What’s the silver lining as Inflation rises in India? | Economic Times

There is now a very strong demand which will translate into much higher investment all over the world including India, which can be a spur for growth and trade, says Swaminathan Aiyar, Consulting Editor, ET Now. China is looking to increase power tariffs for its industries. Natural gas prices are going up; coal prices are expected to go up. Do you see inflation being transitionary in nature? Also what is the India impact of that? Inflation is going to rear its head. It has already reared its head the world over. India is more linked to the world economy on some of these parameters than people realise. So inflation is high in India. It is certainly rising in other places too. There is some volatility in India because food prices are going up and down. But I would simply say yes, inflation is a threat for every country. We have had so many years of mass printing of money without generating consumer price inflation. We are reaching the end of that and once that end is reached, we are seeing an unexpected and unanticipated spurt in prices across the board and supplies. Look at the ships piled up all over the place; look at the chip shortages which people are now saying will continue right till the end of 2022. On the supply side, there is a problem and on the demand side there is so much accumulated pent up demand! The money is out there and now with the end of fear of Covid, we are going to get additional demand in India and in the rest of the world. This is a global phenomenon and India is neither capable of going it alone or escaping it, although at the margin we can try to be a little better. Historically, this has been a high inflation, high interest rate country and we will continue to be that. The positive part of it is that there is now a very strong demand which will translate into much higher investment all over the world including India, which can be a spur for growth and trade. These are the positives, but yes inflation by itself is a dampener and we need to take care of that. But it is worth saying that there is a silver lining and that is now reflecting a strong increase in global demand and that is good for India.