Bringing down food prices must be the government's first priority. A gamut of factors are responsible for stoking inflation, including the sharp shortfall in foodgrain production last year, the unjustifiably high procurement prices for wheat and the failure to anticipate problems by improving the transportation and availability of foodgrains and food products. The Centre and states need urgently to coordinate their efforts in order to maintain proper supplies and ensure adequate delivery through the PDS. Hoarding is bound to exacerbate shortages and the government must make it known that it is prepared to crack down firmly on traders and wholesalers. Provision must be made in good time for imports to fill supply gaps even though this will cost more after the depreciation of the rupee. One-shot efforts at bringing down potato prices in large cities may buy governments some peace and quiet for a time. But attendingto middle class discontent is not enough. There are wider responsibilities on the food front and they can be shirked only at the cost of much avoidable hardship to the most vulnerable people.

Failure to dampen inflationary tendencies is bad news for the economy as a whole. Not only does a rising rate of inflation negate the benefits of the falling rupee, it adds pressure on interest rates which are expected to harden. And rising interest rates will in turn have an impact on the exchange rate. Although there have been some signs recently that industrial growth could be picking up, it is much too early to think that the economy is going to escape stagflation. The government can choose to wait and hope that better days are around the corner with higher agricultural output and a better commodities supply position. But it should not bet on the rate of inflation coming down dramatically as a result. That would be to assume that things of its own making, such as the fiscal deficit, tax measures and policyconfusion, are not going to play their part in feeding inflationary expectations. The far better alternative is to act now across a broad front to contain inflation.