Inflation Up and still Rising in India !

The RBI Governer Y V Reddy is worried about the fiscal deficit as a percentage of gross domestic product of India which continues to be among the highest in the world. It is well known that the RBI pegs the rupee to the dollar in a window that is seen as comfortable to its policy and to the Political masters, while constantly stating that they are for an orderly market. The slow realisation that RBI can do little to curb inflation if the fiscal deficit worsens is worrying its Governor. The balancing act is getting more difficult for the RBI, as rupee has fallen amost to 43 to the dollar from the recent 39 due to Oil Cos dollar purchases and Fiis that have constantly sold stocks and rupees, both in the cash and futures markets.

Little wonder, as this government has in recent months put Fiscal responsibility to the wind in an election year with doles, pay hikes and freebies like the NREGS and loan waivers, and the fms estimates are going horribly wrong, both on the inflation front and on the Tax collection front, now that the Us is facing a slowdown and possible recession and the world is facing uncertainties due to oil.

The Inflation figures and not that accurate and there is international suspicion that these numbers are being fixed. Worse the gap between early figure and the actual figure of Inflation is widening. India’s inflation rate may be revised to 10 per cent from the latest estimate of 7.82 per cent as data for prices of different commodities is updated, London-based publication The Economist has said. India revised inflation figures for the week ended March 15 to 8.02 per cent from the earlier estimate of 6.68 per cent.

I had estimated this in many of my posts right since the Budget 2008.

So expect more inflation and more prise rise and a possible increase in interest rates due to government borrowings and worsening conditions.


10 thoughts on “Inflation Up and still Rising in India !

  1. If kids like you stay up so late, obviously there is going to be a power crisis, (midnight) oil crisis, and similar deficits in the Gross Domestic (re)Production!
    Then you will blame our great leaders like Rahulji and Priyankaji. Shame on you: if educated people behave like this, how will the future generations? In fact, if you are always screwing your computer and our brains all night, how will there be future generations at all??

  2. Doc, u finally did it — u put a whole new twist to the inflation argument 😀

    ps u forgot to mention the Mother Italindia Soniaji!
    as i see it
    if it was not for all that tree cutting and mangrove chopping ie deforestation, mumbai would not feel the effects of heat exhaustion, and i wouldn’t get almost sun stroked and slept all afternoon allowing me to stay up at nite, so blame the builder lobby that has so many erections and connections so high up that even the enlightened madam and the political lobby get weak in the knees and dance to their incantation of fsi multiplication.
    plus have heard pollution induces sterility in population, disturbing the cycle of re production and menstruation and also induces Cancer in the reproducing population which has to sometimes be cured by irradiation?

  3. Rupee is now 43 against the dollar?
    Well, thats certainly good news for my friends who have gone to US for project assignments. They were crying a few months back that they are loosing money as the Rupee is becoming stronger. 🙂

  4. “so many erections and connections so high up that even the enlightened madam and the political lobby get weak in the knees and dance”
    Erections lead to connections, which then lead to going down weakly on the knees to madams. All this subsequently leads to a lot of heat but, alas, not much enlightenment! Oh, yes, after a couple of quarters, the inflation is obvious!

  5. 🙂 doc, have too little time to think about this predicament , u never cease to amaze

    amit the rupee is swinging between 42 and and 42.90 and rbi has recently intervened at around 43 . Yes the good times r back for the techies and shareholders of cos like infy wipro and tcs etc inc me 🙂

    nita , hike or no hike inflation is here to stay for the foreseeable future say at least till winter
    u cannot hide the true picture for long and cushioning the economy has a big price that is funded through off balance sheet loans ur children pay. this a ticking time bomb and needs urgent action

    this govt has got the economy into a mess of epic proportions and the next incumbent should think twice before taking the fms chair- read my mid month musings posts
    the oil cos cant simply afford it and are almost bankrupt and they are getting working capital by putting assets on lien -and this cannot last long
    the psu banks that are already suffering the farm loan waiver which is goin to total 70000+ crores
    once there is a loan waiver all farmers dont pay back expecting another loan waiver and things get real bad
    oil is at 133$ a barrel
    govt has little option
    increase the cost of petrol and diesel
    cut excise and sales tax on oil and face a big hit on revenue and income
    make upstream cos pay the subsidy and ruin them which means no more oil import if they get into a situation as hp bp etc
    or give another bunch of diktats

    it should lead to cascading effect if the govt gives diktat that banks should give the oil cos loans without the due diligence or security to back it

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