Inflation and Recession
Ghost of inflation is back to haunt. Inflation this week surpassed 6%. There are chances that interest rates of loans will be further increased to cool off inflation. Finance minister has already given indication for this. This means that EMIs for loans are going to increase further. This means that EMI for loans will increase further and taking loans will also be costly. I had planned to take loan about a year back. But the rates increased. I expected the rates to come down and decided to take loan after it. Unfortunately after every interval rates have been increasing. Already there has been three rate increases.
Increase in Inflation in India is mostly driven by hike in food prices.Vegetables, food oil,Food grains have become costly.If government had any policy to tackle the food prices then inflation would have been history.But it seems government totally neglected food security.Today I saw on CNN that shortage in Rice is expected globally. From past four to five years Indian government has decreased its stocking for food grain buffer stocks.As a normal practise govt used to stock 30 to 40% food grains more than that was required to tackle any food crisis.But now government has actually reduced the food grain procurement to the levels that is lower than that is required to maintain food security.
Effect of inflation on current food prices
In order to tackle inflation government is planning to same age old trick of increasing CRR and loan rates.But what is happening in America is in direct contrast with what is happening in India. Rate cuts are being announced every now and then by Federal Reserve. Rates of houses are crashing down. While in India real estate prices have sky rocketed. Apart from that many economic indicators in US are not showing sign of recovery.From past couple of years there has been decrease in US consumer spending that affects the global export markets.Many economists have all ready predicted that recession is about to begin in US economy and that will hurt global markets.
posted by Abhishek Upadhyay @ 8:37 AM
6 comments
6 Comments:
My family in the U.S. says that people are cutting spending. The slowing of the market is "old news" where they live, though. There are parts of the U.S. that have never recovered from industy moving overseas.
...Kaal karai so aaj kar, aaj karai so ab, pal mein parlai hoyegi, tab bahuri karega kab...
Much like the loan you wish you had gotten in advance of our recent economic woes, I too wish I had traded my car in for a more fuel efficient car. Now, the interest rates are too high and the cost of gasoline vs. the cost of a new car are comparable.
Good post.
Cheers!
hahahaha
American gori quoting desi aphorisms.
Too Good.:)
akal i have a lot! and heard you are out of orkut:D same pinch!
:x ullu!
mein toh yahi aakar reply karoongi :P !
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