Rising Inflation in India is a worry

inflation-190.jpgInflation in India is on a rise. Substantially! In September it rose by 8.62%, while in August, it was up by 8.51 and in July it was 10.31!

For the 5 months until July the inflation in India was over 10%. In fact the drop below 10% is actually a slowing down of Inflation. The prices of primary articles – food, non-food articles and minerals – have gone up 17.45%, and the fuel and power prices have gone up 11.06%. The manufactured goods are up by 4.59%.

The RBI is under pressure to tighten its monetary policy. Meanwhile, the 10 year bond yields have risen to the highest level in more than 5 months, with the fear of rising inflation. This also reflects in the increased bank borrowings:

banks borrowed an average of 756 billion rupees ($17 billion) each day from the central bank’s repurchase auction window last week, compared with 114 billion rupees in the previous week, reflecting tighter cash conditions.

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The jobless rate in India is also almost touching the double digit mark. In July 2010, it was 8%.

One wonders if the salaries and incomes are rising in a similar way? The expenses seem to be going almost at par with dollar level costs in US, but the incomes are in Rupees. Will this keep the household budgets safe for the middle class? Is that going to be worrisome?

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