Consumer Issues
About inflation, commodities and effective substitutes, and proteins

An article in The Wall Street Journal a couple of days ago, left me all mixed about some everyday issues

I guess one of the most essential things for someone who is always in the glare of the media, is to be articulate. Often you have to say something which sends the reader into a tizzy. For fear of sounding stupid, the reader does not ask anything.
Today, I stumbled upon an article titled, "RBI: India Experiencing Structural Food Price Shock", in The Wall Street Journal.  (You can access the report at
.)  The article reports on a speech by Reserve Bank of India deputy governor Subir Gokarn. Each of the quotes is worth reproducing. I am not an economist, so to me the sentences were high octane economics. Here goes:

"Persistent price increases in commodities for which there are no effective substitutes, with other things remaining equal, will raise the potential rate of inflation over a period of time," Mr Gokarn said in a speech.

I tried to break down the sentence at different places and still ended up as confused as ever. Does this mean that when the price of something goes up, inflation happens? Or does it mean that inflation happens only when prices of commodities, of those that have no effective substitutes, go up? (Wonder what the term 'effective' substitute' means?) One brilliant sentence and the readers can enter into a debate about the meaning, context and the impact. I think what it means is that when price rises, inflation happens. Wait. Maybe it means that when prices rise, the 'rate' of inflation will go up. One thing, though, was clear. Inflation is here to stay. The only thing to wonder is why and what makes it happen. Part of the answer is in the explanation given. Inflation is because of 'persistent' price increases.

This sentence followed immediately:

"This means that actual inflation or interest rates would be higher than they would be in the absence of such increases."

The sentence is far more profound. One thought that there is more than one kind of inflation. One is 'actual' inflation referred to in this statement. The second part though should defeat a layman like me. That if the prices do not increase, the inflation or interest rates could be lower. I hope I got it right. Or, does it mean that because of prices rising, inflation is higher than what it could be without such increases? Well, I am all at sea.

The next quote is something out of this world:

"Increasing demand for protein appears to be an inevitable consequence of rising affluence. The affordability and availability of protein is an important indicator of an equitable and sustainable development with implications for both nutritional balance and macroeconomic stability," Mr Gokarn said. A powerful supply response to all sources of protein is needed, he added.

The first half is clear to me. As we Indians get richer, we want more proteins. This includes our dals and perhaps chicken. (You see, in Chennai, most shops selling chicken have the word 'protein' in their name). The next part of the sentence was a Eureka moment for me. The more of dals and chickens I have, the more prosperous my nation is! And the gentleman has drawn another interesting relationship. That affordability is not enough by itself. One should be able to lay hands on it also. And how much of dal and chicken we can have and access tells the story of how healthy we are (nutritional balance?) and how healthy our economy is (macroeconomic stability)! What deep linkages.

So, the solution lies in making available more dal and chicken to all. Sure it is not enough by itself, but proteins are an important indicator. Since I do not eat chicken regularly, I must eat more dals. That is a sign of my growth. And of course I stay healthy and the nation also remains stable.

I never knew that economics, inflation, chicken, dal and proteins were so closely linked and that they are key determinants of social and national development. And as the gentleman says, we need a powerful 'supply' response. We need a national campaign to grow more dals and hatch more eggs.



p y k

6 years ago

there was a humorous management book some time back .3 columns wrere there , pick random word , 1 each from column a,b c. you get the the most powerful jargon e g stragegic supply initiative..first class bullshit. if rbi governor talks in public forum, it means all is NOT well. u must run for cover! it is like why the drugmafia boys stay with their mothers etc etc.

How can you beat this real-estate bubble?

As property prices are showing only a few signs of abating, analysts predict that a potential real-estate bubble is looming large. So how can you achieve your long-awaited dream of owning a house? Moneylife went into a huddle with some industry analysts to give you the answers

With real-estate prices continuing to stay on the higher side, what are the choices left for the average working-class person? Here are some unorthodox, innovative and out-of-the-box ideas:

Solution No. 1: Work hard, jump jobs, do anything to reach an annual Rs40-lakh salary.

