A flawed calculation of inflation

Synopsis: The current official inflation rate does not correctly measure price rise and it needs modification. Introduction Inflation for the last four months has been worryingly high. Wholesale price index (WPI) has been above 10% and consumer price index (CPI) crossed the 6% mark. Does the official data capture the real picture? Data issues: Unlock… Continue reading A flawed calculation of inflation

Transient easing: On inflation

Synopsis: Cutting fuel taxes is a sure-shot way to address a major component of price pressures. Introduction The latest retail inflation data suggest, that price pressures have begun to moderate in the economy, with CPI showing inflation having slowed for a second month to 5.3%, after July’s 5.59%. However, price trends among the constituents of… Continue reading Transient easing: On inflation

If inflation remains elevated, Monetary Policy Committee could lose credibility. This must be avoided

What is the news? RBI Governor has expressed optimism over the state of the economy. Speaking at an event organized by The Indian Express and the Financial Times, he noted that the economy will witness a sequential improvement in the second quarter of this year. What does the recent GDP data indicate? Recently released GDP… Continue reading If inflation remains elevated, Monetary Policy Committee could lose credibility. This must be avoided

Why Palm won’t fix India’s edible oil woes

Synopsis: India should focus on improving indigenous edible oil production rather than focusing on palm oil, that has many problems. What are the problems associated with oil palm crop? Reduces choices of farmers: Since, Palm is a long gestation crop, it reduces the responsiveness of farmers to changing market demand. For instance, farmers can switch… Continue reading Why Palm won’t fix India’s edible oil woes

A cycle of low growth, higher inflation

Source: The Hindu Synopsis: Unless policy action ensures higher demand and growth, India will continue on the path of a K-shaped recovery Background Some economists are of the opinion that the Government should not intervene with the economy and that it will revive by itself. These economists’ reason that, like after the Great Depression, the… Continue reading A cycle of low growth, higher inflation

Behest lending can give rise to a NPA problem

Source: Livemint Relevance: A lesson from the 2008 global financial crisis that can help India tackle post-pandemic situation better Synopsis: Aggressive lending to MSME sector can result in a NPA problem in the future. Background Response to 2008 financial crisis Central banks and governments across the developed world adopted extraordinary policy measures to avoid panic… Continue reading Behest lending can give rise to a NPA problem

Oil on the boil

Source: Business Standard Relevance: Understanding how global crude oil prices impact India Synopsis: India should gradually move away from an over-reliance on imports for its crude oil and gas requirements. Possible solutions. Impact of energy demand Energy prices are likely to stay elevated due to demand from a rapidly recovering global economy, even if the… Continue reading Oil on the boil

Adverse impacts of rising inflation

Synopsis: A rising inflation level adversely impacts the purchasing power of the consumer and discourages lending activities in an economy. India is currently observing an upward trend which may induce RBI to alter its accommodative stance and tilt towards a stricter monetary policy. Background: RBI has not intervened on high inflation since the onset of… Continue reading Adverse impacts of rising inflation

WPI inflation eases to near two-year low

According to government data,wholesale price-based inflation has reached a 2 year low of 2.02% in June,2019. This decline comes on the back of reduced inflation in the prices of manufactured products as well as a drop in the prices of fuel and power sources. However,RBI has projected upward in food inflation in the near term… Continue reading WPI inflation eases to near two-year low

Low oil price, food supply kept inflation low:Viral Acharya

The outgoing deputy governor of RBI has credited flexible inflation targeting,low crude prices and efficient food supply management for successful taming of inflation in recent years. The RBI has shifted to a flexible inflation targeting with a headline target of 4 percent(+/- 2 percent) when the Monetary Policy Committee (MPC) was instituted in 2016. He… Continue reading Low oil price, food supply kept inflation low:Viral Acharya