Aam Admi Prices

The hike in petrol prices is here once again. After a gap of four months, the petrol prices have been increased by Rs 5 a litre. We all know that fuel prices in India are ridiculously subsidized. A price hike is inevitable for state run OMCs (Oil marketing companies) to survive. Interestingly, the recent hike is just 50% of what is required to trim losses on petrol to nil. The Government wants to take the credit for a 'moderate' increase keeping in mind consumers' concern. But wouldn't that have been best served by cutting the excise duty on crude oil? The Government let that opportunity slip in Budget announcement for the fiscal. Had that been done, it would have cut losses both for OMCs and the public.

Now that the State elections are over, the Indian consumers should be ready to face higher fuel prices. The decision whether to decontrol prices of diesel will be taken this week. Currently, sale of diesel is making a loss of Rs 17 a litre and constitutes four times the demand of petrol. All I can say is that hike in petrol prices is just a trailer and the worst is yet to hit the general public.

On the other side, borrowers may be getting mad at the RBI for raising interest rates indiscriminately. Consumers are still trying to figure out why petrol prices had to be raised by Rs 5 a litre. Complaints over rise in food prices have got lost in the noise over interest rates and fuel prices. But the government has been completely inept at addressing the common man's woes. Or at least making way for better pricing and adequate supplies going ahead.

Agreed that stopping the US from printing cheap money and pumping that into India is not in the Indian government's hands. Also, that the rise in crude oil prices is not something that the government can contain. But what it can certainly do is to ensure that food products available in plenty are evenly distributed. This can at least keep the prices of some products under check.

But as per chairman of Commission for Agricultural Costs and Prices, the government is doing little to ensure stable prices. While wheat exports have been disallowed, the farmers are selling the produce below the minim support prices (MSP). They are in fact forced to do so as the government is not buying the surplus produce. At the same time high taxes in states like Punjab make the export of what unviable. Thus there are several anomalies that need to be corrected. Unless the government wakes up on time, both the producers and consumers of the grain will be severely hit. And that is something the economy can ill afford at this point.

With its meteoric rise and now drastic fall, silver seems to be a very volatile asset class. So should you as a retail investor look at owning this white metal.

Well, if you are looking at investing for long term returns, then the answer is a resounding 'yes'. Gold has risen by more than 62% since 2008, while silver prices have run up by more than 220% during the same period. And if one were to take a look at the results over the past ten years, silver has risen by more than 668% since 2001. Gold and the Sensex on the other hand, have seen an increase of about 385% and 368% over the period. Silver's has definitely hit the ball out of the park.

But, there are some caveats. With such dynamic returns, the metal is a favorite play for traders trying to make a quick buck. Thus returns over the short term are quite volatile, as seen by its recent 30% fall, which left investors spooked. As for gold, the shiny metal has for years maintained its status as a store of value, due to its scarcity. Since, silver is much more easily available in nature, it cannot replace its richer cousin as a store of value. All in all, you may have to bear short term pains, for long term gains from this asset.