Why? Because, according to a recent report, a person needs to earn at least Rs40 lakh annually in order to purchase a house in the financial capital of India. A study by Liases Foras, a property research firm, shows that the weighted average cost of a new house in Greater Mumbai is about Rs2 crore. As banks cover only 80% of the cost of the house, Rs40 lakh has to be funded from a person's own pocket.

If you think that this is impossible and unpractical, consider the example of Anand Singh (name changed on request) from Vashi in Navi Mumbai. When Mr Singh first came to Mumbai five years ago, he was earning a salary of Rs3.5 lakh per annum. But last year he did the impossible by purchasing a 3BHK in Thane, costing
Rs1 crore. Unbelievable, but true. Hear him narrate how he managed to make the biggest investment in his life.

"When I came to Mumbai from Kolkata in 2005, my salary was Rs30,000 per month. I couldn't afford to buy a house then. But Mumbai is a land of opportunities, I made rapid progress, switched a couple of jobs and my salary increased to Rs2 lakh per month last year. Property prices in 2007 were very high. I used the crash last year to book a Rs1-crore 3BHK house. Today the price of the same house has increased by 25%," Mr Singh told Moneylife.

So if you want that dream house, better start visiting your head-hunter soon.

Solution No. 2: Forget Mumbai or Delhi, there are a lot of other urban conglomerates in this vast country.

According to Sanjay Dutt, CEO (Business), Jones Lang LaSalle India, "When we talk of the possibility of a bubble, we're actually talking of property only in Mumbai and Delhi right now." So what's happening in other cities in India? Mr Dutt told Moneylife, "Real-estate prices have skyrocketed almost everywhere in the country, but the fact is that local people are still buying homes on an 'as-needed' basis in most Tier-II and Tier-III cities. Nor is the supply in most of these cities either overly constrained or curtailed."

If you are thinking how is it possible to live in a place other than in Mumbai or Delhi where your can supposedly climb the corporate ladder at a far more rapid pace compared to other cities, then take a cue from Nitin Naudiyal of Faridabad who works in a corporate in Gurgaon. He came up with this brilliant idea of buying property within a strict (shoestring, did you say?) budget of Rs30 lakh. "Most of the corporate houses are situated in south Delhi, Gurgaon or Noida. In these regions, prices of real estate are generally high. It was not possible for me to buy property within this budget in these prime locations. I chose Faridabad, to buy a 3BHK for Rs30 lakh - which would have cost me more than Rs1 crore in south Delhi. Faridabad is situated at a strategic location, equidistant from all these three corporate hubs and it is easy for me to commute to all these three areas. So, even if my office shifts from Gurgaon to Noida, it won't take me much time to reach my place of work from Faridabad," Mr Naudiyal said.

Aren't you asking yourself, "Why didn't I think of this first"?

Solution No. 3: There is strength in numbers.

Esprit de corps. Groups can command bulk discounts for any service. From time immemorial, some communities have been banking on this formula to purchase their groceries and household requirements.

Vikhyat Srivastava, former analyst with the Kotak Mahindra Group and co-founder of, a real-estate site for group-buying, told Moneylife, "As a group, you can get a discount for any service. If a developer is selling 100 houses, and a group comes to buy 20 or 30 houses together, he would lower the prices for them as he would be able to do away with one lot. As a group, one can get a discount of about 20%-30% in real estate purchases."

If statistics bore you to death, consider this. Until now, buyers trading on have been able to garner bulk discounts of Rs19.85 crore on a piece of real-estate which had a market tag of Rs93.5 crore for 88 flats. Do the math. That's a lot of money saved.

Shouldn't you be looking around for people who have exactly the same idea in mind?

