Imported inflation
Imported inflation
Current Affairs Daily Editorials
La Excellence IAS Academy | April 17, 2024 | Economy
| Syllabus: GS-III, Subject: Economy, Topic: Inflation, Issue: Imported inflation |
Context: Asian Development Bank warned that India could face imported inflation as the rupee could depreciate amid the rise in interest rates in the West.
Imported Inflation:
- Occurs when the prices of goods and services in a country rise due to increased costs of imports.
Factors responsible for imported inflation:
- Currency depreciation as it makes imports more expensive.
- Higher import costs, such as rising crude oil prices.
Other issues
- Critics argue that costs do not directly determine prices; instead, it is the prices consumers are willing to pay that influence costs.
- Value is imputed from final consumer goods to inputs, shaping the pricing dynamics.
- Even currency depreciation reflects changes in nominal demand rather than directly causing input costs to rise.
Source: The Hindu
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