While this may seem like a lot, inflation is even higher in emerging economies such as Brazil, Russia, India and China (BRIC). Paul Krugman of The New York Times argues that increased investment in these booming economies is the reason for much of the inflation, but that the “underlying inflation in the wealthy nations remains low.” Krugman writes of the BRIC countries, “China and India grew more than 10 percent last year, Brazil more than 7 percent. These economies are overheating, and inflation is the natural result.”
Much of the inflation in these developing economies comes from increasing demand for oil and for other raw materials such as copper, cotton, and steel. But this is also affecting the United States, where almost half of the month to month increases in the Consumer Price Index comes from gasoline. In addition to the growing demand from emerging economies, unrest in North Africa and the Middle East is also increasing the price of oil.
While inflation does mean development for the BRIC countries, it can also be hazardous for the country’s poor, who cannot afford spikes in basic food prices. In India, “food inflation has been running more than 10 percent in the past year.” It crossed 18 percent in December 2010, when prices of Indian staples such as onions and tomatoes spiked. Runaway food inflation such as in India can mean hunger for those who can no longer afford basic staples, and is tempering the optimism Indians have in their economic growth story.
