Monday, September 17, 2007

India Inflation At Lowest Point In Two Years

by Stewart Douglas

The Indian national rate of inflation has fallen to its lowest point in over two years, according to figures released today by the national statistics body.

The figures released today reflected the decreased cost of vegetables and some other food stuffs in the wake of rampant economic growth and increasing salaries, pushing the cost of living to new heights.

The wholesale price index, used as a measure of inflation within an economy, was said to have risen by 3.52% on the year to the beginning of September, which is the slowest rate of growth since August of 2005.

The Indian economy is one of the fastest growing in the world, emerging as a future superpower behind China. Over the last few years it has experienced runaway growth in almost every sector, allowing the economy to develop and improve the standard of living for its population.

However, inflation has proven to be problematic for the authorities, including the Reserve Bank of India, which has been engaged in anti-inflationary measures throughout the course of this year.

So far in 2007, India has seen interest rates rise sharply over 5 occasions in order to reign in price strength and keep the economy on track. Additionally, it has increased the minimum CCR, which controls the proportion of deposits banks must retain and hence cannot loan to business and consumer borrowers, several times to act as a complimentary anti-inflation measure.

Increasing interest rates comes at the price of economic growth, and many analysts are predicting that the impact of successive interest rate rises wil certainly be felt on year end growth figures when they are eventually released.

Today’s news reflects the fact that inflation is now within central bank targets, currently set at 5% for inflation, suggesting that the economy may have seen the last of its interest rate rises for the time being.

 

 

 

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