The current phase of low inflation is temporary. With governments across the world pumping trillions of dollars into their economy, we must all be prepared for yet another phase of inflation.
It was just ten months back that we were grappling with mind-boggling double-digit inflation. The price of oil came crashing and so did the rate of inflation. From 13 percent levels, today it is struggling to stay above zero. And the media is full of stories on ‘deflation’ and its after-effects!
Initially, they scared the living daylights out of the common man with their stories on deflation and depression that has hit global economies. Thankfully, those stories seem past us today.
What I am more concerned about is inflation! Yes that’s correct - inflation.
I am no great economist, but I can definitely tell you that with the trillions of dollars being pumped into various economies (in order to bail out these economies by increasing liquidity) fiscal deficits are expected in the region of 12 to 14 percent. My concern stems from the fact that once these monies start reaching the retail consumer, they are bound to fuel inflation. It will be a case of too much money chasing too few goods - the latter being the fallout of the slowdown / recession in global markets.
In the last 12 months, the supply of money through various stimulus packages has grown manifold. Interest rates have eased and are expected to ease further (at least here in India) so that the consumer and businesses start availing loans and increase consumption.
Prices have witnessed a steep drop in order to boost consumption. But the start has to come from the consumer, and his or her desire to start purchasing (all over again). This will fuel demand and will make the manufacturer increase his production level. So the wheel will start rolling once again.
This, in turn, will cause the prices to increase as (in the beginning) there will be more money chasing fewer goods. Hence, inflation will rise from the near-zero levels (0.26% for the week ended March 28, 2009).
Provided crude oil prices (as one of the crucial factors) remain at around $60 levels, my guess is that inflation will claw its way back to 4-5 percent levels by the end of this year. The new government at the Centre will have to manage the fiscal deficit in a very deft manner.
Tuesday 21 April 2009
Wednesday 1 April 2009
New Day. New (financial) year. New Horizons. New Hopes.
Last night as I lay on my bed to sleep, I could not help but think of the (financial) year gone by and what lies ahead in the new one.
Thoughts (of new tidings) kept popping into my mind. Here are some of them that I would like to share with you:
• Access your money through all ATMs: No more waiting in queues (hopefully) at ATMs. From today I can walk into any ATM and withdraw money without being charged by my bank. This should have happened long ago. But better late than never. I could never digest the fact that I have to pay to withdraw my own money.
• Save money, buy the Nano: From today, the Nano would be displayed in all showrooms and later this year, the roads will be full of them (at least I hope for Tata’s sake considering the fact that the last financial must have been his worst ever in terms of luck).
• New government, new rays of hope: By the end of the current quarter, we should have a new government in place. And I hope it is a more ‘functioning’ government. Not a paralyzed one.
• Power to the youth: For millions of young people this election would be their first. I hope they all go out and exercise their right.
• New investments: Time to start fresh SIPs in ELSS (tax-saving) funds.
• Stock markets should start looking up: I think we have seen the worst in terms of the fall in the markets in 2008 - from 21000-odd levels in January to 7700-odd levels in October. This financial year is definitely going to be better. My personal feeling is that things should start looking better from Q3 / Q4 of FY10.
• My new initiatives: I have started some new initiatives to grow my business and I hope they will fructify this year. I hope to take a gigantic leap forward this financial year. Enough of blaming the markets. I will develop new and out-of-the-box ideas to tap fresh clientele.
• New Pension Scheme soon: The New Pension Scheme was supposed to have started from today. But now we will get to know more only in June after the elections are over. This will mark a big leap forward for the Indian financial markets. For investors, this is one scheme to look forward to.
It’s quite rightly termed as the new financial year, since all the things that begin today seem to be related to money and finance. Here’s wishing you a very prosperous new financial year!
Thoughts (of new tidings) kept popping into my mind. Here are some of them that I would like to share with you:
• Access your money through all ATMs: No more waiting in queues (hopefully) at ATMs. From today I can walk into any ATM and withdraw money without being charged by my bank. This should have happened long ago. But better late than never. I could never digest the fact that I have to pay to withdraw my own money.
• Save money, buy the Nano: From today, the Nano would be displayed in all showrooms and later this year, the roads will be full of them (at least I hope for Tata’s sake considering the fact that the last financial must have been his worst ever in terms of luck).
• New government, new rays of hope: By the end of the current quarter, we should have a new government in place. And I hope it is a more ‘functioning’ government. Not a paralyzed one.
• Power to the youth: For millions of young people this election would be their first. I hope they all go out and exercise their right.
• New investments: Time to start fresh SIPs in ELSS (tax-saving) funds.
• Stock markets should start looking up: I think we have seen the worst in terms of the fall in the markets in 2008 - from 21000-odd levels in January to 7700-odd levels in October. This financial year is definitely going to be better. My personal feeling is that things should start looking better from Q3 / Q4 of FY10.
• My new initiatives: I have started some new initiatives to grow my business and I hope they will fructify this year. I hope to take a gigantic leap forward this financial year. Enough of blaming the markets. I will develop new and out-of-the-box ideas to tap fresh clientele.
• New Pension Scheme soon: The New Pension Scheme was supposed to have started from today. But now we will get to know more only in June after the elections are over. This will mark a big leap forward for the Indian financial markets. For investors, this is one scheme to look forward to.
It’s quite rightly termed as the new financial year, since all the things that begin today seem to be related to money and finance. Here’s wishing you a very prosperous new financial year!
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