Inflated problem

Inflation has been a persistent problem for the Indian economy for nearly six years and worryingly for policy makers, Wholesale Price Index (WPI) inflation has been above nine percent for close to a year. Experts say that the price of commodities like food has risen steadily despite a string of good monsoons and record harvests. Sajjid Chinoy, India Economist at JP Morgan says the substantial price rises being experienced by rural India are a combination of a number of factors: supply bottlenecks, rising incomes, greater demand, and changing consumption habits. Critically, Professor Mahendra Dev, Director of the Indira Gandhi Institute of Development and Research points out that the cost of some food items in rural areas may be two or three times higher than official figures. WPI inflation dipped to 9.72 percent in September, down slightly from 9.78 percent in August. However, it still remains fiercely high and analysts in India widely anticipate that the Reserve Bank of India will, for the 13th consecutive time, lift interest rates later this month. The Reserve Bank of India says that it is mindful of a slow down in economic growth and the impact that the rising cost of borrowing is having on businesses and consumers alike. However India's Central Bank has also warned that it is not likely lower interest rates until inflation is brought under control. The timing of India's economic woes is not great. The country is struggling to keep growth and domestic consumption on track at a time when the world's major developed markets, and some of the country's biggest trading partners, are bracing for yet another slowdown.

BBC News