The price of inclusion

Is there a play-off between equity and efficiency? You bet. If India finds it a challenge to sustain eight per cent economic growth, think political economy. Start with the explanation for food inflation: that demand has surged, especially in the countryside — because of higher food procurement prices, higher wages for agricultural labour (rising faster than the growth rate and inflation), and the employment guarantee programme. Rural folk are using the extra money to eat better; hence the surge in demand for fruit and vegetables, and the different protein foods. Trouble is, no one knows how to deal with the resulting inflation. So you may have benefited the aam aadmi, but a key indicator of macro-economic balance has been flashing red for months.

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