The inflation in the food prices has far reaching consequences, especially for the manufacturing sector. As the pressure of costs increases, the pace at which the manufacturing sector was growing has started to slow down. There is an expectation of an increase in the interest rates too.
The government is blaming the fuel price index for the rising cost of commodities. It is expected that in April, due to all these factors, inflation will reach double digits. Reserve Bank of India has been warning of the pressure caused by the rapid inflation. The increase of prices of food has also caused the government to put a hold on its plans to cut back on the food subsidy.
Earlier, the government has planned to increase the food prices to cover up the fiscal deficit. However, for now, subsidies on the food grains and the various welfare schemes offering food on subsidized prices will also continue.
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