Rising prices to protect bonuses of just a few.

Prices in Britain have fallen for 17 months running so that deflation rose to 1.8% in September compared to 1.6% in August. The Consumer Price Index was at 2%, the same as in July 2007, but the Shop Price Index was at -1.8%, compared to +0.5% in July 2007. Compared to September last year, prices of clothing and footwear fell by 10.2%, electrical goods fell 5.9%, furniture and flooring fell 2.2% and DIY, gardening and hardware fell 2.2%. Even books and stationery fell by 1.1%. This when the economy is set to grow by 3.2%, which is a high rate for a developed economy, and unemployment is set to drop from 6.2% to 5.8%, compared to the rest of Europe where growth is flat and unemployment is around 11.2%. In India the picture is totally opposite. Here growth rate is expected to be 5.6% this fiscal, better than the 4.7% last year, but not even close to the 7.6% expected growth rate of China, and yet the CPI is expected to be 7.2% in September, down just a smidgen from 7.8% in August. The Consumer Goods Index fell by 6.9% compared to last year and is down 2.3% in August compared to August 2009, which means that there has been a sharp fall in demand. Surely that should lead to a fall in prices, as happens in other countries, but prices continue to rise at over 7%. Why? Globally, food prices are at 4 year lows, oil prices have fallen by at least $20 a barrel and commodity prices are down overall. Our government has been cutting the subsidy on diesel in small increments so that the price now reflects international levels. The increase in the price of fuel would certainly add to cost but surely not so much that CPI is rising by 7.2%, despite falling demand. This is a fantastic opportunity to cut taxes on petrol so that diesel and petrol cost the same, and then deregulate both. If international prices rise suddenly price of fuel, and its effect on inflation, can easily be moderated by cutting taxes rather than by subsidising one at the cost of the other. According to the World Bank poverty level has fallen from 41.6% in 2005 to 23.6% in 2012 but if poverty is defined as spending Rs 32 per day in rural areas and Rs 47 per day in urban areas it is not likely to add to demand for consumer goods because, with food prices rising at near 10%, all the income is likely to be spent on food. Low demand may be due to the fact that 64% of urban women choose not to work. High inflation means that 78% of retired people suffer poverty because their savings have been eroded. The only explanation for rising retail prices despite falling commodity prices with falling demand is that companies are deliberately raising prices so as to protect their profit margins and bonuses of senior executives. Greedy scoundrels.