Inflation in India

The 1990s is widely described in general as a price stability era all over the globe. During the early part of the decade developed and developing countries alike experienced "a distinct ebbing of inflation", so observes India's central banking authorities, Reserve Bank of India (RBI). Inflation in India, barring some external factors like bouts of increase in international oil price and natural disasters like drought or flood, is showing an ebbing trend. The first half of India's fiscal 2002-03 (beginning April 1, 2002) witnessed uptrend in inflation largely due to increase in oil prices twice during the period and adverse impact of drought on agri- products leading to increase in prices – particularly of oilseeds and edible oils. The efficient handling of supply management helped inflation eased in the second half of the fiscal. As a whole at the end of the fiscal 2002-03 inflation was up 3.3 percentage points. In the light of overall variation in wholesale price inflation, the inflation in fiscal 2002-03 was dominated by non-food items unlike preceding years, according to a RBI report.

One of the major import contents of India's inflation in fiscal 2002-03 were edible oils and oil cakes that recorded highest price increase. Acute shortfall in production of the commodity led to about half the domestic demand met by imports. The RBI report also states that the underlying inflation (measured by average WPI) during this fiscal was dominated by manufactured product groups. Within manufactures again, edible oils, oil cakes and manmade fibres were largely responsible uppish trend in inflation. Inflation measured by average consumer price index for industrial workers (CPI-IW) however eased in fiscal 2002-03.