By David South, Development Challenges, South-South Solutions
SOUTH-SOUTH CASE STUDY
Despite the global economic downturn, many countries of the South are seeing rapid economic growth. That can have a down side: inflation (http://en.wikipedia.org/wiki/Inflation). Inflation can be caused by variety of factors – too much money chasing too few goods, deliberate government policies to increase demand for goods and services, environmental disasters creating scarcity, or poor investment in infrastructure straining against rapid economic growth. But when it gets out of control for life-essential goods like food, then people need solutions to survive.
In India – home to more poor people than all of sub-Saharan Africa – rising inflation has prompted the Reserve Bank of India to raise interest rates, which in turn leads to more expensive loans and credit, just when funds need to be borrowed to invest in infrastructure improvements for the country.
India’s finance minister, Pranab Mukherjee, has warned that the rising interest rates necessary to fight inflation will hurt India’s economic growth.
India has seen inflation jump from single digits in 2008 to double digits this year. Consumer price inflation for industrial and farm workers in India rose by 14 percent, government data show – up from 5.51 percent in January 2008 (It hit 16.22 percent in January 2010, according to the Indian Ministry of Labour).
And it is the poorest who suffer the most from inflation. Inflation in India has led to worker protests for wage increases and rising prices for essentials like food: a life-and-death issue for the poor.
Other countries across the South are also experiencing high inflation, the worst being Venezuela. India has the highest inflation after Venezuela’s 32 percent rate, according to Bloomberg data compiled from 82 countries.
The UN’s trade and development body, UNCTAD, has called for new measures to tackle inflation. “In the past few decades, monetary policies have been more and more gradually based on inflation targeting,” said Supachai Panitchpakdi, secretary-general of UNCTAD. “I see there should be other instruments to contain inflation rather than monetary policies.”
Frustration with inflation has even been taken up by India’s vibrant entertainment industry, Bollywood (http://www.bollywoodworld.com).
The song “Mehangayi Daayan” (“The Inflation Witch”) in a film produced by acting star Aamir Khan has the lyrics, “my husband’s earnings are good but his second wife — inflation — is eating them up.”
Indian marketing consultant Suhasini Sakhare (http://www.suhasinisakhare.com/index.php?option=com_content&view=section&layout=blog&id=2&Itemid=12) from Nagpur has called for Indian consumers to be empowered, just as farmers are with the successful e-Choupal web portal.
E-Choupal (http://www.echoupal.com) has developed a reputation for both controlling prices and increasing incomes for poor farmers. Started in 2000 by the major Indian company ITC Limited (http://www.itcportal.com), it links farmers to the latest prices for products including soybeans, wheat, coffee and prawns.
E-Choupal works through computers set up in rural areas. It has built one of the largest internet initiatives in rural India, reaching 4 million farmers in 40,000 villages. It does this through 6,500 computer kiosks located in the homes of farmer-coordinators called Sanchalaks. The kiosks offer weather reports and the latest market prices, important scientific developments, risk management advice, and help with sales and marketing. The computer is in the Sanchalak’s house and connects to the internet by telephone. Each computer can serve around 600 farmers in the surrounding area.
Indian agriculture suffers from being very fragmented, with poor infrastructure and an army of middlemen looking to get the best price for themselves at the expense of farmers and consumers. Indian farmers are heavily in debt and plagued by a very high suicide rate as a result (http://en.wikipedia.org/wiki/Farmers’_suicides_in_India). This agricultural crisis has a direct impact on India’s ability to meet its development goals and lift many millions more out of poverty in the future.
E-Choupal sees itself as creating a “virtuous circle of higher productivity, higher incomes, enlarged capacity for farmer risk management, larger investments and higher quality and productivity.”
E-Choupal has increased yields for farmers, reduced transaction costs, and raised the quality of output leading to rising farmer incomes.
It is clear from experience in other countries that better access to price information helps control price inflation. E-Choupal has the advantage of providing both information and the means to access it: a big problem in rural India. Most poor Indian consumers do not have access to the internet and make food purchases from small vendors, whom they must trust to set the right price for products.
Online, there are plenty of price comparison websites for Indians (http://explore.oneindia.in/internet/portal/comparisonsites): computers, electronics and household goods (http://compareindia.in.com) for example. But this is of no use to poor Indians without access to the information.
Economic commentator Paranjoy Guha Thakurta told AFP of the political dangers: “There’s a huge amount of discontent and anger across the country and certainly among the poor. Speak to the person on the street and their biggest problem is inflation.”
- Olam: A global food supply company in ‘agri-products’ that got its start in Nigeria. It shows how a Southern brand can grow and go global, and overcome the difficulties of cross-border trade. Website: www.olamonline.com
- Model Village India: A pioneering initiative is reviving impoverished rural villages. Drawing on self-organizing methods used in India since 1200 BC, the Model Village India is based around India’s democratic system of Panchayats: a village assembly of people stemming back to pre-colonial times. Website: www.modelvillageindia.org.in
- e-Choupal: Hope or Hype? By Neeraj Dangi and Harjit Singh, American Journal of Economics and Business Administration 2 (2): 179-184, 2010. Website: http://tinyurl.com/3682r3p
- A book on the consequences of inflation when it gets out of control: When Money Dies: The Nightmare of the Weimar Hyper-Inflation by Adam Fergusson. Website: http://www.amazon.co.uk/When-Money-Dies-Nightmare-Hyper-Inflation/dp/1906964440
- The American National Inflation Association: A website with educational videos and resources on inflation. Website: http://inflation.us
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