Inflation: A tricky balancing act

Officials in Ramaswamy Venkataraman's Finance Ministry are telling visitors the story of the Flying Horse. A man sentenced to death obtained a reprieve by assuring the king that he would teach his majesty's horse to fly within the year - on the condition that if he didn't succeed, he would be put to death at the end of the year.

"Within a year," the man explained later, "the king may die, or I may die or the horse may die. Furthermore, in a year, who knows? Maybe the horse will learn to fly".

The man, of course, is Venkataraman himself and the horse is inflation. The officials do not say so but they are a sceptical lot and do not evidently believe that the so-called anti-inflationary package will make much of a dent in the rising price curve. They are said to be already working on another package but not apparently with much enthusiasm.

For the first time in many years, the ministry is without an economic adviser. The last chief economic adviser, R.M. Honavar, left last year to head a research institute in Madras. His predecessor, Manmohan Singh, is now a member of the Planning Commission and is only indirectly involved in the ministry's policy-making exercises. The package is thus a hit-and-miss affair.

Casual Attitude:The most upsetting part of this inflation affair is that the ministry does not really think - or did not until very recently - that inflation has reached serious proportions. During the first six months of his office, Venkataraman tried to make light of inflation and gave the impression that he had inherited a legacy of the previous government and the 'damn thing', as an official put it, would disappear in due course. When like Topsy, prices grow'd and grow'd, the minister shrugged his shoulders and passed on the blame to factors outside India, particularly the hike in oil prices by the Organisation for Petroleum Exporting Countries (OPEC) bloc.

In December 1980, when there was a slight let-up in the wholesale price index, his ministry said that things were now firmly under control and prices would start tumbling after the new record harvest was in. This did not happen. On the contrary, prices started going up and have not stopped since. There has been a slight deceleration - not a fall but a slowing down of the rate of increase - since May last but not enough to warrant Mrs Gandhi's contention at her press conference that the inflation rate has been brought down by 10 per cent.