By Jaison John
There has been a lot of hullabaloo over price rise during the past few months. But, it seems, nobody is serious about understanding the problem in its real sense and stop-gap arrangements are being resorted to tackle an issue so big and disturbing. Now, the government is trying to solve the issue by making some shoddy moves, but this will boomerang on the country at a later stage for which we will have to pay a huge price at later.
Before we go into the intricacies of the issue, we should understand what is price and how it gets changed? In a market-oriented system, price of a product is determined by supply and demand. Basically, a balance is achieved between what people are prepared to supply and what price people want to buy. This is referred to by economics as a ‘market equilibrium’ price. As the price of a product rises, the quantity which will be supplied also rises and the quantity demanded falls or vise versa. The market price will rise or fall until the quantity supplied or demanded is the same, or in equilibrium.
It is important to note that, supply is what people are prepared to sell at certain price. While supply is influenced by production it is not always same as the production. Demand is not how much people would like to buy, nor what they should buy for a healthy diet — it is how much they are prepared to buy at the market price.
Then, how will you control the price of commodities effectively. The answer is very simple — either you add more supply or reduce population. But, what is happening in our country is an altogether different scene. On the one side, the government is increasing the minimum support price (MSP) of commodities, on the other it wants to control prices. When the government decides to hike the MSP to please vote banks, the price of the commodity will definitely go up.
Price of everything can increase — from electricity charges, FMCG products, salaries, fertilizer prices, labour costs all these can go up. So, there is nothing new in commodity prices going up. There is no written rule that prices of vegetable or any essential commodities should not increase? Change will not happen to such products unless all the parameters are not changed.
An FMCG product can be sold in market with an MRP which can be decided by the manufacturer while the farmer is forced to sell his products at the market price. This scenario may lead to a big shift in farming or we will hear more stories of farmer suicides.
