Inflation Surges Flaming The Finance & Economy

Now, Inflation has become a Global challenge post-Covid 19 impact and present ongoing Russian war with Ukraine for a long period, it has been adversely impacting the global supply chain. Apart from this, Demand and Supply chain in the country with or without considering the global challenges are also a very important parameter for the discussion about inflation. Because Internal Demand and Supply adjustments are the primary concern of the respective countries' Reserve or Federal Banks by keeping the desirable Interest rates form time to time with the consultation of their Governments for the preparation of Fiscal Policy to mitigate the Inflation.

Apart from this, one major parameter is International Fuel prices fluctuation do have direct impact on the prices of commodities and services across the Globe along with the fluctuation in dollar to the parent country’s currency as international trade transactions carry through the dollar only, in this era of interdependency between one country to other causes no independence for a specific country to escape from the Global net.

Global scenario pertinent to the Inflation post Covid 19 appears to be together of the factors mentioned above in addition to the respective countries’ stimulus packages to the Corporates and Individuals have been still paying the positive and negative gestures, even advanced countries like US also not out of the box in the world pertaining to the slow down of their economy with surge the inflation and unemployment rate ever before in the history. Both, raise in inflation rate and unemployment rate are two side of the sharp edge of a sword which pains simultaneously to injure either side of it’s operation. If we take advanced economies like US and UK as a example, Initially the pandemic had adversely affected both the demand and supply side of the economy and hampered the manufacturer’s' capacity to produce the goods, as well as consumers' capacity to consume.

Then the US Congress had approved $6 trillion to assist the US economy and American households to getting through from the pandemic. In which, over $900 billion went to Americans for Economic Impact payments directly. This fiscal support from their government to the citizens had impacted the supply and demand during the Covid 19 uncertainty period as the attractive fiscal stimulus packages had been boosted the consumption of goods and services, ultimately it had created the demand for production and turned it towards pressure on the prices to lead for Inflation.

As noticed by the studies, fiscal stimulus of the pandemic had become the cause to increase in inflation around 2.5% and 0.5% for US and UK respectively and situation was further deteriorated after ongoing Russia and Ukraine war. Further, US inflation rate was hit to 7% In December 2021, it is the highest percentage since the Ronald Reagan presidency, the 5% to 6% and above inflation rate had been continuing the eight consecutive month. President Biden has been under pressure to bring the 40-year inflation high under control at present. US Federal Bank raises Interest rates to keep the inflation under control. On the other hand, the Unemployment rate was 4.8% september, 2021 has come down to 3.5% as on september, 2022 when compared with year on year figures, advanced countries like US also facing the challenge for creation of Jobs.

As far as our country is concerned, We are also not separable from the impact of the Pandemic and Russia/Ukraine war disruption of supply chain. In addition to this, We have been adversely impacted with International Fuel Prices fluctuation directly and fluctuation in value of Rupee to US Dollar indirectly, which has caused in the inflation of Consumer Price Index (CPI) has spiked to 7.41% in September 2022. Though we have pressured with the spiked Inflation and Unemployment rate, Our strength in maintaining Growth rate at 7% is far better than any other advanced countries in the world due to 21 Lack Crores sector wise Atmanirbhar Bharat Package rather than distributing money to the people in helicopter money mode like US and The S&P Global India Services PMI declined to 54.3 in September 2022 from August’s of 57.2 may be appeared as pressure in the Investment from the manufacturing sector, But PMI above 50 points is positive while analysing as a indicator.

Further, Rs. 1,47,686 crore gross GST revenue was collected in the month of September 2022 and monthly GST revenues had registered for more than ₹ 1.4 lakh crore for seven months in a row, Revenues for the month of September 2022 are 26% higher than the GST revenues in the same month in 2021. Hence, the consumption of people has been improving significantly. When compared to the other advanced countries our Growth rate is quite satisfactory, But only present worrying factor is the Inflation surge hampering the real growth as expected between 7.5% to 8%. In order to control the raising inflation RBI took the decision to increase lending interest rates and exercise all other options to get things on track pertaining to the control of Inflation around 6%. Only important thing is to mitigate the Inflation impact with the Job opportunities for the unemployed in our country, most worrying part is rural inflation for essential commodities is much higher in West Bengal and stood first at 10.29% in the month of August.

External factors such as Fuel Price fluctuations in the International Market and balance of foregin currency payments in USD between imports and exports leads to Current account deficit in addition to the Inflation. At present, major share in the Current account deficit consist from the surge in International fuel prices and the Dollar strengthen with all other currencies. As per the data available with the Reserve Bank on India's Balance of Payments during the Q1 and Q2 of Our country overall exports of merchandise and services together in April-September 2022 are estimated to be $382.31 billion with a positive growth of 21.03 per cent over the same period for the last year. Overall imports in April-September 2022 are estimated to be $469.47 billion, registering a positive growth of 37.77 per cent over the same period last year.

The merchandise trade deficit for April-September 2022 was estimated at $148.46 billion as against $76.25 billion in April-September 2021, which is an increase of 94.69 per cent and on the other hand, during April-September 2022, the services trade balance is estimated at $61.30 billion as against $51.39 billion in April-September 2021, which is increase of 19.30 per cent. Hence, Overall Trade deficit had registered around 3.50% to GDP by the end of the Q2, this pressure has been replicating on the Forex Reserves balance as on 14th October, 2022 was $ 528.37 Billion, Whereas it was $ 642.453 Billion as on 3rd September, 2021. Primarily, Forex Reserves was reduced due to raise in Current Account Deficit with the requirement of huge payments for Fuel supplies where the higher fuel prices reasoning lower production by the international suppliers and raise in the value of the Dollar against all currencies along with the gap between imports and exports.

Despite the Rupees 82.80 for One Dollar, it means Rupee has been depreciated due to demand for Dollar in the International market as a media of exchange of currency even there has been slow down in US economy with higher inflation, Rupee value has been strengthen to all other major currencies other than the Dollar is the strength of our consistency in our Fiscal policy and the timely actions by the Union Government and RBI. The existing Forex Reserves are sufficient to meet the requirements. Further, there is huge Foregin Capital Inflows will have attracted as Investments in India to strengthen the Forex Balances since there is a positive in Growth rate around 7% whereas all other major economy in the world have been around 1% to 3% only. In order to maintain the sustainable Growth Rate as per the estimations, Narendra Modi-led Union Government is very keen to implement the National Infrastructure Pipe Line under 111 Lack Crore, out of which nearly 90% projects have been identified and most of them approved by the respective departments. Infrastructure Projects like Gatishakti, Bharathmala and Sagaramala will yield the crores of the Jobs to Youth in time for coming days and Growth of the Nation will be maintained at the Projected parameter for contributing the anticipated GDP.

Recently, Union Government announced the Rozgar Mela for recruiting 10 Lack jobs in various Department and State Governments also come forward to pay attention in the similar line. We need to understand that moderate Inflation is inevitable as we can understand the concept of Time Value of the Money, But, Government shall be implemented their policies to raise the Revenues of the people by means of the Jobs to mitigate the day to day expenditure and maintain savings for their future needs. Hence, the people lives shall not be in miserable conditions due to Inflation to sustain their basic needs and amenities. As We can observe that Narendra Modi led Union Government has been implementing the programs for inclusive and sustainable growth to mitigate future uncertainties in all perspectives.























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