One more argument for the Open Markets

            Considering me and my generation Indian’s have witnessed both the worlds…from the monopolistic surroundings of Doordarshan, Ambassador, Indian Oil, Bajaj Chetak and the national telecom company to the vibrant world of 24 hour news & entertainment channels, cars of all sizes from almost all the major international automobile companies, fuel from wide array of private industries, bikes ranging from Japanese to German manufacturer and cellular phone connections from over a dozen companies. I was always wondering how would have India performed if the famous liberalization of 1992 would have taken place earlier? How would Indians have benefited from the market economy? More importantly I wanted to throw some light on the inflationary issue related to the closed economy.

            On December 14, 1983, for Rs.48,000, Mr. Harpal Singh of Green Park, New Delhi became the first owner of Maruti 800. The keys were handed over to him by none other than, the former Prime Minister Mrs. Indira Gandhi. In 1983 the waiting list on getting a landline telephone connection was 3-5 years and was priced at a fortune. During that time a liter of milk was selling for Rs.2, the cost of onions was Rs.0.50 per kilogram and wheat was retailed for Rs.3 per kg.

            Fast forward 2011: Maruti 800 is phased out but its modern version, Alto is priced at Rs.219,000. Just one of over 10 brands available in this segment. People can get a mobile phone connection in an hour at about 1 paisa (cent) a minute rate. Milk is selling for Rs40/lit, Onion for Rs25/kg & Wheat for Rs13/kg.

            In terms of inflation (compounded): Maruti 800 saw a yearly price increase of 5.5% from 1983 thru 2011 (28 years). As far as telecom is concerned, I am sure I don’t have to give any numbers as everyone knows that phones are cheaper & better. On the other hand price of Milk grew at an astounding rate of 11.5%, Onion at 15% and wheat at 14% annually. To put things in perspective, India’s average inflation, WPI (that’s wholesale Price Index and not Consumer Price Index, mind you) was around 7.6% in 1980’s, 6.3% in 90’s and 8.8% in 2000’s. (RBI)

            Increase in competition, in most cases, will bring in control the rising inflation. Not that it is the ‘only’ solution, but it will be a positive step for the economy in the long run by making producers more productive. My point is, the worrisome trend that we see in the prices of consumer essential items is mainly because agricultural sector is not productive enough and it is being shielded by the government subsidies. True, a rural farmer needs some government assistance, but on the other hand given the opportunity that farmer will love to see his field, flush green with the use of modern technologies. I am all in the favor of a ‘partial’ opening of the retail markets in India. This hopefully, will bring modern technologies to the farmers in India’s rural areas, where indeed they are working hard but without the help of technology, they are not getting enough returns and hence committing suicide because of pressure from rogue lenders with political connections. 

            The partial opening of the retail market will take off some inflationary pressure for the Indian consumers, will help boost the spending in the economy and more importantly will help our hard working Kisan’s (farmers) to feed there families and live a respectable life.