Inflation in India

I. Shooting the Messenger, The Economist, 4-10-08, http://www.economist.com/finance/displaystory.cfm?story_id=11020068

II. Summary

Recently, due to inflation on commodities like fuel, food, edible oils and metals, Indian government is worried. The Indian government has recently cut import duties and banned the export of edible oils. It also has a list of 15 commodities which they dictate the production and distribution of. Due to recent increases in the price of steel, the government has threatened to add steal to its list. Steelmakers are caught in the middle between the rising costs of coke and iron ore and government involvement. In 2007, the government banned futures trading in 2 types of bean, rice and wheat because they felt speculators were causing the prices to rise without substantial reason. Many argue that this action is like shooting the messenger and banning futures trading would do little to curb increases. Some of the commodities' (on the list of 15) prices have already started to go down and politicians should pay attention and not be so quick to act.

III. Reactions:

• This article relates to the theme of creation, expansion and interaction of economic systems. This is because the article's focus is on India's economy and how it and its government are reacting to rising prices in the commodities market.
• Wholesale-price inflation is at its highest point since 2004 and the government has started to take action in recent years in order to curb inflation.
• The Economist is a British newspaper. The person writing the article is an outsider because the issue is on India's economic situation. The gender of the author is unknown because no name is given.
• The article is indicative that The Economist is in favor of the industries (steelmaking, rice farming, etc;) and is against the actions of the Indian government. It is possible that the author has animosity towards India due to their independence from British rule. The author stated, "If the politicians who bash the futures market could be bothered to look at the message it is conveying, they would see that the prices of several sensitive commodities are already on their way down. Just in time, that is, for the election." In the quote, one can sense that the opinion of the Economist is that the Indian government deserves no credit for its recent attempts in trying to stabilize the economy.
• The point of view that is missing is that of the Indian government. An explanation from the government for its hasty actions to intervene (regarding inflation) would improve one's understanding of the issue.
• Due to the fact that the government's case is not stated I can't fully come to a conclusion. I feel sorry for the industries that are caught in the middle between government control and free market.