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Contents contributed and discussions participated by Rafael Proeglhoef

Rafael Proeglhoef

Who cares about the price of onions? - 0 views

Inflation India Growth Food Prices Price
started by Rafael Proeglhoef on 23 Sep 12 no follow-up yet
  • Rafael Proeglhoef
     
    Investors in India are asking the Reserve Bank of India (RBI) for lower interest rates, so that more can be invested in order to accelerate the country's growth rate (which has been decelerating). However, the RBI is concerned that this could lead to an increase in inflation (which is already high) as AD would increase, causing the country to produce beyond its full level of employment, meaning that price levels would raise more than RGDP proportionally (demand pull inflation). The RBI believes that people are more concerned with inflation as it causes the price of food to go up, affecting poor families. However, there is a possibility that growth is of more importance to Indians when looking at the country's economic performance. Other factors such as an increase in oil prices and a poor-monsoon could drive food prices even higher. As result the Indian RBI must be very cautious whether it will be worth lowering interest rates.
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