Subtle and sneaky. And insidious.

"Inflation rose sharply throughout 2022 across both advanced economies and emerging markets," wrote Prof Nouriel Roubini. "Specifically, many countries are now engaged in various 'wars'," and "accordingly, the US, Europe and NATO are re-arming, as is pretty much everyone in the Middle East and Asia, including Japan." Then there are the wars against climate change, future pandemics and "rising income and wealth inequality". Higher spending by governments will lead to inflation and "this 'inflation tax' is a subtle and sneaky form of taxation". In India, "The average inflation rate was 6.2% in fiscal year 2020-21; it continued to rule high for much of 2021-22," wrote Puja Mehra. "The RBI (Reserve Bank of India) concluded that inflation was the lesser evil compared to the collapse in growth" and flooded the financial system with liquidity by printing new money. Average consumer (CPI) inflation was 6.6% in 2020, rateinflation.com, fell in 2021 because of the ferocious Delta wave of Covid-19, but the average was 5.1%, still much higher that the government mandate for the RBI to keep it at 4%, ET. "India's hampered response was characterized by months of inertia from the government of Prime Minister Narendra Modi, and a startling lack of resources, according to interviews with two dozen scientists, officials, diplomats and health workers." Bloomberg. CPI inflation has been above 6% from January to October 2022, dropping to 5.88% in November. "The deceleration in food prices was largely responsible for lower-than-expected inflation. Food contributes 39% of the total CPI basket," wrote Pavitra Kanagaraj. However, "core inflation increased five basis points to 6.19% in November. It has remained higher than 5.75% in the last 19 months." How the government has benefited from the "subtle and sneaky" inflation tax is clearly shown by the rise in goods and services tax (GST) collections which has more than doubled from Rs 7.19 trillion in 2017-18 to Rs 14.76 trillion in 2021-22, cleartax.in, despite the pandemic. RBI forecasters expect CPI inflation to moderate to 5.2% in 2023-24, wrote Vivek Kaul. "Given that most of these forecasters are corporate economists, they have a tendency to underestimate inflation and then revise their forecasts as higher price levels become obvious. Take the case of 2022-23. Initially, the median forecast was for inflation of 4.7%. This has since been revised to 6.7%." Raising interest rates "will not produce more food, oil, or gas, but it will make it more difficult to mobilize investments that would alleviate the supply shortages," wrote Prof Joseph Stiglitz. He celebrates the victory of former shoe-shine boy and trade union leader Lula da Silva in Brazil's presidential election. Perhaps, Prof Stiglitz should look at Brazil's neighbors Venezuela, Nicaragua and Argentina, all with socialist governments. Why encourage inflation tax? It hurts the poor the most.