Inflation News as on August 2008
The inflation rate, calculated on point to point basis, was recorded as 12.63 percent (Provisional) for the week ended 9.08.08 as compared to 12.44 percent (Provisional)for the previous week. Whereas the inflation rate as on 11.08.07 stood at 4.24 percent, a sharp increase of 8.39 basis point within the time span of just one year. If the growth of the inflation be traced, it seems that the predictions of the experts are coming true in this regard. As warned by the economic veterans, Inflation continues on its journey uphill.
The official Wholesale Price Index for 'All Commodities' (Base: 1993-94 = 100) stood at 240.7 percent (Provisional) for the week ended 09.08.08, with a marginal hike of 0.1 percent as compared to previous week's 240.4 (Provisional) basis point.
The index for the primary articles and manufactured products reported a slight increase whereas the index for the fuel, power, light and lubricants group remained static compared to previous week.
The Indian economy has been registering a mammoth GDP growth post-liberalization. The opening up of the Indian economy after the 1990s increased India's industrial output, which in turn raised the inflation India rate significantly.
The stupendous growth rate of industrial output and employment created an enormous pressure on the inflation rate and pushed it further. The Reserve Bank of India (the central bank) and the Ministry of Finance, Government of India is concerned about the present upswing of inflation India. The present rise of inflation India rate could be detrimental to the projected growth and aims of the Indian economy.
The main cause of rise in the rate of inflation rate in India is the pricing disparity of agricultural products between the producer and consumers in the Indian market. Moreover, the sky-rocketing of prices of food products, manufacturing products, and essential commodities have also catapulted the inflation rate in India. Furthermore, the unstable international crude oil prices have worsened the situation. As a result of this, the Wholesale Prices Index (WPI) of India touched 6.1% as on January 6, 2007 and the Cash Reserve Ratio (CRR) touched 5.5% on the same day.
The Reserve Bank of India - the central bank of India, has assured the Indian business community and the general public about the harmless rise in the CRR but apprehensions still exist amongst business circles in India. The Reserve Bank of India is devising methods and financial models to arrest the rise in the rate of inflation in India. This insurgency financial modeling may arrest the immediate crisis but the long-term concerns are yet to be allayed or addressed. To arrest the disturbing sentiments amongst the Indian business circles, the Reserve Bank of India had given top priority to price stability and economic growth sustenance in India, in its recently drafted monetary policy. The Reserve Bank of India has raised the Cash Reserve Ratio in a continuous manner to arrest the rise in rate of inflation rate India.
Most developed nations across the world have devised several methods to arrest inflation and bring in stability to its economy. In India, the solution to this problem lies in rationalizing the pricing disparity between the producers and the end-consumers along with increasing India's agricultural produce. This will not only ensure inflation stabilization but also sustain the present economic growth rate of India.