India inflation rate

A long running rot in India’s agricultural scene is now rearing its ugly head. For long government panels and sanctioned committees had predicted that India would have a problem in maintaining its ability to provide a consistent supply of vegetables and fruits to a nation of a billion but these indications have been consistently brushed under the carpet by whichever political party was or is in power. The result has been an environment where vegetable prices have been on the rise for quite some time. Hit by the increasing rate of inflation, they have now sky rocketed.

The only piece of good news that has been coming in amongst the financial chaos in India and the world for the past few weeks has been the decline of inflation and today continued that sentiment to some extent. Inflation has now fallen below 11% and the figures released today indicate the present number at 10.68%.The figure itself is not something to cheer about. A 10% inflation is still high but the declining rate of inflation from a high this year of Thirteen Percent  to what could in a month’s time be a single digit number has been encouraging.

The movement of oil prices in the world markets has brought about the setting in of some important changes. Free markets like the United States or the Socialist ones like India have had to accept the fact that the very structure of the world economy is changing. We once viewed the 100 dollars per barrel of oil as an indication to push the panic button but after everything that has happened in the past one year there is an inclination to believe that this figure despite being regarded as ‘high’ is still a ‘realistic’ expression of the oil scenario.

The vicious circle of rising fuel prices and inflation have significantly impacted all sectors of the Indian economy but more so the industrial and manufacturing sectors. The IIP (Index of Industrial Production) figures released on Friday along with Inflation figures for the week ending June 28 have dealt a double blow to the Sensex.

The price of crude oil has risen yet again. It has now crossed the $145 a barrel mark and in all probability unless a miracle occurs tomorrow’s weekly inflation figures will also show a rise.

This is the highest rate since November 13, 2004 and was above an average  forecast of 7.38 percent in a Reuters poll of analysts. The rise is mainly due to higher food prices for example the price of Tea went up by 17% Don't believe the food shortage hype though.  The media is creating a food shortage frenzy that is similar to the oil crisis frenzy.  This story has no legs and will soon die down.

By Vipin Agnihotri

In my opinion, a penny saved does not necessarily mean penny earned. This is because of the simple reason that inflation eats away the value of every rupee earned. Even worse, it is quite tough to forecast inflation.

By Vipin Agnihotri

Inflation reduces the purchasing power of money. For example, if the rate of inflation is say 10 percent per annum, the purchasing power of money declines by 10 percent per annum. In such a situation, an income increase of 10 percent per annum is needed to protect investors real income.

By Dr Suvrokamal Dutta