Cost of food for 1.3 billion people.

In extremely good news for the government, retail inflation fell to 3.7% in August from 4.2% in July and the Index of Industrial Production rose by 6.6% in July, compared to 6.9% in June, but much higher than 1% in July last year. Inflation is much below the 4% target set for the Reserve Bank of India (RBI) by the government. Wholesale prices also rose by a softer 4.53% in August, down from 5.09% in July. This is important because it may persuade the RBI to keep interest rate on hold. "While weakness to the rupee adds to the upside risk, factors such as still sanguine domestic food prices and moderation in global commodity prices (excluding oil) are likely to provide some relief," said G Kapoor. The upper reaches of Indian society, including politicians, economists and business tycoons, all believe that a low interest rate is essential for stimulating economic growth and bringing untold riches to the country. It is another matter that the riches tend to concentrate in the hands of a minuscule section of society, but we only get to hear their opinions. One supporter of the government, sort of an employee, wrote that claims of rising inequality is a myth and without any evidence. Which was demolished by P Chakravarty who analysed official income tax data to show that the Gini coefficient for India has risen from 48 in 2013 to 63 in 2016, making India one of the most unequal countries in the world. A Gini coefficient of 0 is perfect equality and 100 is totally unequal. The perilous condition of the economy was described as a "systemic collapse" by PS Jha. "A systemic collapse can result only from a systemic failure. In India, the RBI, has dealt it by imposing and then maintaining a regime of very high interest rates for industrial borrowers since 2010, regardless of the rate of inflation," he fulminated. The main reason for lower retail inflation is the fall in food prices which maybe good news for consumers but is very bad for farmers, wrote M Chakravarty. Core inflation, which strips out volatile food and fuel prices, has fallen from a high of 6.65% in January 2014 to 5.67% in August 2018. This is still too high. With around 58% of the population dependent on agriculture for their livelihood it is too large a vote bank for politicians to ignore. The government has guaranteed a 50% return over costs to farmers with an eye to general election by May 2019. But, the way the government calculates costs to farmers is 38% lower than what the farmers demand. Over Rs 3 trillion will be spent in waiver of loans to farmers from 2017-2019. Maharashtra has made it mandatory for traders to buy crops at Minimum Support Prices fixed by the government. All this will surely raise prices of food. And that will raise retail inflation. What happens then?