Inflation, inflation, inflation!!!! Everywhere you hear about this in India 
So, what is it all about this inflation which pinches peoples of all spheres very hard – from the you and me as common man to the business man owning hotels in sub-urban Chennai, to the leading auto makers, the stock brokers, to the lending private and public banks to the Indian government itself. Let’s look at this right from the common man’s perspective in this article.
Common man: As you all know, there has been steady increase in prices of all essential commodities in the past couple of months from milk, vegetables, fruits to the petrol costs. Food inflation has been persistently hovering in the higher teens. Increase in crude prices internationally has led to the overall domino effect in the increase of many essential commodities. The increase in petrol prices not only increases your monthly fuel expense but also same amount of increase in the transport of various essential commodities. The local wholesale and retail vendors add this to the essential commodities and pass it on to the common man. Also, after the deregulation of petrol prices by the government, the oil companies directly tweak the prices based on the international markets. So, in this regard the government has very little room for any change. The international crude prices been increasing due to the slight sense of recovery, though temporary in the developed countries like the US and northern Europe.
So, since inflation is something which hits the common man and the poor in particular are heavily hit, this immediately becomes a political issue. So, government has to be seen as being doing something. This is where RBI comes in. The theory is with increase in interest rates, the demand could be tempered and thus bringing down the inflation. This theory hold good if the pressure point is in the demand side. But, inflation in India is mainly due to supply chain which has just crumbled down. This needs some structural changes like effective management of the public distribution system, proper world-class storage facilities for all essential commodities and stricter rules for all types of hoarding.
Public Distribution System(PDS): State governments use PDS to supply rice, wheat and other essential commodities to the people below poverty line(BPL) in their respective states. This chain of distribution system is pathetic and dysfunctional in many states. So, the poor are forced to get the essential commodities from the private retail outlets. This not only is a burden on the poor, but also increases the demand in retail outlets resulting in overall increase in prices. So, the states has to reform their PDS and strive for better quality and low wastages in PDS. Also, an universal PDS, meaning everyone in the state in entitled to this ration card and particular quantity of rice, wheat etc. has to be put in force. This helps in avoiding duplication of ration cards and wastage of grains. This has been followed successfully in states like Tamil Nadu at present. Also, the prices of food grains through PDS should be uniform throughout the country. For example, illegal hoarding takes place from one state selling grains at Re.1/ Kg to another state selling grains at a higher price. So, this kind of hording can be avoided. Corruption of PDS employees also is a reason for this. They have their illegal ways with the middlemen in hoarding the grains.
Storage facilities: World class storage facilities has to be in place for food grains, milk, eggs, meat and other essential commodities. High technology storing facilities can be used in this regard. Public- Private partnership can be used and a involvement of FD in retail can be helpful to cut down on wastages due to inadequate storage facilities. Of late, we are witnessing grains rottening due to this particular hamstring in the government distribution system.
Strict rules on hoarding: Hoarding as was pointer out before was an critical impediment when it comes to food inflation. Government employees working in PDS has to be aware of the hoarding and take strong action against illegal hoarders with checkpoints at various places along state borders. Big retail corporations hoarding commodities to create artificially inflated demand has to be punished by the government. Futures markets on commodities has to be properly monitored and any sudden spike in Futures market has to be analysed on their cause.
These are some of the important structural changes to the distribution system which could bring down food inflation to a great extent. But this needs courage and conviction from both the states and the union government.
