Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

How else can the govt. tame inflation?
Wed, 7 Sep Pre-Open

It's inflation versus growth rate again. This time, the inverse relation is even stronger, as macro economic conditions deteriorate. The GDP for the first quarter came at 7.7%, and as per FICCI, we should not be surprised if it further slips to 7.5%. The gravity of the situation can be assessed from the fact that fiscal deficit during 2QFY11 worsened to 55% of the annual budget estimate, as compared to 24% last year accompanied with slippage on the revenue side as well. That means that we are no better than the US when it comes to maintaining fiscal discipline.

The Indian economy seems to be taking a hit from all the directions. The manufacturing sector has slowed down. The outlook for the agriculture sector looks gloomy due to an unfavorable monsoon forecast. To make things worse, the service sector, which accounts for more than 50% of the GDP, will suffer slowdown in exports, especially in the software segment.

In such a scenario, hiking interest rates will slow the engine of the Indian economy. But does the Government have an option? Well, as per FICCI, these are the times to experiment with supply side measures. Since food inflation is the prime culprit, allowing free movement of commodities could be a solution. This will require a major reform in the Agricultural Produce Market Committee (APMC) mechanism. Under the current system, the farmers have to sell their produce to agents or traders under supervision of the APMC. This makes them vulnerable to traders' and marketing agents' price manipulations. And this is just one of the multiple reforms waiting to be undertaken. The other beneficiary could be the retail sector. It's time to go for FDI in multibrand retail as it will spur up investments and spruce up logistics.

To conclude, the need of the hour is to work on supply dynamics to ease inflationary pressure without sacrificing growth. This will require a flexible business environment that can facilitate investments, not to mention the various regulatory reforms waiting for the light of day.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "How else can the govt. tame inflation?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.