Home Editorials Transformational Policies

Transformational Policies


The opposition complains about high prices of LPG and fuel, but it does not explain why it does not reduce taxes on these commodities in the states ruled by it, except for the occasional token action. The answer is simple – these commodities are a major source of precious revenue and even basic expenses would be hard to meet without this windfall. As it is, the states are heavily dependent on transfers by the Centre, which has to levy the unpopular taxes.

It is understandable that the opposition is eager to make inflation a political issue, but the people have a better understanding now of the problem than before. This is because there are a lot of services being delivered by the Union Government that clearly impact positively on their quality of life. The Prime Minister has focused on this in his remark against distributing ‘revadis’. This comes from the confidence that his comprehensive welfare programme is beginning to bite and, very importantly, deliver votes.

Inflation, as any economist will affirm, is not the cause of a problem, but the symptom. There are numerous reasons for the prices of particular products to go up – these can also be part of a necessary creative disruption in the market. In the wake of Covid and the Russian invasion of Ukraine, the rapidly integrating world market is in rapid retreat. Small countries with a narrow income base and those heavily dependent on import of essential goods are facing a major existential crisis. In that context, India’s relatively more self-reliant and robust economy is responding much better. Not only is inflation at moderate levels, particularly as compared to even the developed economies, the government policies are looking much beyond mere reaction to the developing situation. The consistently high prices of fuel have ensured consumption remains rational and tax earnings are high. The government would be reluctant to admit this, but that is the reality.

The truth is that artificially low prices do not allow for the manufacture and sale of better quality products at competitive prices. There are those who never cease praising the quality of life in European countries, but fail to recognise the overall cost of living in rupee terms. Transition is never easy and people have begun to realise that, having experienced the transformation that has taken place in the last eight years. The carpers will have to come up with better arguments instead of trying to turn high prices into an emotive issue.