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Post-Global Financial Crisis: Heating Up of the Inflation Debate in India

In: Emerging Asia

Author

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  • Venkataramana Yanamandra

Abstract

While the US and the other industrial countries continue to face the very real risk of a recession-deflation spiral due to their large output gaps (i.e. excess of potential output over actual output), some emerging economies in Asia are facing the problem of inflation due to overheating of the economy. The inflationary problem is particularly acute in India, which has experienced double digit inflation since the beginning of 2010 as the economy has been on a tear, growing by 7.4 percent in 2009–10 (Figure 18.1). Inflation as measured by the Wholesale Price Index (WPI), as measured by the new and old series, has been in double digits since February 2010.1 Specifically, it peaked at 12.9 percent in August 2008 due to rising oil and commodity prices internationally and then declined sharply between March 2008 and June 2009, even turning negative for a period (due to a high base effect phenomenon in certain commodity groups such as iron and steel and fuels). The inflation rate turned positive in September 2009 and has been around 11 percent since February 2010. As of June 2010, y-o-y growth in the WPI was 10.6 percent as per the old series but there was a moderation in the price index since July according to both series.2

Suggested Citation

  • Venkataramana Yanamandra, 2011. "Post-Global Financial Crisis: Heating Up of the Inflation Debate in India," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Emerging Asia, chapter 18, pages 104-111, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-30627-1_18
    DOI: 10.1057/9780230306271_18
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