Why inflation is rising in India
This article examines the recent surge in India's Wholesale Price Index inflation, which has reached nearly 10%. It explores the economic theory of supply and demand as a potential driver for these rising costs.
Why it matters
Understanding the causes of inflation is essential for assessing the economic health of the nation and the impact on consumer purchasing power.
I nflation, except during the COVID-19 pandemic, has remained relatively low in India for over a decade. But it is back with a bang. Wholesale Price Index (WPI) inflation is hovering close to 10% in June (Chart 1a) . After remaining low — negative, or close to 0 — until December last year, the climb started with a sharp jump since March this year.
Even those with only a fleeting connection to economics believe that prices rise when demand outpaces supply (overheating), and vice versa. But is that really the case?
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