Indian Inflation at 10% and Climbing..

Indian inflation is knocking the 10% door and there is no stopping it . The Fm’s lips are sealed cause he has lost face , now the advisers are doing the pep talking.

Here is an excellent must see interview by Cnbc with a very eminent economist Dr. Shankar Acharya.

Video Interview Dr Acharya Text link here

Essentially he is not saying anything new, as these facts are out in the open for a long time now but he is very candid in explaining the mess and the indecision by the UPA and Cabinet over the last 4 yrs in not increasing prices.

With inflation at 10%, cpi inflation march data at 17.9% , the current figure could be above 21%, and worse real inflation could just be a lot lot more my estimate around 50% . The interest rates are at 9.5% pa – so one is getting a negative yield on investment and ur sb interest , fd interest bonds etc are all giving negative returns.

Interest rates better move up, well above 10% or people will start thinking of alternative avenues to invest, the Fiis are the smartest and have been withdrawing money from India consistently since May.

Read a humorous take by India Play

The state govts borrowing program, and the India posts finances might go for a toss if the interest rates on Postal Deposits, NSC and MIS stay at 8% , as 80c lollipop is seldom useful to the non taxpayer who is the target audience of the postal bank.

Oil is still inching up and so are commodity prices and here is a 1 yr chart of the Nymex crude.

If it continues its upward march, and if the govt doesn’t act due to the coercive Karot threat, things can be a lot worse.. Deficits will mount while the consumption of subsidized fuel will also grow, thanks to price control. But being an optimist, and expecting some kind of intervention, lets hope for the best.

The Chinese have intervened with a raise in fuel prices at the pump , and sure it helps, the Nymex is down 4 $ but lets see if this is a short term solution, and how long the disastrous Indian subsidy policy will continue.

Ps though my neck is really suffering stress this post is a guilty pleasure ๐Ÿ˜‰


7 thoughts on “Indian Inflation at 10% and Climbing..

  1. “With inflation at 10%, cpi inflation march data at 17.9% , the current figure could be above 21%, and worse real inflation could just be a lot lot more my estimate around 50% .”
    Whoa, there!
    What is that all about? Sounds scary, man!

  2. wow 10%! and the world still thinks its all because of the oil prices. well well thats what the media and the learned economists say ๐Ÿ™‚

  3. :O 21 percent..
    OMG ,
    anyways the i never understand the way they calculate these things..i just know the defination..

    OK so would it mean that the rates would be so high that middle class people can go to the category of poor.. is it so ???

  4. first i based this post on the data that will be released today or in near future , net net inflation might be above 10% already.
    Yes Doc, figuratively the inflation is going up up and away…
    compare ur hotel bills that is if u have been regular at it.
    Kip , welcome to my blog, and here it is more politics, doles, vote banks and economic mismanagement.
    Ankur inflation could be higher, cost of some input products in the energy sector have doubled. Cost of milk has gone up from 16 to 25 atta from 16 to almost 25/27, branded basmati rice from 50/55 to 96/105, edible oil from 45/55 to 90/95 – these are just examples

    Arvind when inflation is up and interest rates aren’t adjusted likewise to cater to vested interests – (inflation adjusted) return on investments become negative, traditional investing becomes a fruitless venture
    then u have Asset price bubbles – and commodity bubbles like in the US and India , where rich people find newer avenues to park funds, but sadly for india we dont have that many rich, most of whose income is spent on daily essentials. Answer to ur question – its just another tax – Yes over a long time it will devalue ur traditional savings like fds and bonds .

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