TO BRING DOWN INFLATION ESPECIALLY IN FOOD COMMODITIES.
I am surprised that the new government is looking at the same strategy of the previous government in keeping the interest rates up to keep down the inflation. My suggestions for tackling inflation would be :
1. Abolish Forward trading in Commodities, especially Agricultural commodities:
If I remember right Sri. Gadkari just 4 or 5 months after he took over as BJP President wrote a wonderful article on how the prices of commodities , especially food items and cash crops, were artificially kept up due to the 'Forward Trading' in the commodities. He had given a lot of cases of commodities wherein with only a little over 2-3 % of actual delivery of actual material the prices had gone up tremendously due to the balance 97-98% of futures trade in those commodities. So the first priority of the new government should be to abolish the 'FORWARD TRADING' in commodities like metals (GOLD etc), Food items (Rice, sugar etc), cash crops (cotton etc) and scrap the commodities exchange itself. This forward trading is just gambling, where the 'rich' traders swindle the gullible 'poor' traders and the 'farmers'.
2. The second thing to be done is to bring down the prices of diesel and petrol, as this has a cascading effect on the prices of all commodities. This can be done by cancelling all taxes on crude and petroproducts, like import duty on crude imported, central excise in Refinery, CST, VAT etc and levying only one tax called "Excise" @ 15% on basic selling price of the Refinery,: This can be shared at the rate of 10% by central Govt and 5 % by the state. This would certainly bring down the price of diesel and petrol at least by 25% from the present day price or even more.
3. The third is to bring down the loss in agricultural produce due to lack of cold-storage facilities. A huge amount of vegetable are wasted due to the lack of proper storage facilites; Big companies like ITC, TATA etc who are already well spread out in every nook and corner of the country, can be encouraged by way of subsidy or incentive to invest in cold storage plants through out the country, near the areas of production to stop this wastage. This will be a big boost to the farmer who otherwise would lose the whole of his produce; and the general public will benefit due to the lower prices. more
1. Abolish Forward trading in Commodities, especially Agricultural commodities:
If I remember right Sri. Gadkari just 4 or 5 months after he took over as BJP President wrote a wonderful article on how the prices of commodities , especially food items and cash crops, were artificially kept up due to the 'Forward Trading' in the commodities. He had given a lot of cases of commodities wherein with only a little over 2-3 % of actual delivery of actual material the prices had gone up tremendously due to the balance 97-98% of futures trade in those commodities. So the first priority of the new government should be to abolish the 'FORWARD TRADING' in commodities like metals (GOLD etc), Food items (Rice, sugar etc), cash crops (cotton etc) and scrap the commodities exchange itself. This forward trading is just gambling, where the 'rich' traders swindle the gullible 'poor' traders and the 'farmers'.
2. The second thing to be done is to bring down the prices of diesel and petrol, as this has a cascading effect on the prices of all commodities. This can be done by cancelling all taxes on crude and petroproducts, like import duty on crude imported, central excise in Refinery, CST, VAT etc and levying only one tax called "Excise" @ 15% on basic selling price of the Refinery,: This can be shared at the rate of 10% by central Govt and 5 % by the state. This would certainly bring down the price of diesel and petrol at least by 25% from the present day price or even more.
3. The third is to bring down the loss in agricultural produce due to lack of cold-storage facilities. A huge amount of vegetable are wasted due to the lack of proper storage facilites; Big companies like ITC, TATA etc who are already well spread out in every nook and corner of the country, can be encouraged by way of subsidy or incentive to invest in cold storage plants through out the country, near the areas of production to stop this wastage. This will be a big boost to the farmer who otherwise would lose the whole of his produce; and the general public will benefit due to the lower prices. more
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Sir, The Oil refineries should work at a profit, otherwise they will not be able to sustain themselves. But they need not make huge profits as we see now, and the Government take a big chunk of it as 'dividend' too; this is in addition to the import duty and Central Excise it earns. Everybody in the UPA knew where the problem lies, but they did not want to take any corrective steps lest they disturb the big fishes in the oil refining business, you know who ? more
Jun 05
Sri. Arjan, It is not the implementation that was wrong , the whole principle behind the steps taken by the UPA were themselves faulty. I think most of us know that out of the total cost of Diesel and petrol, more than 50% make up of the Import duty on crude, the Central Excise on the refined products, the CST, the state taxes like VAT etc. If the Central Government and the state governments sit together and reduce the taxes by half, then the price of diesel and petrol and diesel to end user will be down by at least 25%. This will bring down the costs of transport of all commodities, right from cement , steel, coal, food grains, vegetable, fruts etc and they will have a cascading reducing effect on the prices of other items too. This does not need an economist TO think it out as it is simple logic; the central government on its part, can first reduce the import duty on crude and the Central Excise and then begin talks with the CMs of the states to bring down the VAT. Let Modiji try it out, and you will see the results in terms of a reduction in inflation in a month's time. more
Jun 05
SIR, LETS GIVE SOME TIME TO THE NEW GOVT BEFORE JUMPING TO CONCLUSIONS. FURTHER, WE JUST CANNOT CONCLUDE THAT EACH AND EVERY STEP OF THE UPA GOVT WAS NOT CONDUCIVE FOR THE BETTERMENT, MAY BE THE IMPLEMENTATION WAS NOT AS SHOULD HAVE BEEN. . more
Jun 05
KV, This is an excellent analysis and solutions you suggested if taken in right spirit by the Government would definitely yield positive results for the growth of Indian economy. However, we need to properly address it so as to reach the right people in the Government. I think Rajendra Pratap Guptaji can help take up the issue with the right quarters. more
Jun 05
I am sorry to say that this government is also going the way of the former UPA government in allowing FDI in e-commerce; big giants like Amazon and e-bay with their big pile of cash will cause havoc in the lives of small time traders in the country. Another thing that needs immediate attention is the prices of diesel and petrol-- instead of continuing the monthly increase of prices as done by the previous government, it should relook into the import duty of crude, the different taxes like Central Excise, CST, VAT etc and try to bring them down, so as to bring the prices of diesel and petrol to affordable level. This will have a cascading effect on the prices of all commodities especially food items, benefiting the common people immediately. But will this fall on sensible ears. more
Jun 05
