Entry #2

Inflation the Rising Prices In India

“Too much of Money chasing few goods” is the famous statement of Walker.

Well, at present the above statement seems to be true as we can see People spending Money like water while the goods esp. the food articles are in short supply.

Our latest worry is Inflation which is beside the rising prices in India,

In the last year the Economists are worried whether Deflation would set in as the prices are falling. The Economists are shouting that the Prices are falling while the common man wonders where they see that the prices are falling! The real Position is the Economists talk about Whole sale Index prices while the common man is worried about Consumer Price Index. When the Government realizes about the Price rise it is now late as the consumer price Index is now touching around 9.89 percentage and is heading for Double digit Inflation.

Among food items prices of sugar pulses and potatoes increased by 55 percent 36 percent and 30 percent.

The Budget announcement of hike in Petrol and Diesel added fuel to the fire and the petrol became dearer by 11.84 percent and Diesel by 8.85 percent.

Inflation for food items was 17.70 percent by February while for manufacturing goods it is 7.42 percent.
The rise in Price level is spreading from food items to manufacturing items too and Inflation is increasing at a faster rate than anticipated.

When we analyze for Price raise we can say

1. The government had failed to have Enough Buffer stock to be released when the Price of Food items are raising.
2. The Importance of FCI is bogged down resulting in less procurement of agricultural goods.
3. The failure of P.D.S. systems
4. The evergreen problem of Black Money running parallel Economy.
5. The failure to harness the river waters.
6. To develop the infrastructures mainly I.T. fields many arable lands are converted into real estate purposes which resulted in reduction in the cultivable lands.
7. The Velocity of money is greater than the supply of goods.
8. The recent hike in the fuel prices

The result of this

“Savings is like toothpaste. It is easy to take out but very hard to put it back” Well People savings are getting eroded.

It is robbing the poor and makes the rich more richer

The RBI is in dilemma whether to raise the lending rates or not but while certain Banks like ICICI and HDFC Banks are already raised the lending rates.
So it is up to the Ministry of Finance to control the rising prices due to Inflation by Monetary and Fiscal Policies, either
1. By controlling the flow of Money
2. By controlling the lending of the Banks
3. By extending good support price for Agricultural Products
4. By taxes levied on the goods.

So until then

Let all of us carry bags of currencies to bring back the bag of vegetables.