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Why is the Indian Economy experiencing high inflation?

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I was watching the program ‘Politically Incorrect’, on NDTV. Mr Mani Shankar Iyer expressed himself on the topic. We see a phenomenon as intrinsically good, or bad. Perhaps the reality is neither good, nor bad. Those who are generating income, have afforded the high prices of essential commodities seen recently. There have been no food riots, nor widespread deaths among the poor. What does this exhibit, as an aspect of the inflation phenomenon? This perhaps indicates, that the inflation is truly evenly spread throughout the economy, or, more or less evenly. In other words, all the sectors of the economy are experiencing more or less the same rate of real inflation. This is making possible, for the common man to afford the essential commodities. At the least, this is showing that the common man is holding in his pocket, money proportionate to the inflation. I admit, that my surmise might, or may be wrong. Perhaps, I have not factored into account the subsidized food availed by the poor, or the NREGA functioning. But, the subsidy is availed by those who live below the poverty line, in other words, those who do not have any work, or those who cannot generate income through work. These people do not belong to the economy, i.e., they are independent of the economy, in their economic contribution to the economy, through work.

I am referring to those people who contribute to the economy, by earning money through work. The economy is growing, so is inflation. The whole economic chain, is experiencing growth in productivity,and inflation, simultaneously. The goods and services being purchased up and down the chain, are showing an even trend. Perhaps, this is aiding the economy, and hence the government.  Perhaps, in an economic down-turn the essential commodities are the last to be affected, in terms of reduced consumption. In India, presently, the conspicuous, and essential consumption, are showing  reasonably high factors. So, the government wants to curb inflation more for political, rather than economic reasons. The government cannot explain to the opposition, nor to the nation reasons for high inflation, nor does it ignore the opposition or the nation on questions of inflation brought up by them. If the central government falls, or is not re-elected because of inflation, then perhaps, it will not be due to the effects of inflation.


Written by discussionofviews

August 12, 2011 at 5:59 pm

Posted in Uncategorized