"In October, the Consumer Price Index for all Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 6.2 percent over the last 12 months, not seasonally adjusted," US Bureau of Labor Statistics. "Inflation across a broad swath of products that consumers buy every day was even worse than expected in October, hitting its highest point in more than 30 years," CNBC. Retail inflation rate in India rose by 4.48% in October compared to 4.35% in September, BS. It may seem that prices in the US are rising faster than in India but there is enormous base effect at play. Consumer price index (CPI) in the US rose over a 1.20% in October 2020, while CPI in India has risen by 4.48% over a scorching 7.61% rise in October 2020, when demand was low because of the pandemic, wrote Udit Misra. "Core inflation rate is the rate of inflation when we ignore the prices of food and fuel." "The worry for India is that core inflation is now over 6%." What is the worry? Higher prices abroad will mean higher cost of imports into India. As central banks raise interest rates to control inflation it will raise the cost of borrowing for Indian companies, and the Reserve Bank (RBI) will have to follow suit which will raise cost of borrowing at home. "Indian companies raised over USD 3.43 billion from foreign markets through external commercial borrowings (ECBs) in July this year, RBI data showed" ET. Indian companies had borrowed USD 2.15 billion in July 2020. In Europe, "Euro area annual inflation is expected to be 4.1% in October 2021, up from 3.4% in September according to a flash estimate from Eurostat, the statistical office of the European Union." In Germany, it was 4.6%. In the US, "Consumer price inflation will likely endure as long as companies struggle to keep up with consumers' prodigious demand for goods and services. A resurgent job market -- employers have added 5.8 million jobs this year -- means that Americans can continue to splurge on lawn furniture to cars. And the supply chain bottlenecks show no sign of clearing," ET. Climate change can make it much worse. "Global crop yields could fall about 30% because of climate change, while food demand is expected to jump 50% in the coming decades, according to United Nations' estimate," ET. "Crisil has estimated that the highest inflation was faced by the upper 20 percent income group in urban areas," BS. This is because fuel and core inflation make up 65% of their commodity basket, while "The lowest inflation was faced by the bottom 20% in rural areas," because of lower food prices. "In a worrying sign of soaring inflation, apples and tomatoes were selling at the same rate in grocery markets of Agra," India Today. "Vegetable sellers are feeling the pinch both ways; on one hand, supply of produce has dipped, while on the other hand, rising prices are forcing customers to buy less." Importing food items to make up any shortfall will likely not help. Globally, "Higher shipping rates and prices of foodstuffs from grains to vegetables are likely to drive the cost of importing food up by 14% to $1.75 trillion, the United Nations said," ET. So, what is the solution? In a shameful article Nobel Prize recipient Paul Krugman makes excuses for the Democrat government of Joe Biden by comparing with Europe, ET. But Europe did not dole out enormous stimulus worth $1.9 trillion like Biden did, CNBC, an infrastructure bill worth $1 trillion, BBC, and is now pushing for a $1.75 trillion social spending bill, CBS. What would happen if the Republicans did not act as a check no one knows. In India, we say 'Ram Bharose', which means 'depend on Lord Ram', Quora. US motto is "In God we trust", wikipedia. We say, "God help us".
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