Does this mean the inflation will come down?
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But the government is still optimistic that the stance adopted by the RBI is the correct one. The Economic Affairs Secretary actually expects inflation rates to trend downwards in the coming months. He has given a forecast that the inflation rates would come down to 7% by March 2012. And as unbelievable as it sounds, experts actually agree with him.
However, the reason for this is not because the prices would come down. It is simply due to the base effectt. So what does this mean? It means that due to the high rate of inflation recorded during March 2011, the percentage change in prices for March 2012, would appear to be low. It is just a statistical phenomenon. Nothing more than that. And other than the fact that it will make the government look in a better position, it would not really be of any help for the 'common man'.
The supply side constraints still continue to haunt India. Unless those are removed, it is unlikely that the prices of core commodities would ease up too much. This in turn would add pressure to the margins of the manufacturing firms. As a result, the latter would find it difficult to reduce prices anytime soon. So even though the inflation rates may start to signal the end of tough times, the reality will actually be far from it. Higher prices would continue to trouble us. At least till such time as the Government steps up on the reforms.
Do you think that lower inflation rates would actually mean lower prices? Share your views with us or you can also comment on our Facebook page.
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9 Responses to "Does this mean the inflation will come down?"
Jack Wilson
Oct 18, 2011High interest rates have never brought down onion prices... only more supply or reduced demand can do that. So, even if statistically speaking WPI and CPI numbers start trending down because of the high base effect, RBI and the finance ministry will pat itself on the back and congratulate themselves on curbing inflation by raising interest rates. They are not only fooling the gullible public but perhaps fooling themselves as well. God save India from its politicians and bureaucrats.
PARMOD SEHGAL
Oct 18, 2011At the outset let me remind that the the inflation every body is talking about is whole sale price index,whereas the consumer prices i.e the retail prices at which the roadside vendors sell fruits and vegetables are higher by 40 to 50% than these and at the same time they do not reduce the prices when there is correction in the whole sale markets.I think policy makers are intellectually bankrupt and do not know what to do.They continue to follow the western financial models blindly.Central Banks in the developed western economies
apply the methodology of interest rates tightening or loosening because their consumptions are based on credits and loans,where as more than 90% of the Indian population do not depend upon credits and loans for their consumptions.70 to 90 % of the budget of the countryside families is spent upon the food articles on which they do not take loans on which they have to pay
interests .Would our policy makers blinded by the western phenomenons realize this basic fact.
nanda gopal
Oct 17, 2011as brought out inflation cannot be reduced and absolute cost will not come down in the present context as a lot of illegal money is chasing few items available. The only way we can improve India is by demonetizing the 100/500/1000 Rupee notes and limiting the cash held by individuals and companies to a smaller level which will also reduce black marketing, corruption/ havala goondaism. This will also reduce the interest rates as banks will have a lot of money and industries can grow with lower interest rates. There will be some sectors which will be affected but a large sector which is honest will be benefited. I can elaborate and discuss more my email id is nandav1942@hotmail.com. This will have a more significant result much more than Annas movement can ever think of achieving.
ananya
Oct 17, 2011This only means that the rate of increase in inflation is going to decline and not the inflation in absolute terms...dun know who the govt is trying to fool.
Venkat Reddy Durgempudi
Oct 17, 2011Hi,
As I understand rate of infaltion is being calculated based on the previous years prices, if so, inflation rate coming down next year, from 9.7% to 7.0%, means prices would have gone up by 7% over the previous fiscal year instead of 9.7% currently it is at. Nevertheless, prices would go up but at a reduced rate. People with limited incomes, incomes that do not grow atleast at the rate of inflation would become poorer by the day. This way poor get poorer. This seems to be reality in rural India.
In a dveloping country inflation will never be zero for obvious reasons.
Ramanand
Oct 17, 2011Our FM is trying to fool the public, as is always the case with politicians. Not only will we have continued inflation, it will occur with acute shortages of all goods and services come March 2012. As the US Economy grinds to a halt due to the debt overhang, Indian middle class is in for an even ruder shock in 2012 (as compared to 2008), where high prices of everything would be coupled with job losses and severe inability to payback loans. We might even see an exodus of people from urban centers to semi-urban/rural areas as the cost of living becomes unbearable in cities if you don't have a decent paying job.
Amit Sengupta
Oct 17, 2011No- it won't. The market won't care for the data- all it will look for is the flowing cash, demand & supply. Cost of funds is no issue so long as business is done primarily with public money and supply-demand mismatch allows costs to be passed on to the end consumer. High inflation indeed helps generate a cash pile by the few and so, if the market doesn't care, the politicians don't care either.
hs goel
Oct 17, 2011agriculture DO play an important part in bringing down inflation BUT high labour fertiliser cost and farmers selling of their land due land prices are the factors you cannot overlook
hsgoel
Oct 18, 2011to my thinking costly [what costly]food has two factors which are playing a part in making it costlier [once it has been harvested] 1 the insufficint and adverce storage 2 the commodity SATTA MARKET [by different names regards hs