Aam Admi's worries grew with spiralling prices

The impressive growth of economy failed to contain inflation

Almost throughout the year, all the three and Chairman of the chief economic advisory council to the Prime Minister C Rangarajan kept giving new dates and figures to check inflation. Each time, needless to say, they failed. The `aam admi' - the centre of Congress' poll plank - was a picture of distress all through the year as his burden on the pocket kept going up.

The opposition parties, out to put the government on the mat, cried hoarse over the `bankruptcy of policies' to curb prices but the UPA government kept failing the common man.

Most part of 2010 did witness impressive revival in the growth momentum of the economy but the phenomenon of high inflation especially spiralling food prices caused multiple worries to the government on the economic front.  

Though statistically 2010 experienced some mellowing down in high flame of inflation compared to second half of 2009 the common man virtually reeled under the mounting prices of essential commodities especially key food items and vegetables. As 2010 draws to a close, the abnormal increase in prices of staple kitchen vegetables like onion, garlic and tomato has virtually brought tears in the eyes of common man.

The rising spree of food inflation-- now hovering at the double digit level of more than 12 per cent-- is increasingly putting pressure on the overall inflation, which stood at 7.48 per cent in November.

What is worrisome is that if the rising trend of food inflation is not curbed in coming months the ballooning of inflation may disturb the overall fiscal equilibrium of the economy thereby hurting the ongoing nascent economic recovery.

An analysis of data shows that all throughout 2010 most of major food items like cereals and pulses as well as vegetables witnessed spiralling rise in prices.

Why is food inflation rising?

The government says the ongoing rise in prices of key food items is because of continuing of demand supply mismatch due to disruptions in the supply chain following many parts of the country experiencing heavy rains.

The other major factor that is contributing to the rise in food prices is the growing demand for food articles in the wake of rise in disposable income level of people at large due to impact of growth momentum of country's expanding economy.

Though the government is hopeful of reining in overall inflation to 6 per cent by March end 2011, there is a big question mark whether the government can achieve this ambitious feat. Many apprehend that 2011 may witness continuation of high inflationary pressures due to various domestic and global factors.

The domestic climatic conditions, external market conditions, logistics deficiency, the phenomenon of hoarding and ineffective agriculture policy are being cited as the major causes for the prevailing high inflation.

The government is already under pressure to hike key petroleum products like diesel and domestic LPG with global crude oil prices hovering around 95 dollars a barrel.

Any rise in diesel price will have a cascading effect on general price line. Thus as the economy bids adieu to 2010 there is a big question mark as to whether the inflation can be reined in at targeted 6 per cent by March end 2011.