Sunday, July 15, 2012

Poor correlation of rainfall shortage to inflation

                                                               Source: Economic Times  

Inadequate and uneven rainfall is one of the biggest worries for the Indian government these days. For critics are already predicting spiraling inflation going forward. If the Rain Gods do not get generous soon, experts believe that supply shortage could take inflation to new highs. But as data from the past shows, there has not been a very strong correlation between rainfall deviation and inflation, against popular belief. In fact even in years of adequate rainfall, prices have risen due to unrelated factors. Thus instead of staring towards the skies, our policy makers would do well to undertake policy measures that would persistent inflation

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