Faulty Management Cause of Growth-Inflation Imbalance

In November, the inflation rate rose to 4.78 percent, and it has created several complex problems for the government. In itself, this inflation rate is not dangerous, but the circumstances under which this rate has been recorded rings a danger bell.
For the past some time, the inflation rate was quite low due to recession, but whatever was the rate was due to sudden rise in prices of very essential food items.

Pressure on RBI
The inflation rate in respect of essential food items has reached 20 percent pushing up the overall inflation rate. The problem is that the government does not have any immediate remedy to reduce prices of essential food items. There is growing pressure on the Reserve Bank of India (RBI) to increase interest rates, but there is danger of it adversely affecting the improvement in economy. Second, how effective would the monetary steps be on price rise due to shortage of food items is also being argued continuously.
The manner in which we run our economy is still quite old fashioned. The RBI would certainly take some steps to reduce cash, but the question is when? The government could certainly make some efforts to increase availability of food items, but arresting this price rise can take place only be after the Rabi harvest comes.

Result of Mismanagement
In fact, price rise in essential food items because of shortage that we are suffering from is the result of mismanagement of past several years. While the growth rate has increased due to development in service and industry sectors, the agriculture sector still stands where it was. We don't have any plan for long-term needs.
Food items of our everyday need also keep going through the vicious cycle of less production, more prices and more production, less prices. If a big country like ours would leave its agriculture on the vagaries of the market and the monsoon, crisis will be created.

Affecting Price Hike
There has been less rain this year and prices of pulses have gone up. More pulses would be produced next year and the prices would fall. But when growing pulses would become a less profitable proposition and the rains would be good, farmers would again reduce growing pulses.
The present crisis toward the end of the first decade of the 21st century is warning us that it is necessary to pay attention to agriculture, otherwise people would keep suffering from price hike, and policymakers would continue to work out the complex arithmetic of growth and inflation rate.