The NDA Government, which succeeded an inefficient regime, has to do a lot to give succour to the people of India
It is open loot through the free pricing mechanism. The wages in India shrink; one pays more and buys less. little is left in the pockets of an average wage-earner but the profits of the companies in the fast-moving consumer goods, milk, housing, pharmaceuticals and other areas rise phenomenally. The lack of a social mechanism to check the process of fixing the prices is playing havoc with the economy. The companies are thriving by raising prices of every product as a new product batch enters the market. Some FMCG companies have raked in a mean profit of 82.04 per cent during the past five years. The loser is the consumer and the Government, as in most cases the latter is paid taxes at the base lowest prices. Wage increases have either been in the range of three per cent or remained stagnant.
Free market does not mean free loot of the consumers. The myth spread by Manmohanomics that nobody should interfere with the price-fixing mechanism of the producer is playing havoc. Inflation indices give an erroneous view. The recent ‘slump’ in wholesale and consumer indices does not indicate fall in prices. The indices indicate that after the run-away inflation of over 44 per cent to 46 per cent during since 2009-10, the rate of increase has slowed over the already prevailing high prices. Not a commodity has become cheaper.
The Narendra Modi Government, having succeeded an inefficient and ineffective regime, has to do a lot to give succour to the people. It is needed to be done not only for economic reasons but also for social and political purposes. High prices weaken not only the economy and the currency but also the social fabric and leads to severe law and order issues.
Another aspect often not talked about is that it robs the Government, the largest consumer, of sizeable revenues. This is the surmise of a paper produced by the lok Sabha Secretariat in September 2013. It says, “The rising prices adversely affect the economic conditions of fixed-income groups, particularly wage earners. When prices are high, the value of money is low and vice versa. There is always a lag between price rise and money-wage adjustment.” Poor people in the unorganised sector are hit the worst because their income is not linked with price index. However, business firms gain during price rise because the value of goods in their stock rises continually.
“Inflation also encourages hoarding of essential commodities, leading to speculation and generation of black money.” In short, it is defeating the objectives of the NDA Government. The companies have devised novel ways to increase the prices. According to financial services company, Edelweiss report, fora popular soap brand, the weight of a strawberry variant pack was reduced from 100 gm to 90 gm. A Kolkata-based firm raised the price of its antiseptic cream by 7.1 per cent, while an FMCG increased the prices of its toothpaste brands from five to 13 per cent. Another company increased the price of its detergent to about five per cent. The firm’s shampoo recorded a price rise of 5.1 per cent in December 2012, Edelweiss noted.
Annually, the prices are being raised in this manner and the weight or volume is being reduced. The rise in prices, however, comes at a time, Edelweiss said, when commodity prices have been softening. “In the last few months, the prices of key inputs, palm oil and copra, fell 30 and 20 per cent” respectively. It is just not the private companies, but even the public sector organisations like railways or road transport corporations are unethically fixing fare and freight rates. They increase passenger fare and freight charges on the pretext of higher fuel prices, but when fuel costs come down, they do respond accordingly. The railways has also raised fare phenomenally through the so called ‘premium’ trains, run with rejected coaches.
The private sector does not care for niceties. For it, high-profit is seemingly a birth-right. How much profit is realistic or should ethically be thereIJ The liberalised economy does not have a yardstick. The socialist economy meant either no profit or a realistic profit up to seven to eight per cent — something even the capitalist economy accepts.
A study by Indian Journal of Applied Research, Rajkot, by Alpa Joshi (June 2013) finds that three well-known consumer firms have a mean profit after tax of 82.04 per cent. Individually, from 2008 to 2012, the profit of one company varied from 87.2 to 142.7 per cent; of another, 104 per cent to 156 per cent; and of a third, 15.7 to 18.7 per cent. Is this not exploitativeIJ The FMCG sector creates employment for about 30 lakh people, mostly in low-paid jobs in downstream activities. The total FMCG market is in excess of Rs850 billion. Its wage bill is one of the lowest, though.
One major FMCG entity has virtually taken over many contenders to create a monopoly and beat the competition. All these companies have penetrated different political parties to sabotage policy-making. They forced the UPA Government to dismantle the Monopolies and Restrictive Trade Practices Commission and create a lame duck Competition Commission.
The NDA Government has to take a call on these widespread malpractices. Society has a role in checking the weird behaviour of any of its sections. Corporate sovereignty is not utilised when it comes to delivering social responsibilities. It is used only for exploiting society. All companies must be dealt with, and with a heavy hand, for rampant malpractices which have become the rule. The phenomenal loot must be stopped.