Posted by Kavitt S on 10 May 2008 | Tagged as: Business News - India
When will the worm die down?
It was the highest since an annual reading of 7.68 per cent on Nov. 13, 2004. The annual inflation rate was 6.01 per cent during the corresponding week of the previous year.
Posted by Kavitt S on 11 Apr 2008 | Tagged as: Business News - India
Inflation jumped to a 41-month high of 7.41 per cent on Friday, seen as a deadly blow to the government and fanning expectations of more monetary tightening that would hit economic growth. Inflation has climbed steeply in
Terming soaring inflation rate as a global phenomenon, the government on Friday said it has no “magic wand” to bring it down immediately though it is taking and will take all possible steps to contain price rise. “Inflation is at a very high level in all emerging markets such as
Posted by Kavitt S on 06 Apr 2008 | Tagged as: Business News - India, Expert cues
Much to the fear and embarrassment of the UPA government, inflation rate almost doubled during the three months of 2008 to reach the 39-month high mark of 7 per cent. Although 2008 began with inflation rate of 3.79 per cent for week ended January 5, prices rose as the year progressed.
Such a sudden spurt in prices has thrown the household budget of the common man into disarray, putting pressure on the government and the Reserve Bank to take steps to control the inflationary pressure.
What is Inflation exactly?
Inflation is a measure of rise in general price levels of goods and services. Inflation is measured by taking a set of goods and services, and then the prices of the items in the set are compared to prices one time period ago.
In India, inflation is measured based on the wholesale price index (WPI) which measures the change in prices of a selection of goods at wholesale prices. Inflation is primarily of two types - Cost push and Demand pull. Cost push inflation is due to rise in costs of input materials or labour, whereas demand pull inflation is due to increase in demand beyond installed capacity.
Inflation comes in many varieties. The worst variety, from the viewpoint of politicians, is food-led inflation. In a poor country like India, where half or more of family spending is on food, rising food prices spell electoral doom.
Inflation went up quite a bit in the beginning of last year (around seven percent) due to high liquidity in the markets (huge funds inflows in the form of FII and FDI). The RBI controlled inflation by tightening the monetary policy (raising cash reserve ratio and interest rates) and letting the rupee appreciate against foreign currencies. Inflation came well within the control limits in the second half of last year. However, inflation is going up again this year from the last few weeks. This week, inflation figures reached the 7% mark. The reasons of rising inflation this time are quite different from those last year.
What are the effects of inflation?
Controlled inflation is good for the economy as it increases motivation levels of people. The government, in consultation with the RBI, decides the inflation threshold in the country (current inflation threshold range in India is 4-5 per cent). The inflation target is one of the key parameters that go into determining fiscal and monetary policies.
When inflation accelerates, as is the case today, governments across the globe tend to panic and rush out with anti-inflationary packages. The government is panic-stricken today because food prices are going through the roof. Overall, wholesale price inflation has accelerated from 4.5% in January to almost 7% today, and looks headed for double digits. Consumer prices are rising even faster because of consumer panic. The consumer price index is available only with a lag of two months, but newspaper reports suggest that in some cities the consumer price of rice is up 20%, edible oils 40%, dairy products 12% and some pulses 20%.
Life in the four metros across the country is getting tougher for poor and middle class consumers as their budget for grocery and other food items have shot up by almost 40 per cent in the last one year, with Delhi being worst hit. The maximum surge in food prices was witnessed in the national capital, followed by Kolkata, Mumbai and Chennai.
What are the main reasons behind rising inflation? Continue Reading»
Posted by Kavitt S on 05 Apr 2008 | Tagged as: Business News - India, Retail investors, Stock Markets
Inflation numbers (at 7%) are still very much out of RBI’s comfort zone (of 5%) and show no signs of relenting. While the banking system is once again flooded with surplus cash flows, price levels too are rising to newer highs. CRR (Cash reserver ratio) hike seems to be next on the cards. This would help to reduce liquidity in the markets and hopefully in the process, lower inflation rates. Bad news for investors and retailers .. Stock markets may tumble further due to this news and the eventual liquidity crunch. Continue Reading»
Posted by Kavitt S on 04 Apr 2008 | Tagged as: Business News - India
After data revealed that India’s annual inflation rose to a three year high at 7 per cent, two whole percentage points higher than the RBI’s comfort level, stocks tumbled further. At around noon today, the Sensex was down 373 points or 2.36 per cent at 15,459.12, the low point of the day. The Nifty was down 96 points or 2.02 per cent at 4675.30, near the low of 4668.90.
This fall could be attributed to doubts in the investor’s mind about what new steps would be taken to curb inflation. While fiscal measures have already been taken, there is fear that monetary steps, in the form of hiking the CRR hike could be taken as soon as today, which is making investors even more jittery. Capital goods, technology, auto and banking shares were worst affected.
BHEL, HDFC , Mahindra & Mahindra , Larsen & Toubro and ITC were the biggest Sensex losers.
Ranbaxy Laboratories, Tata Steel and Hindustan Unilever were the only index gainers.
Again, Commerce Minister Kamal Nath maintained that the rise was primarily on account of supply side constraints.
Posted by Kavitt S on 04 Apr 2008 | Tagged as: Business News - India
THE country’s top steel producers, including Tata Steel, SAIL and Jindal Steel, on Thursday decided to roll back the prices of long steel products, including construction-grade TMT bars by Rs 2,000 per tonne. The price cuts would be implemented immediately.
The reduction in prices of steel products is part of the measures introduced by the Finance and Steel ministry to lower inflation rates and provide relief to the common man directly using these products.
Accordingly, the steel companies have also agreed reduce the price of galvanised corrugated (GC) sheets use as roofing material for low-cost housing.
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