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Inflamed by inflation!

business Updated: Nov 04, 2011 22:39 IST
HT Correspondent

The rise in prices should bring more tears to the commoners than the onions suggest. Consider what Heena Sardana has to say.

"Shopping and eating out are the two biggest casualties of the inflation. Also, I have started spending less on cosmetics and parlours as my pocket money is not adequate," says the Delhi college student.

Persistent rise in prices have hit families across regions and income scales. And the Reserve Bank of India (RBI's) continuous monetary tightening have failed to tame the price monster, but forced families to cut down on non-essential expenses.

RBI has hiked interest rates 13 times in 19 months, squeezing money to curtail demand - and thus, inflation. But it has had little effect. Costlier borrowings have prompted consumers to defer purchases of goods such as cars that are mostly bought through loans.

"We had wanted to buy a LED TV but have put it on hold, till don't know when. We had also planned to go in for a new two-wheeler, but are really thinking whether to or not, given the four-time increase in petrol prices," said Sumati Parama, a Chennai-based homemaker.

Consumer durable loans contracted by 16.4% in the April-September period compared with 9.5% last year.

Supply shortage
In a normal year, vegetable and fruit prices fall sharply by December. This year, this seasonal pattern is not to be seen. Economists say either the weather has played bad, or there is speculative hoarding that is at work.

"While wholesale and retail prices of vegetables always differ, it needs to be seen whether the gap widen significantly by December this year," said a government economist, who asked not to be identified.

High protein diet
Recent price data shows that prices of protein-rich food items such as pulses, milk, eggs and fish have risen faster that overall food prices.

At relatively low levels of per capita income, carbohydrate-rich diets, based on cereals such as wheat and rice, dominate protein-based diets. When incomes rise, richer food is sought after.

According to RBI deputy governor Subir Gokarn, "Rising affluence has also led to an increase in demand for proteins and nutrition."

Fuelling inflation
Oil companies on Thursday hiked petrol prices by Rs 1.82 a litre, the second such hike in less than two months-a move that is bound to have a domino effect on many expenses such as transport and possibly stoke public anger in an inflationary atmosphere.

"Of course it will have some adverse impact on inflation. But the oil prices are going up and petrol is a decontrolled item," finance minister Pranab Mukherjee said on Friday.

The government has also dropped oblique hints about a possible a hike in diesel and cooking gas prices in the near future.

The takeaway: brace yourself for high prices will remain high, at least in the near term.

Inevitable can’t be avoided | Making do with less | Inside the food price muddle