2011 may continue to give pain on food inflation to the government and put pressure on the manufacturing sector due to the hyper-inflation, says the Assocham paper on “Realizing the Objective of Stabilized Inflation”.
The paper says the major draw back of the country’s inflation control strategy is that it always considers inflation as a seasonal and temporary problem. Monsoon failure has always been dubbed as the main cause of inflation. Similarly, above average rainfall has been interpreted as the end of hyperinflation era. In reality, besides the domestic climatic conditions, external market conditions, logistics deficiency, unauthorized hoarding and ineffective agriculture policy too have been the major causes of inflation.
Rather the current food inflation needs to be seen from two angles: one, there is a shift in income brackets with the growth of the middle class as a result of industrialization and growth of services raising demand pressure, and two, the gap between producer prices and consumer prices is widening with retailing at consumer level a highly profitable job as demand pressure increases.
The paper says the major draw back of the country’s inflation control strategy is that it always considers inflation as a seasonal and temporary problem. Monsoon failure has always been dubbed as the main cause of inflation. Similarly, above average rainfall has been interpreted as the end of hyperinflation era. In reality, besides the domestic climatic conditions, external market conditions, logistics deficiency, unauthorized hoarding and ineffective agriculture policy too have been the major causes of inflation.
Rather the current food inflation needs to be seen from two angles: one, there is a shift in income brackets with the growth of the middle class as a result of industrialization and growth of services raising demand pressure, and two, the gap between producer prices and consumer prices is widening with retailing at consumer level a highly profitable job as demand pressure increases.
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