Monday, June 23, 2008

Double-Digit Inflation A Rarity In India - June 23, 2008

A double-digit inflation rate has been a rarity in Indian economy and it was only in early 1990s and during 1994-95 that inflation hovered above the ten per cent mark, according to the website of Reserve Bank of India.

The RBI website, which gives average monthly inflation figures with the base of 1993-94, tells that the last time inflation was in double digit was in April-May 1995 when it ruled above 11 per cent. The mid 1990s saw a very high inflation and for 12 months in a row from June 1994 till May 1995, the rate of inflation was in double digits.

Prior to that, there was a period when the economy witnessed double digit inflation for a period of 21 months, from November 1990 till July 1992 with a high of 16.3 per cent recorded in September 1991.However, the base year for calculating the inflation numbers at that time was the year 1981-82.The all-time high for inflation was recorded in February and March of 1995 when it hit 16.9 per cent. Given the current inflation rate at 11 per cent, we are still far away from going anywhere near the all-time high levels, an analyst suggested.

The mid 1990s was also the period when inflation went down dramatically . The RBI data suggests that inflation dropped gradually from 11 per cent plus in May of 1995 to 4.5 per cent in February 1996. Subsequently, it was a period of low inflation with only occasional blips. The lowest level was in February 2002 when it was only 1.4 per cent.

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