Inflation at its all time high (11.05 %) and its impact in India

For the first time in the economic history of India, the inflation has touched an all-time high 11.05 % in a period of thirteen years.

The economists said that the Indian Government as well as the Reserve Bank of India has not taken timely steps to check the inflation under control.

The economists also feel the present trend may even trigger further rise in inflation.

The recent hike in the fuel prices of petrol, diesel and the cooking gas in turn indirectly escalated the prices of many essential commodities.The immediate reaction to the higher rate of inflation was the fall in the sensex in BSE by 517 points since August,2007.

Crisil’s chief economist D.K.Joshi said that rates could fall on the back of a good monsoon and the prices of metals and minerals are expected to fall.

BJP characterizes the rise of inflation as funeral of the congress and it called for the immediate resignation of the Prime Minister and the Finance Minister.

Due to the rise of inflation, the lower income group has been worst hit since the public distribution system has also failed.

India’s sustained growth will also be affected due to the current trend of inflation.

The government’s options are limited as the price rise is from the supply side.The consensus is that inflation will rise further in coming weeks. Higher diesel prices will push up the prices of other commodities, where transport will become a major cost. ’Headline inflation could even touch 13 % by end-September before easing off’ said economist Mridul Sagar.

To provide immediate relief to the lower income group from the collapse of the public distribution system, the Government of India has ordered that all edible oils should be sold only through the public distribution system.