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Why are our inflation figures, particularly for Consumer Price Index, in India, so high?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 preetham asked almost 3 years ago

Why are our inflation figures, particularly for Consumer Price Index, in India, so high?

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

Dear Friend, The government keeps giving multiple explanations for this. Sometimes, it is said that this is because of supply-side issues. Other times, the government says that this is because of high growth and huge increase in demand with not much increase in supply. Once, the government gave a reason that it's because of our huge population that inflation is so high. And sometimes the reason is attributed to global factors beyond our government's control. Some reasons are as follows: **Supply side issues:** Due to infrastructural bottlenecks in the production chain,aggregate demand exceeds aggregate supply in the economy. Lack of cold stores(perishable items), warehouses and erratic monsoon often leads to shortfall in supply. **Fuel Import:** Our fuel requirements are met substantially by imports.The high crude oil prices add to the transportation costs thereby pushing up the commodity prices. Subsidies on kerosene,urea etc. increases the purchasing power of customers. **Low Interest rates:** To realise the target of near 10% GDP growth rate, the interest rates have been kept relatively lower over the years in India.Free education loans have been extended. Welfare schemes like MNREGA have raised wages and increased the demand of goods in rural areas.Constant demands of wage hike by Trade and Bank unions have led to Cost-push Inflation. **Tax evasion**

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