By raising the prices of diesel and petrol by Rs 3 and 5 per litre respectively and that of LPG by Rs 50 per cylinder, the UPA administration has shown rare courage. This is especially brave in these ominous times of political economy constraints. But beyond the petty politics of power-seeking and power-sharing lies one fact: the price Indians pay for petrol has no relationship with the usual demand-supply equilibrium under which any free economy operates. All developed economies pay more, few emerging economies pay less. Inflation, say political parties, will rise and wreak havoc on the household economics of the common man. There will be strikes by the Left; then by other parties; and, of course, criticism from the BJP.
It is coincidental that the price rise follows the the BJP’s electoral victory in Karnataka last week. Among the many reasons being cobbled up for the Congress loss is the rising inflation rate, which after yesterday’s oil price hike will go up by 0.5 percentage points. How much of this is a cause-effect relationship and which half is the effect leading up to ‘cause-seeking’, I’m not so sure. For, to stay afloat in this Age of the Sound-bite is not easy unless you have a short, snappy and easy-to-digest ‘analysis’ to offer. Hence the popular misconception that inflation was the prime reason for voters turning away from the Congress — and that this ‘morning’ will show the ‘day’ in other states like Madhya Pradesh, Chhatisgarh and Rajasthan.
Opinion in Hindustan Times, June 04, 2008