Price-Rise and Elections

Official inflation rate as pub-licised by financial authorities from time to time has little to do with retail market prices. Between March 2004 and February 2014, prices of essential goods and services have risen sharply defying all projections by market analysts. School fees per student have increased from Rs 49 to Rs 280, which is a rise of about 435% in rural areas over nine years. Mango prices have increased from Rs 16 per kg over Rs 70 on average. Price rise for oranges is 285%, black pepper is 236%, beef is 234% and buffalo meet is 232%. Prices for mutton soared by 215%, salt by 187% and moong dal (unwashed) by 195%. Cigarettes have become more expensive by 195%. Average urban prices could be much higher. Prices have stagnated for inland letters and post cards, and have marginally declined for minimum rail fare per adult. Even the price of a transistor radio has risen by 10%. There is every reason to believe that price rise is engineered. In other words it shifts income distribution further against the poorer classes and in favour of more affluent sections.

Regular hike in prices is now part of market mechanism. That elections have impact on market as also on price movement is a fact of life. Election funding is a tricky business and those who donate liberally to political parties mop the required extra money from the market. And consumers pay the price. After all businessmen are unlikely to fund politicians of their choice by eroding their reserves and assets.

The 2009 General Elections results in India indicate that 33% MPs who have assets of Rs 5 crore and above, returned to the Lok Sabha, while 0.44% of those who have Rs 10 lac and below in assets managed to win. Among law makers who had assets ranging from Rs 50 lac to Rs 5 crore, 19% won. 94% among those with assets of Rs 10 lac to Rs 15 lac lost. Centralised campaign funding is a key feature of any dynastic political party, be it the Nehru-Gandhi family owned Congress or the M Karuna-nidhi-Alagiri DMK. Besides tremendous stature in leadership, inflow of campaign finance allows the political, dynastic family to centralise control. Corporate donations to politicians were made legal in 1985. Congress has been the largest recipient of corporate funds. A big chunk of the contributions by corporates to political parties is still being done ‘under the table’. The BJP, with Modi as the model of aggressive growth, may secure as much or more of corporate funds, than Congress, in the coming Lok Sabha elections. A BJP victory may be more beneficial for businesses as it would translate to a higher growth trajectory in the short to medium terms while emphasising less on social welfare schemes.

They talk of price-rise for the sake of talking. It’s now a proven fact that all their noises about price-rise and promise to control inflation are aimed at playing with the gallery. With the 2014 General Elections approaching it is now the season of corporate funding to politicians. And more electoral funds mean more volatility in price situation. The prospects of lowering prices even in areas where the government exercises exclusive control, seem bleak, because political parties, national and regional as well, need money.

Vol. 46, No. 30, Feb 2 - 8, 2014

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