute nearly 55 per cent of the retail price of petrol and nearly 35 per cent of the price of diesel. Although some state governments including the Left-led governments in Bengal, Kerala and Tripura have reduced their share of sales tax on petro-products, the central government continues with an unjustly high tax regime. Nearly 40 per cent of total excise duties colleted by the central government come from the oil and gas sector alone. The finance ministry refuses to give up on this easy means of mobilising resources and continues with high indirect taxes on oil despite rising international oil prices.

The recent hike in the prices of petrol by Rs 5, diesel by Rs 3 and LPG by Rs 50, which was the seventh petro-price hike in four years of UPA rule has further fuelled inflation. The finance minister has himself admitted that the petro-price hike has added to the inflationary pressures in the economy by having a cascading impact on transportation costs, agricultural inputs like fertiliser, petrochemicals, plastics, fibres etc. However, it was the finance minister who did not heed the demand of the Left parties to reduce the excise and customs duties on petro-products. These demands were only partially met by doing away with the customs duty on crude and reducing excise duty by Re 1 per litre. Had the excise duty been cut by a greater amount and a windfall profits tax imposed upon the private oil refineries, the oil price hike would have been unnecessary. However, the finance minister refused to act on these proposals, as it would have meant taxing the profits of private corporates. Neo-liberal dogma has prevented the UPA government from acting on the concrete demands made by the Left parties.

Instead of meeting these demands the government is spreading a disinformation campaign that price rise is an international feature and the government can do nothing. What is the truth?

Is Inflation

lower in India?

The UPA government claims that inflation today is a global phenomenon and prices are increasing in India because they are increasing in countries across the world. The government also claims that that it is doing its best to deal with the situation and has been successful in keeping inflation in India lower than most countries. How true are these claims? While it is true that food and fuel prices have gone up globally, governments across the world are also taking steps to counter inflation. The question is therefore, whether the government of India has been more or less successful in tackling inflation and price rise than the governments in most other countries. The answer is clearly no. Among the major developing countries in the world, the ones, which have experienced double-digit inflation in May-June 2008 besides India, are Russia, Turkey, Indonesia, Pakistan, Venezuela, Egypt and Saudi Arabia. All the other major economies had their inflation rates in single digits. Not only did the advanced economies like the US, Japan and West European countries have inflation rates lower than India, but even major developing countries of Asia like China, Malaysia, South Korea and Thailand; Latin American countries like Brazil, Argentina, Chile and Mexico; and East European countries like the Czech Republic, Poland and Hungary had inflation rates lower than that of India. The UPA government's claim that India's inflation rate is lower than most other countries is untrue. The fact is that the government of India has been among the worse performers in the world as far combating inflation is concerned.

Why the UPA Govt

failed to

tackle inflation?

The UPA government has mainly relied upon monetary steps to tackle inflation, i.e. raising of interest rates by the Reserve Bank of India. The interest rates have been increased in order to slow down credit growth and curbing consumption and investment, with the hope that slowdown in overall demand will bring down prices. This is based upon a wrong understanding of why inflation is taking place in the present context. In recent years, inflation has been driven by sharp increases in prices of essential commodities like food and fuel. Since these are essential commodities, people do not reduce their consumption if their prices go up. Rather, people reduce expenditure on other non-essential items in order to maintain their consumption of essential commodities. Raising interest rates therefore rather than having any impact on the prices of essential commodities, make credit more expensive for farmers, small and medium industries and middle-class borrowers who borrow from banks to buy homes and other consumer items, thereby increasing their hardship. The only way that price rise of essential commodities can be tackled effectively is by the intervention of the government in the market to control prices. However, the prime minister and other economic managers of the UPA government (Chidambaram and Montek Singh Ahluwalia), because of their strong neo-liberal convictions, are opposed to any government intervention in the market and they insist that market based monetary interventions are the best way to tackle inflation.

They argue that government intervention in the market would “hurt growth”, which in other words mean curb the profits of big capitalists, traders and speculators. Since they are committed to the big capital-led skewed growth process in India, which has already created huge inequalities between the India of the rich and the India of the poor, they do not want to take any step, which will upset their “reforms framework”. The most glaring evidence of the UPA government's anti-people and pro-big capital approach was the refusal to act against the steel and cement companies, which had formed a cartel and steeply increased prices. The government, while openly admitting that a cartel was responsible for rising cement and steel prices, did not invoke its legal powers to impose price controls but only resorted to issuing fruitless appeals to the industries to voluntarily reduce prices.  It is this refusal to depart from the neo-liberal dogma and market fundamentalism by the troika of Manmohan-Chidambaram-Montek that has precluded any meaningful step towards addressing price rise and inflation.

causes behind

global inflation

Global inflation is a direct result of the policies pushed by imperialist countries through the WTO and other international agencies, which have dismantled national regulatory mechanisms, and opened up markets to greedy multinationals. The role of US imperialism in the enormous increase in international oil prices which is a major factor in global inflationary trends needs to be underlined. The US quest of grabbing oil resources in West Asia, the  war and occupation of Iraq and military threats to countries like Iran has had a destabilising impact on the international oil market. Devastated Iraq can produce only one third of its potential production of oil. From around $25 per barrel before the Iraq war, the international price of oil has reached over $140 per barrel in recent times. According to a recent report as much as 60 per cent of the oil price rise is due to speculative capital and hoarding of oil by big companies. US-based international financial companies like the Citigroup, JP Morgan Chase, Morgan Stanley and Goldman Sachs, which had suffered huge losses because of the crash in the US stock exchanges, have pumped in huge funds into the oil futures market in order to make speculative profits and cover their losses in other spheres. These financial speculators along with the multinational grain traders like Cargill, Monsanto, Syngenta and fertiliser companies are also responsible for the sharp increase in global food prices, precipitating food crisis and riots in several developing countries in recent times.

Another reason for increase in prices is the diversion of land from foodgrains to bio-fuel in many Western countries primarily the United States, with George Bush doling out huge subsidies for such bio-fuel production. Since the US was a big supplier of corn to the world market, the drop in its exports due to diversion of land has led to higher prices. Thus it is the policies of the United States, which is an important contributory factor to the present global inflation.  

How should India

deal with

global inflation?

Global inflation, particularly the increase in oil and food prices, are a direct outcome of the international finance driven process of imperialist globalisation. Ironically, the UPA government, while failing to recognise the obvious causes of global inflation and taking steps to insulate India from these adverse global trends, has been pushing for even greater integration with the imperialist world order and US imperialism by pursuing the strategic alliance with the US through the nuclear deal. The solution to the problem of global inflation does not lie either in high-cost nuclear energy or in becoming a junior partner of the US. It lies in strengthening economic self-reliance to ensure food security and forging close links with oil and gas exporting countries in West Asia like Iran and pursuing projects like the Iran-Pakistan-India gas pipeline.


The UPA government has violated the assurances of the Common Minimum Programme on the basis of which it had come into existence. Its present policies are no different from those eocnomic policies pursued by the previous BJP-led government. Indeed by following such policies the UPA government led by the Congress is only helping to strengthen the communal forces. The communal forces cannot be fought by pursuing anti-people policies. The CPI(M) and the Left parties had been warning the government to reverse these policies.  Their refusal to do so and their adding salt to the wounds of the people by surrendering to the demands of US through the Indo-US nuclear deal cannot be tolerated.

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