Asia’s economic dynamism has come under severe test as global commodity prices - food, fuel and other commodities.  Inflation ranges from 6 to 20 per cent across the continent. Inflation is now a global phenomenon but in advanced countries, especially USA, preventing or shortening a recession, which has taken hold of the American economy, as market analysts believe, gets over-riding priority over change in headline inflation numbers. US Fed’s aggressive rate cuts and injections of hundreds of billions of dollars into the financial markets, over a six-month period, have hardly dented the pervasive instability.

Asia will be neither immune nor be hostage to the global slowdown. While it is not exposed to massive financial deleveraging and credit markets in USA, it is closely tied to global goods market and Asian financial markets have become more closely meshed with rest of the world with flourishing cross-border holding of assets. East Asian financial markets are more closely integrated with international financial markets.

For China and India, ADB has projected growth rates in 2008 to slow from 11.4 per cent in 2007 to 10 per cent and for India from 8.7 to 8 per cent, which in turn would moderate growth in South Asia as a whole. But escalating inflation could trigger cost-price spiral in the region.
While cyclical factors associated with global slowdown may help to mitigate the upswing in the world commodity market, prices are likely to remain at historic highs, according to ADB. Monetary policy actions would depend on whether price pressures are seen as temporary and likely to recede or more structural and durable.

Indian Government has moved swiftly to counteract the inflationary surge by a slew of measures, abolishing or reducing import duty on crude/refined edible oils, banned export of non-basmati rice and pulses, hiked the export price of basmati rice, and involved states in actions to prevent hoarding or profiteering. Lowering food prices is more crucial but manufactured products index has also been a significant factor for the rising wholesale price index. Steel prices have soared like cement prices and Government is reportedly urging steel and iron ore producers to being about coordinated price reduction. Carried to extra controlling prices may begin to retard growth prospects for the medium term but inflation has to be reined in the interests of the consumers and of the economy in general.

Political India is already aroused with all the parties in opposition and the Left holding UPA Government responsible for the steep rise in prices which cannot be seen altogether in isolation from global commodity price trends. The strong capital inflows have increased money supply, raising inflationary pressures and rendering difficult the management of monetary and exchange rate policy. So far, monetary policy in controlling money supply growth to maintain price stability has had only limited success. While pressures mount on RBI to cut policy rates, high inflation leaves no room for easing its monetary stance.

In all the economic growth decline, the rising inflation and the political influence, it is the common man that is paying the price.