India at double digit inflation!

4 posts / 0 new
Last post
investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
India at double digit inflation!

Consumer Prices
Prices paid by industrial and farm workers in India rose almost 14 percent in May, according to government data. By contrast, consumer-price gains are running at 5.2 percent in Brazil, 3.1 percent in China and 5.8 percent in Russia.

http://www.businessweek.com/news/2010-07-07/india-needs-contingency-plan...

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: India at double digit inflation!

Among the BRIC countries, the Asian giants India and China skated through the 2008-2009 crisis with strong GDP growth, whereas Brazil fell into negative growth and Russia went deeply negative.

HIgh inflation in India, and bubbling property prices in China, are typical of the late phase of the business cycle. In other words, India and China appear to be out of sync with the rest of the world, most of which is in early recovery with disinflationary symptoms still present.

Both India and China will be tightening policy (rising interest rates in India; rising reserve ratios and yuan revaluation in China) in response to their late-cycle inflationary pressure. The risk is that they slide off into an out-of-phase recession, at a most inconvenient time for North America and Europe. This possibility bears close watching.

V's picture
V
Status: Platinum Member (Offline)
Joined: Dec 14 2009
Posts: 849
Re: India at double digit inflation!

The 30% rise in fuel prices due to the removal of subsidies will send inflation well north of 10%. I expect to see more strikes , violent riots and a possible slowdown of the entire economy. The population continues to skyrocket ( soon to pass China) water is a huge problem as is environmental destruction. Add the US and Israel messing with Iran (major source of oil and gas) and India is not a place I would choose to be.

V

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: India at double digit inflation!

This factoid illustrates how Asian countries are entering a later phase of their economic expansions:

July 9 - Bloomberg (Eunkyung Seo and William Sim): "The Bank of Korea raised its benchmark interest rate for the first time since the global crisis, joining counterparts across Asia in removing monetary stimulus as the region leads world growth... The won neared a two-week high as South Korea joined India, Malaysia and Taiwan in lifting rates in recent weeks..."

By contrast, the Federal Reserve and ECB can't even contemplate raising rates on their prostrate economies now.

This out-of-sync state of the global economy spells potential trouble. Should the Asian authorities go too far in tightening and provoke a 'growth pause,' it would constitute yet another headwind for the debt-ridden OECD economies.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments