Now, even if we replace the base-year effect with a more
normal-year, inflation will be well within the RBI and the government's (too)
comfort zone... Government is the biggest spender in the room... it also loses
the value of its money when inflation goes up... it will have to find more
sources of revenues... which when inflation is high kills demand more than
double... at one place the demand has gone down due to high inflation and taxes
will squeeze the situation too... people will demand more income... wages and
incomes cost will go up... prices will go up more... the chain reaction will go on a
few rounds as long as inflation remains near the target... INDIA still does not
have food-security which is likely to put pressure on prices of food... same like before.. Fuel
prices have become favourable... So we need to pass its fullest benefit to the
economy... for maintaining strategic reserves, too, or explore Shale-wells...
Our only problem is vegetable prices which are too much volatile and signal
more investment even in imports... Why INDIA is shying away from satisfying its
people's needs ? A simple zero import duty/tariff will be a great incentive...
The long-run path of the prices all over the World has shown a downward
trend... Imports will help lower prices in the economy or reduce volatility,
means lower inflation... good for demand and growth... means (again) more expansion... The economy is on the right track...
Well-done Rajan...
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