Inflation!!!!

Inflation reaching two digit figure..has taken every one by surprise, everyone is tensed over this overshooting commodity prices…its not normally that the economy bleeds like this.

But how do suddenly prices rise?? With my limited knowledge, I can attempt answering this.
Firstly prices don’t rise abruptly, we need to understand the cause behind this..Reason less supply and more money.…This is how we define inflation “ too much prices chasing few commodities” . i.e people have a lot of money to spend but the supply of goods and services not showing similar trends. The easy personal loans, low interest rates., the easy availability of car and white goods with EMI option etc..all raise the purchasing power of the economy….this is an ironic situation for only 14% of the families spend 15k or more on household expenditure and 38% is in the bracket of less than 4k a month. So who is actually having a high purchasing power?? The resources are concentrated in hands of Few Individuals – i.e how Poverty defined in Economics

Neways now with measures such as high Repo rate and CRR, what RBI is trying to do, is getting the excess money supply in place. Increased CRR and Repo rate will ensure banks lending capacity go down, and thus we will see the increase in PLR. All these will take time to get back the things to normal. All these will also impact the foreign inflow of cash in the economy. The stock market currently looks very depressing but it will bounce back.

Lets hope things get back to some shape soon….