What concerns the economists at present in the country is a high surge in the wholesale price-based inflation that has, according to them, touched a 30-year high leading to a very alarming situation.
Seeing no risk of hyperinflation the distinguished economist Kaushik Basu warned if the retail inflation follows wholesale prices, it might lead to an inflationary crisis. The Wholesale Price Index (WPI) reflects changes in the average prices of goods at the wholesale level — that is, commodities sold in bulk and traded between businesses or entities rather than goods bought by consumers.
Yet, he accepts that the inflationary situation is at a very risky bend adding that most commonly wholesale price inflation seeps into the retail price inflation thereby creating a very dire situation for the country because prices are rising quite instantly.
Intertwining monetary policy and fiscal policy is needed ultimately. A better curation of policy is not supposedly occurring between the Treasury, the Finance Ministry and the central bank for aptly dealing with the rising inflation.
How can another economist Arvind Subramanian differ from Kaushik Basu, as he was also very much afraid of the global situation that may turn a little bit more inflationary in the next one or two years?
Supervision over the resources are shrinking in the country and conflicts over the resources are rising very sharply. There is no vocation for the people hinting at shrinkage in the resources. If the resources do not grow rapidly, the conflicts will intensify with inklings of higher inflation.
Side by side the worrying aspect is that poverty has started rising again diring the past few years, though our country’s economic growth in the last 30 years was driven by exports. Studying minutely such rude leanings, our economists had to point out that there was no economic model in the world where a country can grow 8-10 per cent without high exports.
In the meantime, the wholesale price-based inflation eased marginally to 12.07 per cent in the month of June this year as crude oil and food items noticed some softening in prices, while retail inflation slipped a tad to 6.26 per cent in the same month although it remains above the comfort level of the Reserve Bank for the second consecutive month in a row.