Beating Inflation

The belief has been belied . There is no more decoupling left in our economy or should I say that our economy never actually decoupled . Adding on to that our inflation worries is gripping the pockets of every Indian. How do we deal with such a scenario where our gdp growth is slowing down , liquidity in the system is in excess , markets are performing horribly and inflation has almost deflated our wallets ?

Firstly , our markets are yet to decouple or shall I say that we are not that our markets are not economically independent . The sub-prime has almost left the FIIs moribund . The FII investments in our market has decreased drastically over the last quarter. To add to this domestic HNIs and Retail investors are cutting down their losses . Our markets are totally directionless. We are infact one of the worst performing markets today . Why is it so ? There was already a bubble building up in our markets and now we can say that the stocks are really coming down to their proper valuation .Lesson : We need to be a smart investor rather than a speculative investors .

Is the government policy in easing supply side constraints justified ? Maybe in long term but it might but not in the short term. The problem actually stemmed from America converting one third of their maize produce to ethanol , Ukraine stopping wheat exports and almost no wheat coming out of Australia . Thus the local hoarding at national level s has led to surging inflation in almost all teh developing countries . The first step to curbing inflation would be to stop national hoardings .

Secondly , if RBI tries to suck out excess liquidity the repo rates would go up which inturn would affect PLRs ..something which our FM doesn't want . With such a starking scenario , we have to come up with a sensible mix of monetary policies , governmental policies and increased investment in agriculture and related areas . Our markets need not worry as our fundamentals are still looking good and we have nothing to worry as long as we grow at 7.5% + steadily .

So lets all look forward to a bright resurgent India.......