Today,
inflation has become a major cause of concern for the global
economies ranging from highly developed countries to emerging
economies. The distinguishing characteristic of today's
inflation is that it is largely due to the increase in the
prices of essential commodities and has direct impact on
the living standards of low income group people and hence,
it has become a sensitive issue on social and political
fronts. Particularly, in India, it is a major issue during
the period of elections.
Since
2006, global food prices have been experiencing an increasing
trend and have observed historical peaks even beyond the
levels of 1980s. The index of food prices reached
150 in 2008 from 100 in 2000. Similarly, the index of oil
prices for 2008 is estimated to be above 550, which was
at 150 at the beginning of this decade. The index of all
commodities has reached above 300 in 2008 from the level
of 100 in 2000.
India
recorded an inflation rate of 7.61% for the week ended April
26. According to the Wholesale Price Index, it is the highest
since November 8, 2004, which is basically driven by rising
food prices. Inflation rates in different countries are
at historical highs—4% in the US, 8.3% in China, 13.3%
in Russia, 9.6% in Saudi Arabia, etcThere
are long-term as well as recent factors which have contributed
to such an enormous increase in food prices. Emerging economies
have been recording significant growth rates, especially
since 1980s. China experienced the growth rate of above
10% in 2007-08 and India at above 9% (Figure 4). The enormous
growth in China and India which together have around 40%
of total world population has provided for the increase
in the income levels of individuals which, in turn, provided
an incentive to demand not only more agricultural products
but also electricity for domestic and industrial uses, fuel
for transportation, etc. The increasing demand for transportation
has been adding fuel to the skyrocketing oil prices. Furthermore,
the rise in population is another factor which adds to the
rise in demand and, in turn, prices. The most interesting
thing to note here is that the population growth, especially
in growing economies has multiplying effect on the already
increasing demand. As a result of the increasing demand
from emerging economies, the imports of these countries
have increased during the last decade. |
