A Case Study of Indian Economics: The Failure of RBI and Modi’s Administration to Control Inflation

by | Apr 2, 2023 | Invest During Inflation | 22 comments

A Case Study of Indian Economics: The Failure of RBI and Modi’s Administration to Control Inflation




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VIDEO INTRODUCTION:

Ever since the Russia Ukraine war has started, inflation in India has gone over the roof and has even touched 6%.
So if you are a student of business, economics or even political science, this is by far one of the most important metrics that you need to study and keep a track of.
Let’s do a deep dive and try to understand,How is inflation calculated? How does RBI do to control inflation? In 2022, why is RBI failing to curb inflation in India? How does this affect ordinary people like you and me?And most importantly, what are the study materials to help you understand Inflation and Indian economics better?
To understand the macro view of the Indian economy and inflation, we first have to understand the basics of how inflation is calculated and what exactly does the Reserve bank of india do to curb inflation?

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Inflation, in simple terms, refers to the general rise in prices of goods and services in an economy over a period of time. In India, inflation has been a major concern for both the Reserve Bank of India (RBI) and the Modi government. Despite several measures taken by them, the inflation rate appears to be uncontrollable. Let us examine the reasons why RBI and Modi government are failing to control inflation.

Firstly, one of the major reasons for inflation in India is the rising fuel prices. This is due to the high cost of crude oil in the international market and the heavy taxes levied by the government. RBI cannot control fuel prices as it is dependent on the international market, and the Modi government is reluctant to reduce taxes as it will lead to a loss of revenue.

Secondly, the devaluation of the Indian Rupee has contributed to inflation. The depreciation of the currency makes imports of essential goods expensive, and this, in turn, leads to an increase in the overall price level. Despite various measures taken by the RBI, such as buying dollars to strengthen the rupee, the Indian currency continues to remain weak.

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Thirdly, the supply chain disruptions due to COVID-19 have impacted India’s food prices. India is an agrarian economy, and the lockdowns imposed to control the spread of the virus have affected the agricultural supply chains, leading to a scarcity of food items. Moreover, the hoarding and black marketing of essential items by some elements in the market have also contributed to the problem.

Fourthly, the demand-supply gap created by the policies of the Modi government has affected the prices of essential goods. For instance, the government’s policy of stockpiling food grains has led to a shortage of supply, creating an imbalance in the market, and thus leading to inflation.

Lastly, the high cost of borrowing has also contributed to inflation. The RBI has kept the lending rates high to tame inflation, but it has not been able to stimulate growth. This has forced businesses to pass on the higher costs to consumers, leading to an increase in prices.

In conclusion, controlling inflation in India is a challenging task, and both the RBI and the Modi government are struggling to achieve it. While some factors such as fuel prices and currency depreciation are beyond their control, others can be addressed by policy interventions. A more coordinated effort between the RBI and the government is the need of the hour, and they need to work together to create a stable and sustainable macroeconomic environment that promotes growth while keeping inflation under check.

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22 Comments

  1.  india

    BEACUSE OF MODI INDIA IS SAFE

  2. Kewal Singh

    ITS REALLY FUNNY….
    IF SOMETHING GOOD MODI GOVERNMENT MASTER STROKE.
    NOW INFLATION OUT OF CONTROL.
    WELL ITS … R.B.I WHO DONE IT NOT MODI… GOVERNMENT HAS NOTHING TO DO WITH R.B.I…HE HE HE HE HE CAN'T STOP….

  3. Anil K

    Not in line with your tittle. The knowledge and reasons shared are not appropriate as per video insights. Need to improve effectiveness.

  4. NC Airways

    8:15 Mr Joshi calculations and interpretations thereof go terribly wrong. This school did not think-

    1. His salary will also increase during the period. It will not stay constant at 80,000.
    2. The market value of the property 'home' will also increase. Mr Joshi has the option to liquidate that.
    True, if he tries to acquire a similar property, he can not buy at the same price.
    But, he has the option to shift from that location to some other location.
    At the end of the day, Mr Joshi walks away with a sizeable 'difference' as profit. Cool!
    Mr Joshi lives another day. He and his family survive.
    3. When lending interest rates go up, the sky does not fall.
    4. When borrowing becomes costly, the FD rates also increase simultaneously.
    5. Mr Joshi and his family members are human beings. Who stops them from working more and earning more?
    6. In such situations, dreams of movies, dining out, or vacations are a recipe for disaster for Mr Joshi-like income groups. They would instead consolidate their state first. Every family member would work, spend only on essentials, save and invest.
    7. Theatre owners, restaurants or travel agents stand to lose, not Mr Joshi.

    How do I say this? I went through a similar turmoil. That story is beyond the scope of this comment.

  5. Rishabh Singh

    Salary of Govt Servant and pension of pensioners are very less in view of high inflation.
    Is Modi govt. against Govt. servants. 18 Months arrear DA confiscated – no timely payment of DA increase and there is no pay commission and revision of salary and pension.

  6. vichu Mallinathan

    No one can explain these concepts better than Think school.

  7. shoaib R.K.O

    This video was very useful indeed, just a request pls post it other regional languages as well, it is something that every citizen should be aware

  8. ssamburle

    I wish you could coach our Finance Minister.

  9. ANUJ MEENA

    ❤️❤️❤️

  10. kishor vk

    i heard somebody saying cash flow saved india during 2008 recession,is it true?? if it is we rapidly moving towards cashless society pls explain how it'll gonna affect india.

  11. Amazing1985

    Hey Ganesh, Modi govt. is doing the complete opposite of failing. Don’t worry.

  12. kavya aredula

    pls start economy classes for upsc

  13. huzaifa dhorajiwala

    In such conditions….big companies should cut down on their profits….and not increase prices….of their goods, though the input and raw material costs have increased…..so in this case the big companies are not going to listen to you and me….but they will listen to the govt…and govt can make them agree to some tax benefits in the good times…..to the companies working in crucial sectors…like the govt gives benefits to its friends….in the form of loan waivers and such schemes……simple….at some point the RBI and Govt should think of the people of india….instead of their rich friends….

  14. Tanuj Bhagat

    Please make a vedio about LIC how it works and if lic get bankrupt then what will happen.

  15. Bivas Chaudhuri

    US control value of dollar by controlling inflation which is 2 percent historically. China don't allow Chinese currency RMB to go down more than 2 percent according to exchange rate and artificially holding value high. These are two examples of money manager and currency manipulator. Britain China Japan etc all invested trillions in US Treasury bonds despite having their own reserve currency because of security and stability

  16. full half

    Great love and respect for your work. Pointing out mistake rather than just screaming with half cooked knowledge is appreciable and I would say real patriotism. Pointing out mistakes and hating govt (or someone) without having any knowledge have huge huge difference

  17. Rohan Bhojannawar

    I think the best way right now is to inject funds in the market and to companies like Germany did, that would help keep the commodity prices low, in addition to the revised repo rate.

  18. Ak is Ok

    I am in 11th arts and i have economics as one of my subjects…when i was studying about cpi in stats I was like wtf is this and how is this even useful, there's no practicality…but through your video i got to know it's importance in real life…very informative

  19. A Life penned down

    Repo rate hike also increases interest on FDs – Though not substantial but in the long run can provide a safe return and maybe help in easing out increase in EMIs reliably

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