Inflation To Remain High Till September Says The PM

Aditya Rao

Singh: Inflation Here to StayThe Prime Minister has finally stopped beating around the bush. He isn’t making statements like “Expect inflation to come down next week or in 15 days.”

That’s the one thing investors and economically aware people have been asking for quite a while. A certain degree of truth motivated by facts and figures and not politically diluted arguments made with one eye on the elections.

While on a two day trip to Bhutan, the prime minister addressed a host of issues ranging from the Jaipur terrorist attack to the tricky problem of inflation. He finally ended up conceding that the inflationary pressure on the economy would ease only with the onset of the monsoon something that is expected to happen this year from the months of June to September.

Rice: Prices are upThe impact of inflation has hit food prices the most. In order to stabilize this, the government has tried to match the supply end of the chain by importing food grains. That is something that doesn’t happen too often. But, like I mentioned earlier this bout of inflation is more than just matching the supply and demand side of the economy.

Retail outlets are still selling commodities at the same price they were earlier. You are still paying the same amount for a bottle of Pepsi or a packet of biscuits. The problem is that you are paying a lot more for something like Rice or Wheat. Something you need more of and more often than the others.

The P.M was however very careful in choosing his words. He used the word ‘ease’ instead of something that would indicate a total control for the inflation problem. That is perhaps a sign that the government has finally accepted openly that food prices in the next few months will be determined even for India by the rest of the world.

He went on to set the date of September 15 as some sort of base deadline to bring the prices down.

The coming of the monsoon predicted to be on time by the met department will ensure a good harvest thus resulting in a significant inflow of food crops at prices the government can control. However this is the case in the staple food crops of rice and wheat.

The government knows that by bringing down the prices of these two crops it can claim to have ‘eased’ the inflationary problem. All the while knowing that it will still have to regulate the prices for other important commodities by relying on a system of import, control of interest rates and more importantly duty rates.

So it is pretty certain that for the next few months you will continue to pay more for essential items more importantly: FOOD.

That is never a good situation especially in the year that will see elections. This is an important fact to be considered simply because governments that face situations like these in their election year deliver financial conditions after the elections that impact your purse, especially if you make more than the average person. But that is a risk a newly elected government can always afford to take.