The fuel price rise will have its cascading effect, no doubt, on inflation. But if you stop to consider the price of petrol was the same as it was in June 2006 when crude went to the skies and back, the question arises: How come inflation was so “high”
The answer: Base Effect. This year we’ve had to measure against a period of recession and global slump. AND some really POOR supply side management by GOI – especially the food and finance ministries. They placed growth above inflation.
In a few months, the inflation figure will begin to start downward to the usual 8-10% range. Thanks to the base effect and a normal monsoon. Then people will start to say, Ah. Oooh. They’ll forget it was Ouch, just a few months ago.
The absolute prices will not have gone down, only the announced inflation % figs released monthly/weekly etc. And people will go back to – oh, the GOI just fudges the figures, so ignore them. And no “noise” will be heard.
Sad, but Aam Admi doesn’t understand these inflation figures are meant to pull wool over their eyes. It’s just that no Gov expected the global slump and melt down in the US. But it’ll all be back to biz as usual in 2011.