Sort of.

Stagflation is when Inflation rises even though the pace of economic growth slows down. So in a strict sense yes, we are.

However, the late learned Mr.Keynes conveniently ignored the “political angle” of economics at times. Why are prices rising in India? In other words what is causing Inflation?

So, is it a Supply Side or a Demand Side phenomenon?

The poor monsoons is the only indicator of reduced Supply. The jury, though, is still out on that and we dont know for sure.

Till the monsoons (ahem,the lack thereof), there were no other Supply side pressures.

So now we come to Demand.

And there, kind sirs, we have our answer since the crazy government borrowing that is supposedly trickling down via MNREGA into consumption spending is perhaps the single largest cause of inflation.

It may be the single largest cause, but it has a double impact.


Government borrowing crowds out private borrowing since nobody`s credit rating is better than the Sovereign as well as the fact that the money supply is finite and if one borrower (in this case the Government) corners most of the supply, then the others will have less.

As such, interest rates go up, which lead to larger interest payments for producers which in turn are passed on to consumers.


As MNREGA pays out copious amounts of money that work their way into the economy in terms of higher spending, prices go up. Especially for food since the first priority for most of India`s poor is better nutrition.


There. Now you have a view of the causes behind the current inflation in India. Even though it is much too simplistic.

Back to Stagflation

Returning to beginning is an excellent way to end sometimes. So to answer the question at the top of the post, yes, we are perhaps Stagflating however not in the term is generally used.

To elaborate, the original Stagflation was the 1971 American one where Commodity Supply Shocks and the Oil Shock (Also supply, obviously) led to high inflation in a period of low growth.

In our case, there is no Supply Shock. Atleast as of now. (We dont know what will be the impact of the US drought as yet.) And no Oil Shock for sure. Infact, oil prices are Shockingly Low.

What we have, ladies and gentlemen, is an invention of our perverted political masters. Please welcome a global first – Demand Shock.

*thunderous applause in background*

By the way…

I was`nt the only one to have considered Stagflation to just be an unimaginatively named inflated male deer.

An inflated male deer ?

Views: 54


You need to be a member of The Rodinhoods to add comments!

Join The Rodinhoods

The RodinStar Post of the Week!

Like us on FB, Please?!

Follow us on Twitter!!!

9 Ideas to use the site!

1. Registration is a click away - via Facebook etc
2. View ongoing discussions and fire up one yourself
3. Wanna feature your startup? Showcase it!
4. Have a question? Just ASK! here
5. Wanna read the BEST OF 2014?
6. Wanna get funding but don't know how to pitch? Here's a template!
7. Wanna know more about Trhs Events - read all the Open House stories.

8. Need help in Digital media? There's a goldmine of insights HERE...
9. Lazy? Just hang out, Chat, add Friends...

Still messed up? Read the FAQ's

What does 'Rodinhood' mean?

Rodinhood is inspired from Rodin - who sculpted 'The Thinker' and Robin Hood who 'got things done'. Hence Thinking+Doing = Rodinhood.

The best place for enterprising folks to hang out, share,make like-minded friends, get feedback and soak in a pool of vast experience.

© 2016   Created by Alok Rodinhood Kejriwal.   Powered by

Badges  |  Report an Issue  |  Terms of Service