Lok Sabha debates inflation policy, voting today

Country won’t tolerate any inflation higher than 3%: Yashwant Sinha

The government dependence on monetary measures for controlling inflation came in for sharp criticism in the Lok Sabha on Wednesday, with former finance minister and senior BJP leader Yashwant Sinha saying the high interest regime was hitting investment in the economy.

Sinha was initiating a discussion on price rise in the House, that saw peaceful functioning for the first time in the current session. The government’s willingness to allow a discussion, with voting, on the issue facilitated smooth discussion on an important issue after a long gap, though the Left parties alleged Congress and BJP had joined hands without consulting other parties.

Quoting UPA chairperson Sonia Gandhi’s remarks in 2005 that futures trading was behind the increase in food prices, Sinha said the government should ban futures trading if it was responsible for inflation. “Everywhere, it is said that we started it. If we started it, we were managing an economy of surplus. Now everything is in shortage, so there is need for another policy. If you feel that price rise is due to futures trading then for God’s sake, go ahead and abolish it.”

The BJP leader also said despite a recommendation from the standing committee on finance in 2009 on forming a Comprehensive Food Pricing and Management Policy, the government had failed to formulate one.

Criticising the proposed move to allow foreign direct investment in multi-brand retail, the former finance minister said this would belie the government hopes and not bring down prices. “Walmart-like organisations have destroyed small shopkeepers and farmers.”

Sinha said the government had put the entire responsibility of fighting inflation on the Reserve Bank of India, which only had monetary policy instruments. RBI had raised interest rates by 4.25 per cent since March 2010. He said this would affect investment and production, bringing the country in the grip of economic slowdown.

The wholesale price index-based inflation was 9.44 per cent in June, while food inflation was at 7.33 per cent for the week ended July 16. Finance minister Pranab Mukherjee recently said inflation was expected to come down to six to seven per cent by the end of this financial year. Sinha, however, made a scathing attack on the government inflation predictions. Stating government economists talk about a new normal, he said, “I would say reject new normal. There is no new normal. This country will not accept inflation of more than three per cent.”

Finance minister Pranab Mukherjee is expected to reply to the debate tomorrow, after which voting on the motion is expected to take place. Communist Party of India leader Gurudas Dasgupta moved an amendment to Sinha’s motion, saying the government had failed to curb price rise.