ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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The Problem of Inflation

Given the lack of consensus within the government on the factors behind the current surge in inflation and the relevant tools to deal with it, an analysis of the trends in the food and non-food groups in the Wholesale Price Index and the Consumer Price Index for Industrial Workers for 2009-10 and 2010-11 could help bring clarity to the ongoing debate. Contrary to the view on food inflation as the major contributory factor, the analysis here reveals that the weighted contribution of non-food inflation to overall WPI and CPI inflation has increased in the current fiscal year. Moreover, the impact of food inflation on the overall inflation rates is easing. Non-food inflation, the rising prices of manufactured products and the global upswing in fuel and commodity prices warrant an increasingly important role for monetary policy.

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