Share prices have been on a record-breaking spree. They have company. Gold is not far behind. Spot prices were around $766 (Rs30,410) an ounce (28.35gm), not too far from the all-time high of $800 an ounce in 1980. And crude oil prices have risen to record levels, of close to $90 a barrel. These are signs of rising inflation expectations. The interest rate cuts in the US on 18 September may have ended, or postponed, a financial crisis in the rich markets. But they are likely to light inflationary fires.
The Indian government seems to be tackling some of these pressures with a calculated move. It refuses to pass through the price increases for fuel due to its growing “concern for the common man”, and issues bonds to oil marketing companies in a smart accounting fudge, showing only the interest cost on its books. But all it does is postpone reality, at last count till 2026, when those bonds mature. So, the burden of electoral populism today will hit the economy in the distant future!