India faces hyperinflation due to failed fiscal policies – it can eventually lead to depression
Nitin Shah
May 2, 2008

Indian inflation soared to a 42-month high of 7.57 per cent for the week ended April 19. Prices across the board went up. The vegetables, food articles, steel, cement and petroleum related products are the main culprits.

Finance Minister in Bangalore came out with a note of confidence saying "Inflation will be tamed... contained. My only appeal to the people is to be patient and have faith. The current spurt is because of international developments.”

But experts do not agree. Indian fiscal and monetary policies are responsible for the surging inflation. India and China subsidized the petroleum products creating the global hyperinflation in energies that came back with vengeance to destroy the life of common people in India.

The commodity inflation is the direct result of failed economic policies of India. India went for cheap money from western countries including US and Euro zone. India allowed unrestricted inflow of foreign direct investment (FDI) without understanding its impact on inflation.

Indian fiscal policy makers are ignorant and does not understand the impact of global inflation on a country that is completely plagued by public and private debt. In the last five years, Indian middle class has accumulated debt that cannot be compared with any historical measures in any country when compared to inflation adjusted real income.

Government of India has borrowed and created a huge budget deficit that is also larger than any historical precedence in the world. The inflation in India has just started. It will become rampant and rise above 15% in the next several years.

The net effect of all this is a major recession or devastating depression in India.

India faces hyperinflation due to failed fiscal policies – it can eventually lead to depression
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