Inflation In The Indian Economy

Starting from the global financial crisis of 2007-08, the world economy has been more or less in a mess.

- Kishore Kumar Biswas

How global economy experiencing inflation

Positive impacts of economic globalisation could not be enjoyed. The crisis that started in 2007-08 in the US, popularly known as the subprime crisis, raised questions on the efficacy of economic globalisation. The US and many countries were affected by the crisis.

Quite a number of proponents of the 'decoupling theory' assessed that the Indian economy had been able to maintain its economic status quo to a large extent independently of what had been happening in the US and other developed countries.

That is, they believed that India did not sneeze when the developed world, mainly the US, had caught cold. In the phase of the subprime crisis, India could somehow avoid its impact by taking a special fiscal policy. But within two to three years, the Indian economy also began to slow down.

Solution incited inflation in the economy

At that time the US adopted the policy of quantitative easing (QE), that is, supplying huge liquidity or money into the economy by buying federal and corporate bonds and other means. The interest rates were lowered to negligibly low levels. That encouraged more people to take loans, boosted spending, and allowed businesses to increase investment. Between 2008 and 2015, the US government had pumped in about $ 4.5 trillion into the economy. The corresponding figure had been barely $870 billion till 2007.