Thursday, Oct 23, 2014

‘Inflation woes mostly self-created, no broad trend across Asia’

FM Arun Jaitley has stated that the government has announced specific measures in Budget 2014-15 to bring down inflation on a sustainable basis. FM Arun Jaitley has stated that the government has announced specific measures in Budget 2014-15 to bring down inflation on a sustainable basis.
Written by Sandeep Singh | New Delhi | Posted: July 19, 2014 12:43 am | Updated: July 19, 2014 9:34 am

Inflation woes of India over the last two years seem to be a self-created phenomenon and not part of a trend across the region as its neighbours are doing better on that account.

While the CPI inflation for the calendar year 2012 stood only second to that of Pakistan at 10.2 per cent, it remained highest among other major Asian countries in the calendar 2013 at 9.5 per cent.

Against this, the CPI inflation in China stood stable at 2.6 per cent for both the years while that of South Korea stood at 2.2 per cent and 1.3 per cent for the two years respectively. Malaysia and Thailand too reported CPI inflation at less than 3 per cent for both the years.
The details of CPI inflation across eight major Asian countries was presented by finance minister Arun Jaitley in response to a question raised by Bhartruhari Mahtab, a Biju Janata Dal MP from Cuttack, in the Lok Sabha on Friday.

The finance minister, however, stated that the government has announced specific measures in Budget 2014-15 such as — technology-driven green revolution, establishing price stabilisation fund, accelerating setting up of National market etc — to bring down inflation on a sustainable basis.

He also pointed out that the difference in inflation rate may be on account of, “Composition, base, weights of the respective CPI basket, the structure of the economy …. The high CPI inflation in India owes to higher weight for the food basket (about 50 per cent) as against 14 and 32 per cent weights for Korea and China respectively.”

While higher inflation is known to eat into the individual savings in bank deposits, data made available by the finance minister in response to another question in the Lok Sabha suggests that over the last three financial years, the CPI inflation has been significantly higher than the average term deposit rate offered by the banking system.

In the financial year ended March 2012, while the average term deposit rate offered by foreign, private and public sector banks across all maturities stood between 6.96 per cent and 7.79 per cent, the CPI inflation for the year was 8.39 per cent.

Similarly, in the year ended march 2013, while the interest rates offered by banks stood between 6.87 per cent and 7.63 per cent, the CPI inflation was significantly higher at 10.44 per cent.

Even in the last fiscal the average interest offered by banks on term deposits lagged the CPI inflation by close to 2 percentage points.

comments powered by Disqus
Featured ad: Discount Shopping
Follow

Get every new post delivered to your Inbox.

Join 1,294 other followers