Solution No. 4: The pre-launch phase is the best time to buy. But there is a caveat, though.

That's when the price of real estate will be at the lowest and developers would be more than willing to sell at reduced prices. Mr Srivastava explained, "A developer needs to do some pre-financing before a project is launched. He can get these funds through these pre-phase channels. That's why he is willing to sell flats at a lower rate at that time. When the project is ready and completed, the rates would be at a premium. But if you buy at the pre-launch phase, you'll be able to get the same house at 70% of the peak market rate."

Neelesh Patodi of Kanjur Marg, a Mumbai suburb, saved a cool Rs18 lakh by investing during the pre-launch period. He bought a 2BHK in a project in Bhandup (another Mumbai suburb) during the pre-launch phase at a cost of about Rs67 lakh. According to data available with Mr Patodi, the same house would have cost about Rs85 lakh after the launch. A 2BHK in a similar completed project in the area is on the shelves for Rs80 lakh, Mr Patodi told Moneylife. He said, "The pre-launch period is definitely a better way of investing. Just because I invested during the pre-launch, my saving is least around Rs18 lakh."

But, as always, it's caveat emptor (buyer beware) which should be your guiding motto. "There is definitely a risk I'm taking. If the project is not launched, what can I do then? Get your facts right, go through proper land documentation, speak to the developer directly and not an agent, before taking the decision to invest during a pre-launch," Mr Patodi said.

But after all, as any classical economics textbook will teach you, profit is the reward for taking risk. Just don't rush in where angels fear to tread.

Solution No. 5: Rent, don't buy.

If you are a guy on the move, with one leg in Mumbai and the other in Delhi, why not rent a house and postpone your buying decision? Mr Srivastava told Moneylife, "Staying in a rented apartment makes sense in a place like Mumbai, compared to buying, considering the current property rates." 

Rucha Sane, who works for an IT company in Hyderabad, has been staying in a rented apartment for four years now. She told Moneylife, "I've to keep shifting from one place to another due to the demands of my job. It would be a good idea to have a house of your own wherever you want to settle. But real-estate prices have also gone up in a number of cities, in addition to metros. That's because the economy is slowly recovering from the global recession. So it's a wise decision for a middle-class person to hold the buying decision for another six months. Once the market becomes stable, invest your money in a house. Meanwhile, it will be better to stay in a rented apartment - as of now."

However, this option might not be viable for cities like New Delhi and Mumbai. Residential rentals are also creeping up here. According to a study by real-estate portal, residential rentals have seen an escalation of more than 20% in Mumbai. Khar, a western suburb of Mumbai, has seen 47% appreciation in rentals in the second quarter this year compared to the same period last year. Saket in south Delhi saw a 31% rise in rentals in the second quarter this year compared to the same period last year. South Extension, Safdarjung and Malviya Nagar followed at 24%, 22% and 21% respectively.

So what next?

Solution No. 6: Be patient, very patient.

When everything fails, patience prevails. According to real-estate analysts, a price correction may be on the cards. Pankaj Kapoor, founder and managing director, Liases Foras, a real-estate rating and research company, told Moneylife, "I expect a price correction but the focus has to come back to consumers. If the property price does not increase in the next three years, it in itself is a correction. There are chances that property prices may undergo correction by 10%. If it doesn't appreciate in the next three years, it's overall a 30 % correction."

If you don't believe him, hear what a real-estate consultant, Sunil Bajaj, has to say. According to Mr Bajaj, price corrections can happen if projects are not well-planned and balanced. "The projects that are not meant for the end user and are being built only for speculation will definitely undergo a price correction first. Projects which are not balanced and not planned well will also suffer."

So are you ready to put on your thinking cap so that you can hear the jangling of your house keys in your pocket? Do let us know if any of these ideas have worked for you. Of course, if you have any more ideas, do write to us at [email protected] to let us know.

Happy house-hunting!




