STAGFLATION, IT IS
Business Today|October 18, 2020
The economy has been going through a phase of stagflation. Here is what this means
DIPAK MONDAL

Why Stagflation is Dangerous

Stagflation is combination of stagnant economy, high inflation and high unemployment, usually caused by a supply shock like increased oil prices due to embargo or war

In case of India, the stagflation-like situation, building up due to systemic disruption in the informal sector, was aggravated by supply bottlenecks due to lockdown

It is difficult to come out of stagflation as there is an inverse relation between inflation & unemployment

Traditional means – fiscal and monetary – of fighting recession or high inflation aggravate the situation. Fiscal measures like increasing subsidies or cutting taxes fuel inflation and monetary tools to tame inflation, such as increasing interest rates, hit growth

The USA saw a similar situation in mid and late 1970s with inflation touching double digits and economic growth swaying from negative to 5.5 per cent

In November 2019, former Prime Minister Manmohan Singh had, probably for the first time, raised the possibility of India facing stagflation. In a column, the former prime minister, also a renowned economist, wrote: “Continued increase in inflation combined with stagnant demand and high unemployment will lead to what economists term as ‘stagflation’, a dangerous territory from which it becomes very hard for large economies to recover.”

Not many had taken his warning seriously. Retail inflation in the previous month was below 5 per cent and despite less than 5 per cent GDP growth in the September 2019 quarter, no one was ready to believe that the economy was facing anything resembling stagflation – in fact, many felt India was facing disinflation as retail inflation was in the 3-4 per cent range and wholesale inflation was just above zero.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BUSINESS TODAYView All

Uncertainty Returns

Industrialised states like Maharashtra, Gujarat and Delhi have been the most affected in the second Covid wave, resulting in large-scale migration of labour and posing a bumpy road ahead for

10+ mins read
Business Today
May 16, 2021

WE WILL SOON HAVE AUTONOMOUS TRAINS RUNNING ON MAINLINES”

In end-January, French mobility major Alstom completed the acquisition of German rival Bombardier Transportation. The new entity has combined revenues of around €15.7 billion, order book of €71.1 billion and employs 75,000 people in 70 countries. Ling Fang, President, Alstom Asia-Pacific, spoke to P.B. Jayakumar on Alstom becoming the largest overseas mobility player in India and why the country is going to be a crucial market for the company. Edited excerpts:

5 mins read
Business Today
May 16, 2021

THE NEW TITAN

TITAN COMPANY’S NEW LEADERSHIP TEAM IS TRYING HARD TO MORPH THE ₹20,000-CRORE LEGACY LIFESTYLE COMPANY INTO A YOUNG, EDGY ORGANISATION

10+ mins read
Business Today
May 16, 2021

SPRINT TO FINISH

CORPORATE EARNINGS GROWTH IS LIKELY TO ACCELERATE IN THE LAST QUARTER OF FY21, BUT RESURGENCE OF COVID CASES COULD CLOUD THE OUTLOOK FOR FY22

5 mins read
Business Today
May 16, 2021

New Stress Pockets

Unsecured personal loans, credit cards, business banking, and MSME loans are emerging as new breeding ground for banks' NPAs. How serious is the problem?

10+ mins read
Business Today
May 16, 2021

NETWORK

Call Of The Mountains

3 mins read
Business Today
May 16, 2021

Mediation On The Table

MEDIATION IS YET TO BECOME THE PREFERRED CHOICE FOR CORPORATE DISPUTE RESOLUTION, BUT PERSPECTIVES ARE CHANGING

8 mins read
Business Today
May 16, 2021

Economic Whirlwinds

With India firmly in the grip of the second Covid wave, the much-expected catapult from a buoyant Q1 is unlikely. How should the Centre steer a slowing economy?

10+ mins read
Business Today
May 16, 2021

BEST ADVICE I EVER GOT

“IMPORTANT TO MANAGE INTENT AND IMPACT DURING TRANSFORMATION” Manish Bhatnagar, MD, SKF India

1 min read
Business Today
May 16, 2021

Asset Monetisation: The Missing Model

Centre Hopes To Monetise Public Sector Assets Such As Land, Roads And Railways To Finance An Infrastructure Push. But Where Is The Model To Achieve The ₹2.5-lakh-crore Target?

7 mins read
Business Today
May 16, 2021
RELATED STORIES

Reincarnation And Realpolitik

China, India, and the U.S. are vying to influence the selection of the next Dalai Lama

5 mins read
Bloomberg Businessweek
April 19, 2021

An Exclusive Interview With Nandakumar Narasimhan

The Little Red Train

10+ mins read
Lens Magazine
March 2021

A Room for Dad

Before Mom passed, I made a promise to her

8 mins read
Guideposts
April 2021

THE DANGAL IN THE JUNGLE, PART 1

YOU KNOW YOU’RE SOMEBODY WHEN YOU’VE APPEARED ON AN INDIAN DANGAL POSTER — IN OTHER WORDS, IN A WRESTLING ADVERTISEMENT.

6 mins read
Black Belt
April/May 2021

WOUNDS AND THE WOMB

JULIE PETERS explores how to heal a relationship with the sacred womb, a place of death, life, and possibilities.

8 mins read
Spirituality & Health
Mar/Apr 2021

BE SQUIRRELY

Giant squirrels, giant lessons? Animal chaplain SARAH BOWEN explores what squirrels can show us about mindfulness.

4 mins read
Spirituality & Health
Mar/Apr 2021

E8 Caste and the Indian Tech Ivies

IIT grads are highly sought after in Silicon Valley. Are they bringing deep-rooted prejudices with them?

10+ mins read
Bloomberg Businessweek
March 15, 2021

Life Changing

I was happily married, happily employed, just plain happy. Until the accident

8 mins read
Guideposts
February 2021

IN SEASON Chickpeas (GARBANZO BEANS)

Chickpeas appear in early recordings in Turkey well over 5000 years ago. India produces the most chickpeas worldwide but they are grown in more than 50 countries. An excellent source of carbohydrates, protein, fiber, B vitamins, and some minerals, they are a nutritious staple of many diets. The name chickpea comes from the Latin word cancer, referring to the plant family of legumes, Fabaceae. It is also known by its popular Spanish-derived name, the garbanzo bean. Kidney beans, black beans, lima beans, and peanuts are other familiar foods found in this legume family.

1 min read
Alternative Medicine
February 2021

When the Signal Goes Out

Government-ordered internet shutdowns are becoming more frequent

3 mins read
Bloomberg Businessweek
February 15 - 22, 2021