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Economy and Inflation – Growing Together

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Growth is a healthy phenomenon. If growth gets stagnated, the world would be in turmoil.  Recently there has been an unprecedented growth in prices. Precious metals have reached a new peak. Oil saw a hike and retreated.  The price of land and buildings is high. Last but not least, prices of vegetables and cereals are getting out of the grip of the average man.

Inflation is worldwide, as recession is global. The International Monetary Fund’s food price index has risen by 29% in the last six months. The high inflation on primary articles is more on account of supply side constraints. Prices of most staples have nearly doubled, while productivity and yield have risen marginally.

India , which is emerging as an economic force to reckon with, is struggling to fight inflation. The Reserve Bank of India, as always, is fighting a lone battle. Retail price of wheat in Delhi has risen by 90%, while production increased by 16% and the yield went up by 4.5%. Sugar prices have doubled,onion prices have tripled, and pulses have more than doubled.Prices are stubbornly high. A fall in prices is not seen in the near future.

In India , it runs so,

a kilo of onions costs Rs 65 ($1.44)

a liter of petrol costs Rs 65 ($1.44)
a bottle of beer costs Rs 65 ($1.44)

India practises socialism. Do not the above quotes substantiate its proclamation?

As the Indian economy grows, more and more people are moving out of poverty and joining the teeming middle class.The population is becoming self reliant as there is shift towards a low dependency ratio.  Twenty years from now there will be a rise in the working age population from 1022 million to 7812 million. India will have more mouths to feed.

The chance of achieving a double digit growth looks dim as food inflation is taking its toll. To harness growth and development the government should focus on increasing agricultural production.

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