The Tariff Commission has also submitted its report in respect of fair prices of rayon tyre yarn, cord and fabric, and a reduction in the prices thereof has been announced. As a consequential measure, tyre manufacturers have been prevailed upon to reduce the price of truck tyres. On the basis of the study made by the Oil Prices Committee, the retail selling prices of all petroleum products other than furnace oil, motor spirit and naphta were reduced with effect from June 1, 1970. Informal control over prices has been continued to be exercised in respect of soap, rubber tyres and tubes, bicycles, matches and iron and steel; producers are not expected to increase the prices of these commodities without the Government’s prior approval. During the year, the necessity was felt of extending this kind of control to the paper industry, the prices of whose products have risen significantly since decontrol in 1968.

The three main factors underlying the instability of prices during the year have been inadequate supply of essential goods, a certain excess supply of money and exercise of monopoly power, of which speculative hoarding is but one example. While, given the several imperfections of the system, the last factor does indeed play a part; it is on the central question of adequate supplies and prudent fiscal and monetary policies that efforts at maintaining a stable price level will hinge. Among the shortages that have bedeviled the economy during the year, the most persistent and insidious from the point of view of the price level for essential commodities are those relating particularly to cotton and oilseeds. Even in regard to foodgrains, while the general situation has been good, supplies have been short for pulses and, even for rice, the position is only marginally satisfactory. In the case of most of these bulk commodities, it would be futile to hope that chronic internal shortages can be made good by imports. Even in 1970-71, the import bill for cotton, rice, tallow and soyabean oil has been considerable. There can be no enduring solution to the problem of prices as long as the country is not able to have adequate production of foodgrains, cotton, pulses and oilseeds and such other food articles as milk and vegetables. Among industrial products too, apart from iron and steel -where output has been hampered by organisational problems - there are areas such as paper and non-ferrous metals where price stability will depend upon substantial increases in productive capacity.

There is similarly need for enforcement of due restraint on the demand side. I must emphasize this particular aspect. While credit for the hitherto neglected sectors must continue to be allocated in adequate magnitudes, the search should be continuously on to enforce credit and fiscal discipline elsewhere in the economy, both in Government and outside. Once success is achieved on this front, the speculative elements will discover that their ability to distort has been effectively limited. This is what generally I have to say about prices.

Now, my Hon, friend, Dr. Austin and some other Members also mentioned about the shortfall in expenditure. They asked whether the Finance Ministry is mostly guilty about this matter. I would like to plead not guilty. In fact we have taken certain steps in this particular matter.