6 years ago

Need to Know more details

Ex Mumbaikar

6 years ago

Perceptive. But your article misses the big picture by clubbing Mumbai and Delhi together when they are divergent. Mumbai is in terminal decline and Delhi will be the next "Mumbai" in the coming 5 years. More international flights land in Delhi than in Mumbai now and the growth in IT collections went down from 50% to 15% last year prompting the Prime Minister to launch a review.
Migrants increasingly opt to go to Delhi, Bangalore, Pune, Hyderabad rather than "step into the shit" in Mumbai.
Also why would anyone one with children want to live in Mumbai where breathing the air is condemning your children to have 20 cigarettes a day and the life expectancy is 59 years compared to 69 years in the rest of India.
If Mumbaikars love Mumbai, at least half of them must leave Mumbai to save it.

Amalaraj Marian

6 years ago

A good article more serious but somewhat in the lighter heart. In an issue as serious as the aam aadmi ka Roti Kapada aur Makaan. If a man is hunting for the first two the third is still not in his reach. The reason being what comes first the egg or the chicken. Same happens with the common man he can't buy a house because he cant save and invest. The important thing for a common man is to keep saving and Investing in good assets which are liquid. and keep looking for opportunities and as and when the thing presents grab it. The situation now is somewhat akin to that in 1991 during that phase aquiring a property was a dream like situation. But the prices went stagnant for the next more then 10 years until close to 2005-06 where the prices slowly started to pick up again.Being in the industry of investments I would advise the best time to buy a property for your self is when the cost of the property is on a 5 to 8 X of your annual salary. for this you need to keep your investments high and your patience up and yes you need to do well in your professional front also. happy investing.



In Reply to Amalaraj Marian 6 years ago

5-8X looks like very high price; bubble zone.

Rambabu Shastri

6 years ago

Solution No 7. Manage to get a house in prime Mumbai area like the mother-in-law of Chief Minister Ashok Chavan. You totally forgot about those who usurp other people's benefits for themselves. There are too many of such ilk in Mumbai's power corridors. You also forgot to mention, Solution No 8. Take a flat on rent, and never vacate.


6 years ago

very good ideas but who is willing to follow.

Indian IT exports to be higher than anticipated: Infosys CEO

Bangalore: India's IT exports this fiscal would be higher than anticipated, given the strong second quarter numbers posted by some big companies, reports PTI quoting Infosys Technologies CEO S Gopalakrishnan.

IT exports are estimated to grow between 13% and 15% in 2010-11, up from about 5% in the previous year, he said.

"I believe that given the strong performance in the second quarter by the Indian (IT) companies, this number probably will get revised upwards," Mr Gopalakrishnan said at IT.Biz, an annual, state-sponsored event here.

TCS and Infosys, India's top two software exporters, posted robust second quarter performance, with double digit sequential revenue growth.

"Overall, the IT-BPO industry is expected to touch around $71.7 billion this year, accounting for about 5.8% of our gross domestic product (GDP)", Mr Gopalakrishnan said.

He said the IT industry would create 1.5 lakh to 1.7 lakh jobs in the current fiscal. "This is only assuming growth is around 10% ".

Noting that currently seven cities account for 90% of the Indian IT export revenue, Mr Gopalakrishnan said it's good to know the sector is spreading its footprint in Tier II and III cities.

He said the focus is to create about 43 new locations to ensure they become the next IT-ITeS hubs around the country to meet the growth demand and near saturation levels in Tier-I cities.

He said 40% of new employees of Infosys are from rural families where one or both their parents have not completed the tenth standard.

Infrastructure growth in Tier-I cities is absolutely essential for the IT sector to sustain high-growth as development in Tier II and III cities would be at a lower rate, Mr Gopalakrishnan said.

"There is no doubt that these are exciting times for the industry. I believe the future is bright and holds new promises and we - the government and the industry - have to work together to leverage its full potential," he added.


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