Wharton India Knowledge has a story on new strategies for the changing Indian economy and lists Inflation as the biggest worry. They say that "Inflation confronts India's government, its people and its corporate environment today. The government is rolling out measures -- essentially interest rate hikes -- albeit without much effect. The people are tightening their belts and reworking household budgets. Companies are evolving innovative strategies and have met with some success"

More excerpts of the Wharton story is as under:

The size of the problem is indeed daunting. Ruling at more than 9% since July 2009, inflation has forced the Reserve Bank of India (RBI) to raise interest rates 13 times over the past 20 months. The cumulative increase is 5.25%.

You may also like to read How is growth, inflation and interest rates related and Understanding Inflation

The high interest rates have forced corporate India to slow down capital investment plans, which doesn't bode well for near-term and future growth. In the just-announced second quarter (July-September) results, some companies have reported reduced profits. Others have slipped into the red.

Household spending also has been hit. The good news for the FMCG sector is that while non-essential expenses have been curtailed, grocery sales have not been impacted, and impulse buying categories have registered a distinct uptrend.

The priorities of low-income, middle-income and high-income consumers are distinct in combating inflation. The low-income group's focus is 'How do I survive?' The middle-income group's is 'How do I balance?' And the high-income group's focus is 'How do I sustain?' But the budgets of all three groups have been reallocated; expenses on eating out, out-of-home entertainment and vacations have been reduced.

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