Should India adopt Dubai Model to control inflation?

Should India adopt Dubai Model to control inflation?

By: Vijay SARDANA

Around the world, inflation is a major threat to political stability in democratic countries, but it is a more serious threat to the ruling families in countries where there is no democracy. UAE's ruling family is trying its best to control inflation. 

The UAE’s Ministry of Economy (MoE) has approved a new policy regarding the pricing mechanism for basic consumer goods in the country. Under this mechanism, these consumer goods are divided into two main groups.

The first group consists of more than 11,000 commodities including fresh and dry milk, fresh chicken and eggs, bread, flour, sugar, salt, rice and legumes, cooking oil, mineral water and other items.

Among items in this group, the supplier requires prior approval if they desire to raise its price due to the high import costs. The prior approval must be obtained via the Ministry of Economy website through a specifically designated system for this service. The applicants must submit all evidence and data related to the increase in costs and their direct causes. The ministry then will decide on the approval and the percentage of the approved price hike.

The second group consists of commodities such as biscuits, chocolates, confectionaries, some cheese products, frozen food, juices and ice cream, tea, coffee, cocoa and its products, wheat, oats, potato chips, household cleaning materials and tools. 

Among this second category, the MoE clarified that there is no need for prior approval if the supplier wishes to increase its prices and these products are subject to supply and demand variations. 

It explained that these goods were chosen based on their abundance, high price competitiveness, and a large number of suppliers of these goods to ensure the existence of multiple alternatives in the country.

The ministry added that price control is an ongoing process, and any unjustified price hike is a violation, which exposes its owner to legal consequences.

Ministry further added that it continues to monitor the prices of the 300 most sought-after basic commodities in the markets, in partnership with the economic departments and regulatory authorities at the local and federal levels. 

More than 40 outlets and cooperative societies in all markets in the country are being regularly monitored to keep the prices of these goods in check.

These 300 commodities belong to 11 main categories: fish and seafood, meat and poultry, bread, grains and related products, dairy, eggs, oils, vegetables and fruits, water, juices, and cleaning materials.

The ministry said that it continuously assesses price fluctuations in the products because of the price fluctuations in the product’s county of origin and it also monitors steep fluctuations in prices and ensures the availability of these commodities in abundant quantities.

The ministry also said that it compares the selling prices of these commodities with their prices in its registered database and with the prices in neighbouring countries. In addition, it is working to develop a shared digital database for commodity prices in GCC markets to ensure continuous price comparisons. The ministry matches the prices of these commodities with the FAO International Price Index too for the most traded commodities in the world.

From the UAE example neither free trade policy nor FDI policy, not even WTO agreements prevent any regulatory action by the government to check inflation.

It is now up to the Government of India to design a suitable policy in this regard. 

The government has already created National Anti-profiteering Authority (NAA), now to control inflation due to profiteering, the scope of the NAA should be reviewed. 

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