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Thursday, July 25, 2013

STAGFLATION INDIA?

The term stagflation was first coined by British Conservative Party politician Iain Macleod, according to the Douglas Harper Online Etymology Dictionary. Macleod, as the opposition spokesman on treasury and economic affairs in the House of Commons used this word in 1965 while attacking the government's economic policy for promoting stagnation and inflation. Collins English Dictionary defines stagflation as a situation in which inflation is combined with falling output and employment.

Is India facing the stark reality of such a stagflation? Chakravarthi Rangarajan, the chairman of the Prime Minister's Economic Advisory Council (PMEAC), spilled the beans in February in his paper titled 'Growth and Austerity: The Policy Dilemma'. "It is pertinent to note that stagflationary tendencies have already reared their head in emerging markets, like India, where financial intermediation was never a problem," he wrote, creating quite a flutter.Whereas we have assurances from the Finance Ministry that India will achieve its fiscal goals by Financial Year 2014, one has to only look at the looming statistics below that could indicate otherwise:

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