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Inflation

I have come across article of Mr. Mahesh Vyas published in
The Times of India on 26.20.2011. There is a parallel article over the same
page title “Balancing Act” I will like to comment over them. I feel that people
do not feel gloom in India as there is no gloom. India at present is having
safe and sound economy except the case of rising inflation.
It seems that the RBI is taking decision on conditions prevalent
today. At present USA has not gone into double and Europe is yet to default so
neither RBI nor the ordinary people in India are feeling any pinch but suppose
the western markets come under pressure. The European states starts defaulting
and USA goes into recession; what contingency plan India has to deal with such
a situation?
The interest rate hike by RBI will ultimately hurt growth
which in terms means lower than anticipated revenue for the government but the
government cannot control its expenses even though it may reduce its revenue.
The policy planner have already promised moon to the people and several states
going under election more soaps will come forward. Where will the money come
for all these plans? The obvious course will be more budget deficit and more loans
by the government which means more inflation and hardened interest rates in
short a vicious circle of interest rates and inflation or simply a interest
rate prices spiral.
There can be an alternate plan of action also in which the
government agencies can make their planning more innovative and bring down
subsidies while increasing coverage of the schemes. Efforts can be made to
secure high rate of growth with low inflation. This can be done by selectively
targeting the commodities subject to huge fluctuation in prices. The growth model
of high growth rate with low inflation will mean more government action. This
will increase the responsibilities of the government.
The food security act and NREGA can be made innovative to
reduce subsidy and increase coverage of the scheme. There will be need to
include trade unions and traders unions to bring in the solutions for averting
major price hikes. The trade unions can also help in this matter as the
commodities market usually employs unorganised labour. The labour unions may like to increase its
membership and the government may like to avail of their services for quick
disposal of essential commodities from one market to another. The unorganised
labour can also act as small vendors and open up kiosks at various places
during shortage of essential commodities. Similarly the traders unions can be
made a party to decision making as the traders knows very well how to take
advantage of a situation therefore they can tell how to tackle the situation.
The FDI in retail and other sectors can help bridge the gap
but cannot replace the conventional methods. The high interest rate will help
generate savings for growth and the government seems to be inclined to find
methods for safe investment of the savings but there will still a need to
increase exports in order to pay for imports. The government infact should
enter into negotiations with the troubled countries to increase exports as well
as imports or simply the stimulate international trade rather than to curtail
it.
I am sure there is a way of low inflation but high growth
rate at least in long and medium term.

Railway Revenue

Indian railway is
dragging its feet from fare increase. No citizen wants a fare increase but
every citizen wants railway to increase its services towards people. The
newspapers details do provide information about the finances of the railways.
It provides the information that railways earn major part of its revenue from
freight charges. The minor part comes from passenger fare and among the
passenger fares the major part comes from low fare seats.
Railway can increase its revenue from other methods also. It
can increase the length of its train by increasing the length of plate forms.
Duranto trains can help in this matter. This type of trains running between two
stations can increase its load. Railways have to increase the length of just
two platforms and increase the length of passenger trains. The double decker
train is also a step in this direction. The railway tickets come cheap but
cannot be bought easily at time of rush; by increasing the passenger capacity
of railway trains the railway can earn revenue and also increase services to
passenger by increasing the availability of train seats. Railways can use the
body of train advertisement purpose also but these are all long term plans.
Increasing train fares are short term measure. It can
quickly help generate revenue and finance necessary expenditure for growth and
providing security in trains. Without arrange for finances railway cannot meet
any of its target be it passenger safety, augmenting capacity or development of
west Bengal or other part of country. If
marginal increase in fares do not meet financial requirement of railways then
fares can be increased in stages along with increase in facilities for passengers
and increase in passenger safety.
Therefore I believe that the railways should drop hesitation
and increase the rail fares. It should not gimmick the airways as lot of
airlines are also incurring losses. Airline model cannot be model for setting
fares for passengers. Air lines do not have facility to add wagons to its
train, railways has it. In time of heavy crowd railways should put more wagons
at work in order to generate more revenue rather than to increase fares as
accordingly.
Railways can be provided with more options to increase
revenues provided they are determined to bring in the change and are open to
suggestions from public. The railway has to invite suggestion from people and
own staff as how more revenue can be generated apart from increasing train
fares. The ideas strike the mind as you work with problem. Lot of people
including staff faces lot of problems while dealing with Indian Railways.
Solving some of these problems can generate revenue also. After all what is business,
a solution for a problem?
A businessman usually generates solutions for a problem. It
may be providing with services or goods. If the railways wants to generate more
revenue it will have to look at its problem and ask the question can this
problem solution leads to more revenue.
If the railways wants to appoint consultant it can do so but
in last ten years how many consultants were appointed and how many problem were
solved? Consultants can solve technical issued but here the issues are
strategic and the leadership has to deal with it. Therefore the leadership
should take decision. Additional value generation will yield additional revenue
which can be used for developing the railways and various parts of country like
West Bengal , Doiwala Railway station etc.