Indian Inflation: Out of Control?

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While some harp on about the growing dangers of yet another housing bubble in the western world, there are other more important things perhaps that are going on in other countries in the world. But, they are of little interest since we are not directly concerned by them. How is it that we only care about what’s actually happening in the back yard while someone round the block might be doing something or on the receiving end of something pretty bad and yet we don’t give a damn about what happens to them? While we are concerned with our bubbles, there are people in India that are suffering from the rise in prices that is drastically changing the way they live.

Over the past year inflation has been driven up by food prices. In September alone food prices were at their highest level for the past seven months and it seems that India is now going through the worst financial crisis that it has ever experienced since 1991.

The Indian wholesale price index (WPI) rose by 6.46% in September.
This was largely due to the fact that food prices have increased beyond control.
Since the start of this year onions have increased by 322%, for example.
Food prices have increased by an annual rate of 18.4% so far according to data released by the Indian government on Monday this week.

Food prices have been increasing due to supply shortages in India which were brought about to climatic conditions and rain. Today the price of a kilogram of onions amounts to 75 rupees today (or $1.22). One third of the Indian population still earns less than $1.25 per day in the country and that means that buying basic foodstuffs is pretty much out of their price range today. Food prices have hit the political agenda as a result and have been made a key issue in the run-up to the general elections that are going to take place within the next 7-month period.

Food Inflation in India

Traders and shop owners are reaping the rewards of a rapid rise in prices today. But, the shopkeepers will not be able to keep hiking prices to recoup on the price increases as the people will run out of money. The real people are at the short end of the stick and suffering from the consequences of the hike that is almost daily now.

India is not the only one suffering from high inflation today in the world. Other emerging countries have also recently seen highs in their own rates. China had a consumer-inflation rate that hit3.1% in September. That was also the highest it had been for the past seven months. Food prices in China have increased by6.1% so far this year. However, in comparison with Indian data, that seems as if it is insignificant.

India is having immense difficulty increasing economic growth in the country and it has a 5%-growth rate that hasn’t been seen for the past decade.
The rupee has already hit lows that have rarely been seen before (it has lost 10% since the start of the year against the dollar) and inflation looks as if it will be fuelled by the interest rates that have been increased by theReserve Bank of India.
There has been a general outflow of capital from India since the start of this year due to the slow-down in the economy.
Inflation stood at 2.1% in September for India and it’s that which is the most worrying element perhaps today (at least for the population).