INFLATION IN INDIA AND OTHER COUNTRIES The most well known indicator of inflation is the Consumer Price Index

(CPI) which measures the average price of consumer goods and services purchased by households. In sum, Inflation is the rate at which the general level of prices is rising. High rates of inflation are often associated with fast growing economies where the demand for goods and services is higher that the countrys productive capacity. The fight against inflation is done by central banks which control the money supply by increasing or decreasing short term interest rates. For instance, the Governing Council of the European Central Bank aims at keeping annual inflation under 2% to promote price stability and sustainable growth.

GDP Projections 2012 in Major Economies Recent Movements Australia China Oct 2011 January (Latest) Change (BSP) 3.2 3.1 8.1 7.9 France 0.4 -0.7 Germany India 1.0 0.2 7.5 6.7 Japan 2.7 2.9 UK 0.9 0.3 USA 1.4 2.0

-10

-20

-110

-80

-80

+20

-60

+60

Source: IHS Global Insight, January 2012

The key highlights from the Global Market Perspective are:

Globally the strong currencies those control the monetary strategies in the international level are less vulnerable to the effects of global inflation than the currencies of the poorer and developing nations. Since 1950 India has experienced one of the lowest inflation rates in the world in comparison to other developing countries and most of these years it had consistently maintained a steady control over the inflation rate by limiting it to only a single digit figure. The biggest turmoil of inflation came in the year 2008 to 2009 when India experienced both the highest ever rate of inflation in the country and the lowest rate also within span of just few months. Though with proper and efficient fiscal management India has been able to mostly avoid the disastrous global effects of inflation Oil and aviation fuel, automobile, banking, steel and cement are some of the key industries that are mostly suffering from the present inflation syndromes. Among other industries IT, FMCG or consumer durable industries are facing pressurized by the effects of inflation and either increasing the price of their deliverables or initiating severe cost cutting measures. The inflation took almost a full swing by making the foreign investors surprised. When last year Indonesia was rather a favourable country for foreign investors, now the most of the foreign investments in the government bonds are quitting. Brazil is the country that saw the world's highest inflation rate ever and still it leads in the inflation rate globally. And though the country is steady on its economic progress, inflation has been a persistent concerning area. Interest rates are shooting up and most of the central banks are not being able to come above the curve. Fiscal policies in most of the emerging economies are tightening.

crude oil prices staged their biggest increase ever. Inflation in the 15 nations using the euro accelerated to 3.6 percent in May, matching a 16year high reached in March. The International Monetary Fund already estimates inflation to be running at its fastest since 1995 in advanced economies. the world needs to invest as much as $20 billion a year on agriculture to tackle a 60 percent gain in food prices over the past 18 months that has sparked riots in more than 30 countries.