June 15, 2008
Contemporary inflation vs characteristic inflation: June 15, 2008, 3:48 am
Most of the inflation seen in India today is a kind of recoil inflation. Its one thats inherent in the way new business ventures come-out but overlooked because you can’t think everything through at the initial stage of a new venture and once the business arrangement is in place the market forces do not allow for a subsidy in the rate at which this blows up. Its like you have a fiercely vibrating band of rubber or plastic that has a tendency to always vibrate in its natural state. You hold it tight so that it gives you a stable behavior while you are making some sort of arrangement but once the “other” components are in place and you are out of picture the whole system along with the fiercely vibrating piece gains an inflation in vibration.
Its a naive analogy but aptly describes what would happen in a system where some sort of inflation is definitively conserved. The Government can’t have a full control over such inflators especially at an initial stage of the phenomena but should consider its role and responsibility in a proactive way. It should invest its efforts for scientific modeling of such behaviors and their holistic understanding and a connection of such details to real market phenomena.
If the above characteristic would be prevalent in the Indian market setups it would be easy to spot such structures especially the natural inflators in the business models because it would be prevalent everywhere starting from small scale to large scale business setups to the stock markets, articles, reports, discussions in the media to tea time gossips. It would show more as a trend than as inflation structures but detailed analysis of these trends and their root causes could be found out.
Why there would be inflation in lodging tariffs, real estate constructions, expenditures in technical education…., exactly how they inflated, their detailed correlation to inflation elsewhere in the country to check the causes of such inflation should be the kind of study that the centers of advance economic studies, management and business schools and Technology initiatives take up. Profit making big and medium size business empires should invest their infrastructure and hard money in these academic and economic laboratory setups albeit in reasonable amounts to understand the inflation behaviors of the Indian market.
Indian inflation in recent times have become causes of real concern and before one trend produces another into another and yet another that increases in its effect and becomes a market attitude its time to act otherwise India would be hardest economic problem to crack, the most expensive place to live along with its huge social and economic problems.