The Indian economy has been registering stupendous growth after the liberalization of Indian economy. The opening up of the Indian economy in the early 1990s had increased India's industrial output and consequently has raised the
India Inflation Rate.
The stupendous growth rate of industrial output and employment has created enormous pressure on the inflation rate. The Reserve Bank of India (the central bank) and the Ministry of Finance, Government of India are concerned about the prevalent and intermittent rise of the inflation rate. The present rise of
inflation rate in india can be detrimental to the projected growth of Indian economy. Thus, the Reserve Bank of India is devising methods to arrest the rise of inflation by putting checks and measures in place. Although the central bank has assured the Indian business community and the general public about the harmless inflationary rise, apprehensions still exist among the business circles of India.
The main cause of rise of India Inflation Rate is the pricing disparity of agricultural products between the producer and end-consumer. Moreover, the meteoric rise of prices of food products, manufacturing products, and essential commodities has also catapulted the India Inflation Rate. As a result of this, the Wholesale Prices Index (WPI) of India touched 6.1% as on 6th January, 2007. Moreover, the Cash Reserve Ratio touched 5.5% on the same day.
To arrest the panic and discomfort amongst the Indian business circles, the Reserve Bank of India, in its recently drafted monetary policy, had given top priority to price stability. It also sought to sustain the stupendous rate of economic growth of India. The Reserve Bank of India has raised the Cash Reserve Ratio in a continuous manner to arrest the rise of
India Inflation Rate.
The solution to this problem lies in rationalizing the pricing disparity between the producer and the consumer. Only this will ensure inflation stabilization and thus sustainable economic growth of India.
