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Our Bureau

Chennai, May 24 Inflation is inevitable for any economy as growth increases demand without adequate supply, resulting in higher prices.

Addressing a workshop on ‘Inflation: Causes and Consequences’, Mr Aurn Bewoor, President, Madras Chamber of Commerce and Industry, said inflation is caused when too much money chases too few items. It was interplay of market forces, internal and external competition of products and services.

During the last five years, prices of certain white goods and cell phones have declined while that of rice, petrol and other basic commodities increased sharply. This was because of supply failing to match demand, he said.

In some countries, including Japan and the US, inflation rarely crossed 2 per cent because of the ability of industry and trade to quickly meet higher demand and having flexibility to slow down output. “We have not been so lucky. Rigid policies and control make us less agile and alert and we react rather than anticipate. The question on increasing fuel prices linked to crude oil is a classic example of what not to do when confronted with forces well outside our ambit of policy.

“Industry and trade may gain as prices rise faster than costs, balance sheets may improve for many and some elements get richer. However, it leaves others miserable and “in a marginal nation like India, that can be cause for a calamity,” he added.

Mr S. Gurumurthy, columnist, said whenever there was pressure on account of price increase, Indians preferred to save. There was an ‘anti-inflationary culture’ in India. Inflation based on wholesale price index was a meaningless exercise since the price index swings to extremes even amongst neighbouring areas.

Mr M.R. Venkatesh, chartered accountant and Partner, GSV Associates, said demand and supply were no more causes for inflation and instead, digital economics and virtual currencies were responsible. The only way contain inflation was to allow the rupee to appreciate, he added.

While agreeing that inflation is a matter of concern, Mr T.P. Raman, Managing Director, Sundaram BNP Paribas Asset Management Company Ltd, said it was a function of supply-demand mismatch. Growth is essential for a country like India and if growth resulted in benign inflation there was no problem.

The President and CEO of RPG Enterprises (technology business sector), Mr Pradipta K. Mohapatra, was of the view that inflation at the current level was not a worrying factor.

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