21st March

Think Bold

The article talks about the much needed measures to be taken by RBI as the WPI reaches 0.44% compared to 2.43% the week earlier. The caveat of deflationary trend would project a wrong picture which needs to be corrected on urgent basis by RBI.

All eyes are now on RBI to announce further rate cuts to prevent deflationary trend. However, we need to see that WPI is measured in comparison to the prices a year earlier in the same week and thus the effect of higher base is clearly visible. When we see CPI for industrial workers standing robust at 10.45%, it shows somewhat different picture although with a two-month lag. But the gist here is that we are in a disinflationary trend which is better then deflation. Deflation is an indicator of demand contraction which is clearly not the case since the demand in sectors like cement, steel and automobiles is picking up. The problem is somewhere else. WPI doesn’t give much weightage to food prices which is currently suffering from inflation of 7.24%. Recent drop in petrol and transport costs would take time to percolate down and the correction would be seen thereafter. 

But RBI cannot wait until the correction happens. Market sentiments are as good as reality. Although RBI says that there is enough liquidity in the market, it needs to cut down the rates and prevent the deflationary trend currently gripping the market.

Red Herring

The article comments on the possibility hinted by CPM’s Prakash Karat recently to join a future non-Congress non-BJP led government. 

As Karat expresses his disinterest to the top job, it is evident that CPM wants to shed off the old habit of exercising power without responsibility. With several political parties joining the third front with only one objective i.e. to hit the hot seat, the PM post, its no wonder that Karat has hold back the argument of the PM candidate from the Third Front. It is better to leave that debate post election. But Jyoti Basu, haunted by the famous 1996 blunder, is asking CPM’s ideological sticklers to become power savvy. While he backs Mayawati for the top post, he himself is much more eligible for the seat with a brilliant CV on his hand and stability of 25 years unmatched anywhere in the nation. However, if CPM comes to the power, it would only do bad for the nation as the party would push the nation to the pre-1991 regime where rich would be taxed for being rich, public money will flow, privatization would die and US would be sidelined along with the nuclear deal. All this would lead to nothing but another Cold War.

What is needed is post-poll backing of Congress in order to bring the revolution. Karat is not short on vision just as Marx but then what that vision leads to is anybody’s guess.