Among developing countries,India has highest inflation

The countrys inflation is the highest among the worlds developed and emerging economies after a 1.2 per cent increase between the years first nine months....

The countrys inflation is the highest among the worlds developed and emerging economies after a 1.2 per cent increase between the years first nine months. According to the finance ministrys Mid-Year Review,consumer price inflation reached 11.6 per cent in September thanks mostly to still rising food prices followed by the stabilising Russian economys 10.7 per cent post and dwarfed by Chinas negative 0.8 per cent rate.

While digging out of the tumult of world-wide struggles,Indias inflation had improved by 2.4 per cent during the first three months of the calendar year. But as seasonal crops failed to produce from April onwards,CPI inflation grew by 3.6 per cent,while food prices grew from 6 per cent to 19.95 per cent in November. However,food inflation serves as a faction of the larger Wholesale Price Index WPI,which has remained below or within one percent of zero inflation.

In the government document tabled before Parliament today,the disparity is clarified: The divergence between the two indices is caused by the difference in weights in the basket of commodities covered in the indices, as WPI measures wholesale prices whereas CPI will take into account the retail prices of goods and services. Although the report does not dismiss the impact of rising food prices,it does state that cyclical economic patterns will curb figures currently bloated by the year-on-year base effect in the wholesale basket. This decline in the base is giving some boost to the current inflation figures, reads the report. This,coupled with the rise in price index,which is indeed taking place,makes the inflation appear somewhat larger than it is.

While the outlook of food inflation will be resolved by the economic cycle,according the report,the rise in prices of primary articles consumed by the common man is indeed a cause of concern and has been placed as a matter of top priority. This is unusual inflation in which the price rise across commodities is highly skewed,so much so that it is more like a correction in price ratios rather than regular inflation, reads the report.

The government declares that inflation of these primary articles has been caused by a strengthening of the poor and middle classs buying power through a variety of anti-poverty programmes instilled by the government. However,the very fact of its skewness seems to suggest that this inflation is not a product of aggregate demand expansion in the economy but rather the product of supply dilemmas.