

Inflation in India

Who cares about the price of onions?

The fight against inflation has left India’s central bank in a lonely place

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Readers' comments



please visit myrajivgandhi.in and take part in an online discussion.We are remembering Rajiv Gandhi and his vision of modern India.


Indian people lost faith in governments inflation data. They add or remove items to their whims and fancies from the index.

Easier and straight forward inflation data to see is price of onions. This is just poor mans understanding of economics. This has been proved right many times in the past, i do not see anything in this to laugh at.


The RBI, I believe, is correct in its stand to keep interest rates intact. Because if the government is so concerned about growth, then it better speed up policy reforms. That can, guaranteed, add a percentage point to the GDP over a period of a year. Can lower interest rates gurantee such improvement?

Occams Chainsaw

It seems to me that this newspaper is not held to rigorous enough editing standards. I find that too many mistakes occur. The columns I write for a newspaper are held to a standard that involves fact-checking most of the time. The Economist is a highly-regarded newspaper and it is my opinion that it should aim to reduce the mistakes.


India's elections are largely decided by inflation.
The elections in 2005 where congress had won was because the government was more interested in growth and didn't pay attention to controlling inflation and shielding the poor.

Things haven't changed much since then.
There were global oil price factors which have compounded inflation India's defunct leadership,alarmed at the risk of losing socialist votes to industrial growth has paralyzed the former.
This has made the situation quite drab.


It would be great if the author could name these studies or research that support this theory of preferences for higher growth rather than low inflation.

Shaleen Agrawal

I completely support the Reserve Bank of India in what it has been doing on the interest rates.
First up, the wholesale price index -- WPI -- is an absolutely archaic, irrelevant and flawed method of computing inflation. The real measure must be the newly introduced CPI, which is close to 10%.
Any keen observer of the dynamics of Indian economy will know that at present, the slowdown in growth/ investment/ capital formation has very little to do with interest rates, and is rather a result of policy uncertainties and poor executive arm of the government.
Moreover, The Economist is right about hidden inflation on account of subsidised prices of fuel, electricity, food and a completely twisted fertiliser subsidy mechanism.
It's because of these subsidies that the government overshot its fiscal deficit limit by a whopping 1.3 percentage points in the last financial year.
One of the factors responsible for keeping private investment out is the massive government borrowing at highly attractive yields, and not the interest rates.
RBI chief Subbarao is absolutely right in saying that monetary loosening will only stoke inflation without supporting growth.
And moreover, the powers that be at the North Block (Ministry of Finance) are aware of this, and that's why they only PRETEND to exert pressure on the RBI for cutting rates.
Hats off to Subbarao and Subir Gokarn for not falling prey to the perceived abatement in inflation and Kaushik Basu's candy-floss clad idiosyncrasies, and sticking their ground to do what is right for the economy.




This is what India did in 60+ years of Independence...!!!
RBI is very much concerned but the Govt is not. Coz its busy in scams and scandals..!!


A recent news in paper quoted that quintals of wheat was wasted in Gujrat due to mismanagement. In India, the only concerned authority is RBI. Government is least bothered about it because they know in spite of all their efforts, they ll lose the ground in 2014 elections. So they better full their pockets.


Its horrible when someone is that poor than cant meaningfully follow prices of stuff a human can actually digest.Like red meat or cheese.Instead they are forced to stuck themselves with food imitations like onions and potato.


RBI is one of the most credible (and least appreciated) central banks in the world - particularly after observation of other prominent central banks.

On another note, I congratulate the Economist on its general coverage of the Indian economy - I've often learned more about it from the Economist than from Indian sources. Thanks.

The Mule

Strange article. Low growth rates have no real bearing on the public. Rising vegetable prices, on the other hand, infuriates them. To suggest otherwise, you've revealed your hand about wanting lower rates at any cost; even being insincere about the importance of inflation in India.


In India, the high prices of onions is widely believed to have led to the fall of a provincial (state) government in a not so distant past.

(Rising) prices of onions are a de-facto measure of inflation, giving government published figures a run for its money.

vkrishnan in reply to rajapurv

In addition to what 'rajapurv' has written, it is important to understand that not all goods included in CPI calculations are used equally in India; most people are affected by the prices of wheat, rice, lentils, edible oils, onions and sugar; also these prices capture short term shocks much better than poorly compiled Government figures.


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