“Hot prices, current crisis”
BETTER GDP AND BITTER INFLATION.BOTH is going hand by hand. Indian
economy is growing at 9%. But given the problem of inflation, it has become
difficult to realize the dream of growing in double digits. The root cause of current
spurt in prices is the price rise of food products. Prices of certain pulses, wheat,
rice potatoes, onion have also shot up in past six months.
From reddy playing with CRR, SLR and REPO rates to fall in petrol and diesel
prices to cut in excise and custom duty to appreciation of rupee there seems no
solution to inflation.
The government has decided to stop the export of pulses and diary products so as
to increase the availability of these products in domestic market. But it will not
have a great impact on the problem because India has not been exporting these
products in large quantities.
Which means even if exports are stop, supply will continue to outstrip demand,
which is the root cause of inflation. To overcome inflation the RBI HAS
DECIDED to suck 14000 crore from money market. It has raised the CRR by fifty
basic points rounding it off to 6%. This will leave banks with less money to lend
leading to less spending and finally reduced inflation.
But the real pinch is felt by public in terms of rise in interest rates for home loans
and PLR.inflation is souring at 6.73%. Rupee appreciates in real terms whenever
domestic inflation is sharper than that in developed countries.
Past years has been a case in point .the government is thinking as to whether the
appreciation of rupee should be used as a conscious policy, among others to attack
inflation. Strengthening of rupee will reduce import costs and consequently have a
depressing effect on the prices of commodities across the board.
With UP states assembly poles just few days away, there is a worry about the
impact rising prices will have on voters. AT ONE LEVEL it can be argued that
rising farm products prices is not bad for every one. It definitely benefits farmers
who are then able to earn higher prices from their crops. And if they are happy
about higher crop prices, they are also happy voters.
This then raises a controversial question that whether the govt. is serious about
curbing inflation or is it playing marginally so as to gain farm voters by keeping

inflation in town. With govt. trying every second weapon to take charge over
inflation lets see what’s more in the kitty.