Low supply can lead to unemployment, Govt needs to intervene, says Prof Krishnaraj

Chandra Prabhu | NT

Bengaluru: Demand and Supply are two of the most important aspects that run the economy. Like wheels on a vehicle, it helps the economy move towards growth.

However, patterns of surging demand and a meagre supply for both essential and luxury commodities has crept in.

Professor Krishnaraj, from the Institute for Social and Economic Change (ISEC) cited different reasons for the phenomenon to occur.

“Supply of essential goods such as vegetables and fruits are affected by the weather and rainfall that lead to shortages of essential goods causing price rise in the short term,” he said.

According to a report by The Wire from March, food inflation in February shot up to 8.66 percent from 8.30 percent in January.

The report also suggested that potatoes, which had a negative inflation rate, had inflated by 12.38 percent. Such happenings are clearly influenced by the weather conditions, and the lack of rainfall.

“Production of Agriculture and industrial production are directly influenced by input price variations,” the professor added.

Luxurious goods, like air conditioners and air coolers amidst rising temperatures have also seen a surge in demand, but a shortfall in supply to meet the same.

“The price rise is due to an increase in the cost of production such as a rise in input prices like petrol prices, electricity, oil, and other intermediaries goods. Low production followed by unemployment will be the impact. “This will ensue as a cost-cutting practice,” Krishnaraj added.

He speculated chances of artificial scarcity by sellers for windfall gains. “They cannot hold for longer,” he added.

When asked if essential goods can turn into luxurious goods, the professor counted on the magnitude of the scarcity of that essential product.

“The water scarcity in Bengaluru gives a good example of this. People shell more money than usual to get water,” he added.

Inflation can impact savings, which gives a domino effect. “There are distress selling of assets to cope with inflation. Non-consumption of required calories of food affects health and nutrition levels among children and women,” he stated.

Intervention of the government bodies in this juncture is necessary, the expert added. “Rationing of essentials, cutting down on GST and curbing artificial hoarding can be a few measures taken by the government,” Krishnaraj signed off.