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Economy

Kaushik's daily dose of inflation

Kaushik has started an interesting series: A daily dose of deflation. (Read his introductory post) Very important news – often overlooked because falling prices are only good, no? No?

While it may sound a little crazy, the next problem, and a very new one for India, is deflation. India has always had the Hindu Rate of Growth, whatever that means, which was some 3% growth forever.

Here’s a link to add: Edible oil imports jump 19% on lower global price.

Palm oil and other edible oils had their duty slashed in 2006,
but in July 2008, prices were at a major high. A report from Bloomberg mentioned that “India’s edible oil imports in May fell 39 percent to 302,345 tons from 494,184 tons a year earlier, after private traders cut inventories of the commodity because of local government curbs on stockpiling”.

How four months can change an industry. From then, to November, when world prices are hitting lows and imports scaling up – and no doubt, local industry is worried that their already high price points cannot be defended.

Like every industry they will go into denial first – refusing to cut their prices and asking for import duty hikes. (Which btw, are not going to be possible if we ink FTAs with Malaysia and Indonesia, planned early 2009) But later, reality will set in, and voila: Deflation in edible oil prices.

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