Is India inching towards hyperinflation.??*!!?....

Sunday, May 9, 2010

I was just browsing the web today, got across an article which was mentioning about inflation of 14 to 15% in Jan 2010.

Couple of years before, there use to be regular report in the newspaper of inflation week on week basis and inflation were in range of 5~8%. Somehow, this is not being reported these days.

Last two years, inflation has been on the raise again, commodities and real estate have been on raise again, but clearly getting away from the reach of normal decent earning of a person.

The main cause of these inflation is a massive and rapid increase in the amount of money that is not supported by a corresponding growth in the output of goods and services. This could result in an imbalance between the supply and demand for the money (including currency and bank deposits), accompanied by a complete loss of confidence in the money. The inflation can be considered as a hyperinflation once the inflation gets beyond 20%.

I believe such inflation could also cause, hoarding of commodities as people hoarding commodities get higher return in a shorter time without any additional effort, disparity in distribution of wealth across the general public, with rich becoming more rich and poor becoming more poor.

India has claimed to have been least affected by recession, however the side effects pumping more money into the system to overcome the recession seems to have triggered inflation, so unless Indian government brings in better control mechanism, we might be having challenges in the near future.

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