People's Democracy

Finance Minister’s Deceptive

Statement on Inflation

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement on November 24, 2011:

THE CPI(M) strongly refutes the specious explanations of inflation contained in the suo moto statement made by the finance minister on November 22. It is nothing but an exercise in deception to conceal the utter failure of the UPA government in checking the relentless price rise.

While referring to global inflationary trends, the finance minister conceals that among the G-20 countries, India has the highest rate of consumer price inflation. Equally appalling is the complacency displayed by the government on the sharp fall of the rupee vis-à-vis the dollar and other major currencies. The depreciation of the rupee is adding to inflationary pressures because India has to import oil and fertilizers.

Rather than protecting the interests of the ordinary consumers by stabilizing the rupee value, the government seems to be catering to the speculative interests who benefit from market volatility. Rupee depreciation is happening mainly on account of FIIs pulling out massive amounts of funds from the Indian capital market. The CPI(M) has been constantly warning the government against liberalisation of speculative capital flows but government has refused to put any curbs.

It is not excessive demand that is fuelling inflation, as claimed by the government, but the hike in prices of a range of goods and services such as petrol and diesel prices, fertilizers, other agricultural inputs, power tariffs, transport charges etc. Cuts in subsidies have resulted in cost push inflation and is having a cascading impact on food prices. The government is refusing to use the public distribution system effectively to provide an alternative source of cheaper food items for mass consumption.

The CPI(M) demands that the government direct the RBI to intervene in the market to stabilize the rupee. Speculative FII flows have to be curbed.

The steps required to check price rise and inflation are:  Rollback fuel price hikes and reduce indirect taxes on petro-products, control fertilizer prices by enhancing subsidy,  universalise the PDS and  prohibit futures trading in sugar, wheat and other essential commodities.

The CPI(M) demands that the government adopt these steps without further delay, to check further price rise and inflation.