Describing the current rate of inflation as painful, a top adviser to the Finance Ministry today suggested distributing foodgrains for the poor in small batches, as releasing them in bulk could lead to misappropriation by unscrupulous elements.
"Foodgrains should be released in small batches rather than in bulk so that it does not get monopolised," chief economic adviser Kaushik Basu said at the 12th Dharamnarain Memorial Lecture, 2010.
He said distributing foodgrains in small amounts would also lower the prices of these items.
"Sell it in small batches, so that those who pick it up and may sell again are numerous, and they are competing with one another and prices will be lower," Basu said.
He said foodgrains should be sold to the poor at very low prices.
"You just open the door and sell it at a very low price or zero price," Basu added.
Following a Supreme Court directive, the government on Thursday decided to release an extra 2.5 million tonnes of foodgrains to states for distribution among the poor, but it will not be free.
"As an interim ad-hoc measure, pending a final decision on the issue, the government is releasing an additional quantity of 2.5 million tonnes of wheat and rice to the states at a BPL price for the next six months," Food and Agriculture Minister Sharad Pawar told reporters after a meeting of the Empowered Group of Ministers.
The meeting of the EGoM, headed by Finance Minister Pranab Mukherjee, came two days after the Supreme Court slammed Pawar for calling the court's August 12 directive on the issue as a suggestion.
On August 12, the apex court had orally observed that the government should ensure free distribution of foodgrains to the poor, instead of letting them rot. However, in the written order, the court said, "The government shall supply foodgrains to the poor at a low cost or no cost."
Basu said inflation is painful, but advised against strong monetary and fiscal policies to combat it, since it will add to unemployment.
"It (inflation) is painful, it is difficult, but taking strong fiscal and monetary measures leads to side-effects like unemployment," he said.
Despite moderation from over 20 per cent in late last year, food inflation still remained at an elevated level of 10.86 per cent for the week ended August 21 this year.
Basu favours more flexible labour policy to allow freedom for companies to hire and fire workers.
"We should allow for hiring and firing of workers and have a social security system. Even if you don't get a social security in place or keep it as it is, it is better to have easier hiring and firing, because there are some people who are not fired because they were not hired."
Once this kind of flexible labour policy comes, he said wages will rise, but so will inflation.
"Once you bring the policy into effect, I expect wages to rise, inflation to rise."
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