For delivery in electronic
format: Rs. 50;
For delivery through courier (within India): Rs.
50 + Rs. 25 for Shipping & Handling Charges
Download
To download this Article click on the button below:
Abstract
India's headline inflation has dropped to near zero levels in
the past couple of months. The question that is lingering
is whether India is on the way of deflation. This article argues
that India is not going through deflation but disinflation. Deflation
occurs when prices fall rapidly. Further,
it argues that with the prices of food, primary articles and
housing not falling much, the current situation cannot be deflation
but disinflation, where only the rate of inflation is falling.
Description
Inflation control calls for curbing excess aggregate demand
and need not necessarily rein in the real growth rate. The
frequent tightening of monetary policy is not a growth killer.
On the contrary, the very signaling by the Reserve Bank of India (RBI)
of its credible threat to contain speculation in real estate
could channelize credit back into real investment, enhancing the
productive capacity of the economy and thus the potential growth rate.
The measures taken by the Union Government to scale
down inflation appears to have yielded results as can be seen from the
current inflation of 0.27% for the week ended March 14, 2009 which
has moved to a little at 0.41% for the week ended March 21 and
further dipped to 0.26% as of March 28. There is no record of inflation
dipping so low since 1977-78, according to the government estimates.
Much of the current fall in the inflation rate is due to a high
base effect, since inflation was at a high of 7.78% in the
corresponding week of 2008. Base effect refers to changes in the Wholesale
Price Index (WPI) number in comparison with the same period in
the previous year, while the index effect is the change in the
WPI against the period preceding the week in question.
Keywords
Professional Banker Magazine, Inflation, Disinflation, Reserve Bank of India, RBI, Monetary Policy, Wholesale
Price Index, WPI, Indian Economy, Financial
Assets, Consumer Price Index, CPI, Global Economies, Deflation, Commodity Prices.
