Swaminathan Aiyar | Inflation: What’s the silver lining as inflation rises in India? Swaminathan Aiyar Response

There is now a very high demand which will translate into much greater investment around the world, including India, which can be a boost for growth and trade, according to Swaminathan Aiyar, consultant editor, ET Now.

China is seeking to increase electricity tariffs for its industries. Natural gas prices are rising; coal prices are expected to increase. Do you consider inflation to be transitory in nature? What is the impact of this on India as well?
Inflation will raise its head. He’s already raised his head around the world. India is more tied to the global economy on some of these parameters than you might think. Inflation is therefore high in India. It is certainly increasing in other places as well. There is some volatility in India because food prices go up and down. But I would just say yes, inflation is a threat to all countries.

We have had so many years of mass printing money without generating consumer price inflation. We are reaching the end of this and once that end is reached we see an unexpected and unanticipated surge in prices and supplies.

Look at the ships crammed everywhere; look at the shortages of crisps which people say will continue until the end of 2022. On the supply side there is a problem and on the demand side there is so much accumulated demand! The money is here and now with the fear of Covid over we are going to get more demand in India and the rest of the world.

This is a global phenomenon and India is neither able to go it alone nor to escape it, although at the margin we can try to be a little better. Historically, this has been a high inflation, high interest rate country and we will continue to be.

The positive side is that there is now a very high demand which will translate into much more investment all over the world including India which can boost growth and trade. Those are the positives, but yes, inflation itself is a drag and we need to deal with it. But it is worth saying that there is a silver lining and it now reflects a sharp increase in global demand and it is good for India.

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