The  voluble mockery of the poor by the congress led Planning Commission by mentioning  the latest poverty line of Rs. 3,905 for rural areas and Rs. 4,824 in urban areas  is nothing less than  a ‘cruel sadistic joke' If one converts the figure into per person per day  it amounts to Rs. 26 and Rs. 32 respectively.

Unless the government decides otherwise by having stringent price and inflation control measures in place making people to live comfortably under such above mentioned guidelines. This is only possible with a balanced ‘Incomes policy’ in place.

It is wrong to consider in India that inflation is essentially a monetary phenomenon, and the only way to deal with it is by controlling the money supply, either directly or by means of interest rates. This view holds that without a totally planned economy the ‘Incomes Policy’ can never work, because the excess money in the economy will greatly distort areas, which the incomes policy does not cover.

What India needs is a well-balanced ‘Incomes policy’ in place. This should lay down wage and price guidelines to mandatory controls like price/wage freezes.  The government can introduce a slew of ‘Tax Based Income policies’, where government a penalty is imposed on those firms that raise prices and/or wages more than the controls allow. This is seen as internalizing the external cost of raising prices and/or wages, solving market failures, which result in high inflation as being faced in India today.

Did you know that ‘Income Policies’ were resorted to in the USA in August 1971 as a response to a very high levels of inflation in the USA? We can learn a lesson or two from  the US in this regard instead of RBI increasing the rates resulting in harming the real economy.

The Government defines tax ceilings, minimum wages and other laws but fails to create a balance between the various income groups, which face a huge disparity between the high and low level income groups. The government has rates of food commodities in place but does not have a mechanism to execute it in reality. The ‘ Super Bazaar’ or ‘ Fair Price Shops’ rates are one example of  governments failure of price control as the market rates are always found to be higher. If the government brings out a well-defined policy and implements it then it has the best chance of being credible and effective in controlling inflation for those sectors of the economy dominated by monopolies or oligopolies. The problem is that in each sector of the economy market forces have formed ‘Mafias’  or powerful ‘Middlemen Consortiums ’  with political clout who enable collective negotiation and monitoring of the price agreements between the consumers and the manufacturers. The middlemen associations in the ‘Mandis’ or ’Whole Sale Markets’  is one example, which reflects largely on the above mentioned issue.

The Price Control Inspectors appointed by the Government are as corrupt as the Food Inspectors, which the nation bears on a daily basis with adulterated food.

The disparity between income groups also lead to inflation as scarce and quality commodities become more expensive and become natural trendsetters for the rest.

India should make price gouging and food hoarding into crimes against the government with very stringent punishment structure. Affective Price control along with Food adulteration laws are needed to set prices. A national commodity wise price ceiling framework should set a maximum allowable price, along with a price floor setting of a minimum allowable price for the Indian market to operate in. Such a structured framework would go a long way in controlling food prices.

We require a  Price Control Act in place as in Singapore. Some of the key features of the act are as mentioned below:

Fix maximum prices, which may include charges for delivery, for the sale of any goods either by declaring the maximum sale price, or by prescribing that the sale price of the goods shall not exceed the price, which they cost the seller, plus a stated sum or a stated percentage of that cost price, or by prescribing the manner in, which the maximum sale price of the goods shall be ascertained;

Fix the maximum charge that may be made by any person for any service in relation to the supply, repair, maintenance, packing, carriage or storage of goods, which shall include the provision of such materials as may be specified in the order;

Fix the maximum price, or prescribe the manner in, which the maximum price shall be ascertained, of any secondhand goods, whether for sale by persons who trade in those goods, or by the private owners of those goods; and

Prescribe what shall constitute a wholesale or retail quantity or transaction either generally or in respect of any special class or classes of goods.

Under this section the Price Controller may fix a maximum price or charge for service in respect of any goods for one area, which differs from the maximum price or the charge for services fixed for another area in respect of like or similar goods.

 (a)declare any goods or classes of goods to be controlled articles;

(b) prohibit the purchase, sale or barter of any controlled article for the purpose of resale in or export from any area specified without his written permission;

(c) prohibit or control the import or export of any controlled article for the purpose of resale in or export from any area specified without his written permission;

(d) prohibit or control the movement of controlled articles between any specified areas;

(e) limit the wholesale or retail dealing in any controlled article to persons holding licenses or permits therefor under this Act or any rules made thereunder;

(f) restrict the sale of any controlled article either by any individual or generally by all persons dealing in the article in any manner in, which he thinks fit;

(g) prescribe such forms as he may think necessary in connection with the matters referred to in paragraphs (a) to (f); and

(h) declare any act or omission in contravention of the provisions of any order to be an offence under this Act and prescribe penalties therefor provided that no penalty so prescribed shall exceed the maximum penalty prescribed by section 16 in corresponding circumstances, which is Life Imprisonment.