Manas Chakravarty: How to beat inflation

WATCHWORD

As you all know, inflation has shot through the roof. Editorials have dissected and analysed the reasons for the steep rise in prices, the talking heads on television have waxed eloquent about it, central bankers have reacted with shock and horror at the return of a dragon they thought they had disposed of permanently.

But nobody has bothered to find out how you will be affected, and there has been no serious attempt to advise people how to change their spending patterns to get the biggest bang for your buck. I propose to remedy that defect in this article.

We must go about this thing in a scientific manner. Consider, accordingly, the index of wholesale prices for the week ended July 31, 2004, where we're confronted with the following piece of purple prose, "The index for 'Food Articles' group rose by 0.4 percent to 186.7 (Provisional) from 185.9 (Provisional) for the previous week due to higher prices of tea, maize and bajra (3% each), urad and fish-inland (2% each) and wheat, gram, fruits & vegetables, masur and moong (1% each). However, the prices of ragi (2%) declined."

Clearly, therefore, you need to change your diet in tune with the price trends. The obvious thing to do will be to stop drinking tea and eating maize, bajra, and inland fish, substituting these items in your diet with ragi, whatever that may be.

Thankfully, non-vegetarians don't have to beat inflation by having ragi every day. The WPI figures for the week ended July 24 show that the prices of fruits, vegetables, and "poultry chicken" had risen by 4 per cent each.

However, the price of eggs had declined, making it and non-poultry chicken, a viable alternative to inland fish. (Note: the economic advisor to the ministry of commerce and industry believes that not all chickens are poultry""presumably, there are some feathered reptiles out there masquerading as chickens.)

Man does not live by food alone""he also needs fodder for his animals and seeds for his crops. Farmers have been having a tough time recently, with the price of fodder shooting up by 7 per cent in a week.

What's more, niger seed prices went up by 3 per cent, while rape and mustard seeds cost 2 per cent more. The best that you can do, if you are a farmer, is to use gingelly seed, whose prices have risen a mere 1 per cent. You could also feed it to your animals, while at the same time using it to produce""um""gingelly.

Among "manufactured products," the price of skimmed milk powder fell by 3 per cent, while cotton seed oil prices fell by 1 per cent. In my opinion, you would do well to stick to gingelly oil, whose prices fell 2 per cent.

What's more, you can now comfortably store your gingelly oil, milk powder and ragi in bottles or plastic containers (prices down 4 per cent each). It might however be more economical to use suitcases for the purpose, because suitcase prices have fallen by 6 per cent.

What should you wear? In the "textiles" group, tyre cord fabric and acrylic yarn are the logical choices, as their prices have fallen by 3 per cent each. Avoid Hessian cloth, whose prices have moved up. Also, do not buy "footwear western type," whose prices have gone up by 1 per cent. Make do with chappals.

Your dream of buying that tractor to commute to work, however, has been nipped in the bud, with tractor prices rising 2 per cent. We recommend you buy an excavator instead, whose prices have fallen 6 per cent.

Our heart goes out to those of you who collect electrodes (up a huge 10 per cent) or skelps, joists, rolls and blooms (4 per cent each). You should shift to stocking up heavy rails (23 kg upwards), whose prices have fallen 12 per cent.

Finally, here is the real bad news. For the week to July 31, potable country liquor prices rose a terrible 12 per cent, while that of "Indian made foreign spirit" went up by 1 per cent. The obvious choice, therefore, is to give up toddy and arrack for whisky.

On the other hand, economists point out that country liquor prices have risen so much because demand has shot up, as people who face a ragi diet prefer to get their calories from the booze.

In short, you can easily avoid the adverse consequences of inflation by becoming a ragi- and milk powder-consuming, non-poultry chicken-eating, gingelly oil-swilling, tyre-cord-wearing, whisky-drinking person, driving your excavator to work and using your spare time profitably by stocking up heavy rails weighing more than 23 kg. It's no wonder the RBI is in no hurry to raise interest rates.

manas@business-standard.com