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Understanding High Inflation in India

Explore the impact of high inflation on India's growth and development, as inflation rates in the country remain among the highest in the Group of 20 economies. Discover the causes behind this economic challenge and how it influences the Indian population's well-being and progress.

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Understanding High Inflation in India

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

    A2 Macro – January 2014
  2. Indian Population Population still rising but more slowly
  3. Growth and Inflation in India Inflation in India is among the highest in the Group of 20 leading economies
  4. 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
  5. 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!
  6. Consequences of high inflation in India
  7. Three Key Indicators for India India needs to import crude oil, machinery and many other raw commodities
  8. 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
  9. Suggestions for reading – click to view
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