The inflation deprive some stable income expectation

the inflationary expectation appears to be rising in most part of the world.
in the developing countries with the indication of Fed gradually reducing the quantitative easing,the apprehension of reducing the flow of funds is causing grave concerns particularly in the nations more dependent on foreign money and in the countries where the trade deficit   is high in comparison to their gross domestic products or in the countries where the external debt is high and particularly the short term component of it.
for taking an example in India ,the Rupee has depreciated more than 20-30 percent against the Dollar ,it now has the exchange rate hovering around sixty rupee to a Dollar.
the foreign financial institution has been the huge investor in the capital market for last 10 years ,now with so much of the Indian currency depreciation ,the FII has incurred huge losses and the intensity of FII selling /withdrawl has gone up.
the Indian trade deficit has risen to 4-5 percentage of its gross domestic product ,which is huge ,the exports has not picked up due to some what depression in developed world ,the policy paralysis,and huge unproductive/inefficient economy.,the deterrent labour law has not allowed to take advantage of abundant labor available ,the small farm size and yet still largely primitive agriculture methods and low yield,the huge corruption ,the poor quality,the infrastructure bottleneck etc has not allowed its export to pick up.
further the India is largely dependent on import of crude oil and the lure of gold by its citizen has caused huge rise in import and the parallel black economy is resulting in lesser arrival of dollar through official channel ,
the huge depreciation of rupee has increased the misery  of masses and further impending election and populism will add to inflation.
in the developed world,the inflation has remained low despite so huge quantitative  easing ,defying the law of economics,the Fed buys bonds from the banks that release the liquidity in the market ,but the banks are again largely depositing this additional liquidity with the Fed and earning risk free interest ,as such the overall money supply in the market is not increasing and so the inflation has remained tamed,but as the economy of developed world picks up and the groeth rates rising,the banks may be tempted lend more to consumer and all segment of economy,resulting in rising of money supply may lead to revival of animal spirit and the caution so large kept starts loosening ,the inflationary expectation may start rising.
the inflation hits the poor more severely ,the middle class is squeezed ,with hardly any social security in developing  world ,the elderly people and other surviving on interest income or some stable income are deprived of their necessities ,the govt doles out a lot on popular schemes ,which after leakages reach little to the beneficiary and value of that too is eroded by inflation ,thereby taxing the vulnerable section more heavily ,.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Create a free website or blog at

Up ↑

%d bloggers like this: