Inflation to come down rapidly: FM

Thu, 13 May Pre-Open

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The developed world and India seem to be engaged in entirely different battles right now. The developed world is fighting hard to stave off a potentially deflationary spiral. India, on the other hand, wants to bring inflation under control. Looks like India is going to emerge victorious, at least in the near term. No less than the country's FM has endorsed such a view.

Addressing a meeting of an industry body, the FM said that he expects inflation based on CPI to decline rapidly on the back of fall in the price of food items. It should be noted that India's food inflation, based on wholesale prices had scaled to as much as 20% few months back, creating a huge furore amongst its denizens. The number now stands in the vicinity of 16%, made possible due to arrival of fresh crops in the market. The CPI is expected to slip even more going forward as food prices come down further.

The fall in CPI is also likely to be a positive for the economic outlook in the near term as this would mean lesser tinkering of the interest rates by the RBI and hence, a more conducive environment for growth. While the IMF in its latest outlook has projected India's GDP growth to grow by 8.8% in 2010 and 8.5% in 2011, the FM is hopeful of an even better performance. Clearly, optimism seems to be back in all its glory amongst the policymakers in India. However, it will not take more than a sub-par monsoon to reduce even the best laid plans to a nought. Thus, optimism needs to be tempered to that extent.

Look who supports a Gold standard?

It is quite common these days to blame politicians for most of the ills plaguing the world economy. To most of us, they come across as ill equipped to handle economic matters and hence, are prone to messing things up, as they are doing right now. Thus, it comes as a pleasant surprise if a politician of an extremely high standing gives some valuable insights on matters economic. One such person is the former US President, Bill Clinton.

In a recent interview, Bill revealed an economic side of his that would be a rarity in political circles. Clinton sounded like a hardcore supporter of Gold and observed that the current financial crisis in the US had its roots in the US coming off the gold standard. While he did try to cover up for it by stating that the US came off the gold standard for reasons of economic management, he more or less said the same thing that most economic experts of repute are trying to highlight these days. For the world to have any reasonable chance of enjoying a long period of stable economic growth the excesses of the past should be allowed to die their natural death and the government should stop postponing the pain by resorting to money printing. If only Messrs. Obama and Merkel could take Bill Clinton a little more seriously.