High inflation in india a threat to growth and development
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High Inflation in India – A Threat to Growth and Development?. A2 Macro – January 2014. Indian Population. Population still rising but more slowly. Growth and Inflation in India. Inflation in India is among the highest in the Group of 20 leading economies. Causes of high Indian inflation.

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High Inflation in India – A Threat to Growth and Development?

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High inflation in india a threat to growth and development

High Inflation in India – A Threat to Growth and Development?

A2 Macro – January 2014


Indian population

Indian Population

Population still rising but more slowly


Growth and inflation in india

Growth and Inflation in India

Inflation in India is among the highest in the Group of 20 leading economies


Causes of high indian inflation

Causes of high Indian inflation

  • High rates of food price inflation

  • Fast pace of wage inflation

  • Weak currency (rupee) which makes imports even more expensive

  • Supply bottlenecks – energy blackouts

  • Failure to lift productivity in farming

  • Expensive fuel and fertiliser subsidies leading to high fiscal deficits

  • Wheat and rice bought by the state at artificially high prices to appease large farmers

  • Lack of intense competition at retail level


Indian rupee v us

Indian Rupee v US $

Indian rupee has been falling consistently against the US dollar since late 2011. Good news for exporters perhaps but India is a net importer of food and energy.

And a lot of corporate India has taken loans over the past decade in foreign currency – debts harder to repay!


Consequences of high inflation in india

Consequences of high inflation in India


Three key indicators for india

Three Key Indicators for India

India needs to import crude oil, machinery and many other raw commodities


Combating the stagflation risk

Combating the stagflation risk

  • Monetary Policy

    • Higher policy interest rates

    • Proposal to introduce an inflation target of 4%

  • Fiscal policy

    • Scaling back extensive system of farm subsidies

  • Structural reforms

    • Increasing competition in utilities and retail

    • New measures to attract inward FDI

    • Reforms to lift productivity in rural areas

    • Huge priority is address poor infrastructure


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