Inflation - Too early to flutter with it

The recent inflation data both CPI & WPI have come in the comfortable range of RBI, but there is need to exercise caution.

The basic cause of inflation in India is supply chain bottlenecks. The constraints that are in supply chain from farm to fork still persist. Though RBI has been able to claw down inflation by increasing interest rates at various occasions, but it has also curbed consumption. Consumption theory was the only USP, which was being showcased to the world that India had. To reduce inflation by reducing consumption is not the way to go forward. It shows RBI’s, the Finance Ministry’s and on the whole Indian Government’s short sightedness to tackle the issue.

One look around and it is evident that there are no major changes in the infrastructure. There are no new rules and strategies to ease out the bottlenecks. There is nothing new apart from clearing FDI in retail sector. But no company has started operations in a big way which actually has helped reduce supply chain bottlenecks.

The inflation has reduced by reducing consumption and not by mitigating inflationary constraints. The car sales have dropped down in the past couple of months which is a clear indication of the reduced discretionary spending.

How long can we pull on like this remains to be seen? Think!