Inflation in India: a compilation of comments

Published: October 1, 2013 at 8:56 am

Last Updated on

Last week I posted a rather non-technical take on Inflation in India: Will it ever decrease? The  post triggered many interesting comments

I also received some interesting responses on Linkedin. Here is a compilation of comments from various Linkedin groups.

~~~~~~

Author: Jyoti Kumar, Director- Development (Co-founder) at Bazaar Analysis Pvt. Ltd

Inflation is simple demand supply game. GDP/GNP (nutshell whatever we produce) of country is on one side and supply of currency on the other side. On GDP/GNP side we have multiple problems. Political reasons are on the centre. But, we should also blame our social or cultural part too. In some states politicians are distributing free electricity to farmers at cost of killing manufacturing units then on some other states they are failing to collect the electricity bill in fear of losing popularity and so, poor supply of electricity and no growth of industries.

At moment we have a major amount of assets blocked in half backed real estate projects. In 90s we had really need of real estate but today it is over supply and government never realized this to stop diversion of money in this sector on the right moment.

Our service sector just need 0-6 year experience people. Beyond that they don’t have high quality work and their resource become costly for them. So, silently they are dumping people beyond 6 year of experience and our government has yet to realize we are going to face major unemployment issue with people having work experience (unlike till early 90s we had unemployed with no experience)

In the mean time we have killed our conventional engineering and just converted all talent to software engineers.

As a society we need too much security and retail investors have blocked their 2/3rd investment in fixed deposit and stupid insurance linked investments that money almost not available for growth of the industry.

inflation in india: insights and c omments
Photo credit: tico_24 (Flickr)

Our investors’ community never want to take a risk or judge the concept at idea level (whatever they claim to do so). They want to put their penny only on the idea which has started yielding. We don’t have investors’ community like who funded Amazon.

Let us come to the other side of the equation. For currency we have copied the fiat currency model from US. We are printing and distributing currency without accountability. In the case of US, whole world is trading crude oil with US$. Virtually, gulf crude production is getting added to GDP/GNP of US. So, printing of extra currency is balancing out. However, we are printing much more than our own production.

Conclusion: Can we control inflation? Yes, we can because we have all resource and talent to do the same. But, we need change in political setup, priority and our own attitude.

~~~~~~

Author:  Harjeet Singh Kalra, Guest faculty, Management studies at Panjab University, Educational Institution, Chandigarh

Join our 1500+ Facebook Group on Portfolio Management! Losing sleep over the market crash? Don't! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free! Did you miss out on the lockdown discount? You can still avail it! Follow instructions in the above link!

Keep the exchange rate under control by keeping the economy open to foreign investment which will keep up the inflow of $ and this shall enable us to meet the demand for $ for import of oil and also keep the oil prices from rising in rupee terms. Rising rupee costs of imports(oil) adds to inflation

~~~~~~~

Author: Division head of an AMC (not sure about AMCs social media policy , so don’t wish to name the author)

Good one and probably reflects the general sentiment…inflation never seems to come down….only observation to add….even good rainfall is not enough to bring down inflation as can be seen amply from the recent sharp rise in onion prices in spite of abundant rainfall …….moreover due to subsidies (again the major culprit) and skewed crop sowing pattern (due to MSPs again determined by govt) the food for which demand is growing like oilseeds, pulses, proteins etc we are not able to increase the supply

~~~~~~~ 

Giovanni Chiampesan suggested (in the post) that I watch a very interesting video by Amercian economist, Milton Friedman on inflation.

Giovanni says, “Inflation is a purely monetary phenomenon caused by an excessive supply of money. Your new head of the Bank of India should be able to curb it since he’s from the Chicago School. See  How to Cure Inflation

This webpage has simple and illuminative description of inflation:

“Inflation results when the amount of money printed or coined increases faster than the creation of new goods and services. Money is a “token” of the wealth of a nation. If more tokens are created than new wealth, it takes more tokens to buy the same goods.”

The same video is also available on youtube

 ~~~~~~~ 

I would like to thank all readers for sharing their insights. I understand that it is a significant expenditure of your time and effort. Thanks to you I understand about inflation so much better.

Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps