Governance (91)
Inflation in India is indeed a complex subject. Interest rate hike (or cuts) alone are not the solution to tackle inflation.
As a loyal foot soldier Sibal continues to defend the indefensible.
"If that logic were right, then it is true of giving away any public asset at a lower price or an institutional price or for free. Whether it is land for a hospital, land for a school, air waves for the telecom sector." That was Kapil Sibal articulating his point in (mock?) seriousness in a chat show. And the logic referred to at the outset? It was obviously about auctioning coal blocks.
The weighted average price of Indian crude imports was approximately US$ 22 a barrel in 2001-02. A decade later in 2011-12 this was well in excess of US$ 110 – a 400% increase!
Put differently, the US$ had significantly depreciated against crude oil – a fact that is lost on most debating the diesel price rise.
That is not all. The Rupee was approximately Rs 48 to a US$ in 2001-02. Over the decade it has depreciated by close to 12%. Put pithily, the Indian consumer faces a double whammy when it comes to the diesel price increase – a massive depreciation of the US$ against crude oil and on top of it, a depreciation of the Rupee against the Dollar. Hence, in Rupee terms crude has increased close to 500% in the past decade.
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