BBC News - India inflation rate rises faster than expected - 0 views
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e lynesmith on 23 Sep 12India's inflation rate rose to 7.55% in August, rise that was much faster than expected by analysts. The primary reason behind this is a rise in India's food prices. In order to decrease inflation and lower prices, the Reserve Bank of India tried to raise interest rates. This should cause a decrease in consumption and demand. Thus in the long-run, disinflation will occur as firms will be forced to lower prices in order to maintain a profit. However, altering interest rates has been tricky for central policy-makers as India imports a large quantity of their food from the US, who ultimately have control the prices. The US will probably add to India's inflation as they are "likely to push up global commodity prices". Even through raising interest rates, which can be damaging as they hurt businesses and consumer confidence, India still has little control over global prices. As a result, India's inflation will raise even.