There is no doubt that the Indian economy is in the doldrums. COVID-19 has left the economy in complete shambles. It is in much worse shape than any other major global economy. COVID-19 has disrupted supply chains, inflation is affecting not just consumers but even companies as they will find it difficult to pass on high inflation to consumers, without seeing a significant dent in demand. 

Recently, All India Council of Association of MSMEs, or AICA, sent a letter to the Prime Minister. They wanted the government to implement some policies to reduce wholesale inflation. The body highlight the following key metrics - 

> In the letter, the association said that this hike in the price of several key raw materials like steel, iron ore, aluminium, copper, plastics, PVC, paper and chemicals has caused an erosion of working capital for the MSMEs.

[Source](https://www.news18.com/news/business/ahead-of-sme-day-msmes-body-writes-to-pm-modi-seeking-intervention-to-control-price-hike-3890747.html)

It is quite clear from the list of materials that there is very little that the govt. can do about the price hike of these materials. The few things that the government can do are reduce import duties/local taxes or provide temporary grants. Market-driven price rises are beyond the control of any government. 

The letter did mention that supply chain issues, as well as hoarding, are causing temporary inflation. The government can surely address hoarding if there is any truth to it. I guess, a massive election defeat of some sort will make the government pay heed to all the concerns being raised since it is all noise at the moment. 

![copper.JPG](https://i.imgur.com/7JBfHdz.jpg)

In their letter, some numbers were scary and tell how much worse the inflation situation is in India. The letter mentions that Copper prices in India have gone up by 109%. International prices of copper have gone up by 58.8% during the last year. The Indian Rupee has strengthened against the US Dollar by 1.2% during the same period. Therefore, Copper prices in India should have risen by ~57.6%. However, in reality, the 1-year inflation in Copper is nearly double in India compared to international markets. 

![inr.JPG](https://i.imgur.com/ypeIsIW.jpg)

The same can be said about steel, gasoline, and edible oils. Transportation or Logistics costs have seen a double whammy - Higher prices of vehicles and doubling of oil prices. The situation in India is super serious. 

I hope the government wakes up to this crisis soon. 80% of India's consumers that do not live in fancy homes and drive fancy cars are in severe financial distress and looking at the concerns of India's biggest small industry body, it looks like the economic nightmare is going to get only scarier from here. 

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