Column : The market price

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: Within the last two weeks, cement and steel companies have begun to rework the prices of their products. As the virulence of the economic downturn eases for the Indian economy, more companies from different sectors will walk the same route.

That is a fairly natural phenomenon. As demand conditions adjust, companies will quite naturally rework their pricing strategies to derive the maximum advantage for their revenue, and so for their profitability. Of course, with respect to the cement sector there is an often fair suspicion that a cartel like syndrome emerges, but that is not the norm in other sectors.

Just as the economy lost its momentum in the third quarter of 2008-09 and producers were forced to cut back on prices and sometime later offer discounts to move their inventories, they will now scout for opportunities to make up for those blips. The opposite will also hold true for the services sector, where pricing pressures are holding good. Getting the correct price signals is very important, one can say the most crucial element, to figure out how fast we can as an economy, swim out of the current recession. If instead, industry captains and ministers play the familiar game of wresting advantages, then long after the rest of the major economies have shrugged off their recessions and gone about their task of rebuilding, we will still be figuring out ways with convoluted schemes for sectors that will just pile up jobs for the boys. Remember the revival package for the textile sector.

But as a new government takes over in New Delhi, there is a high possibility that earnest ministers will immediately ask for the prices to be rolled back. Those would be followed by threats of tax or other punitive measures. In 2008, finance minister P Chidambaram asked the cement industry to reduce prices and created a stand off that did little good to the economy. This is how the situations get messy.