This Inflation Isn’t a Demand Problem
How a supply shortage in one industry can ripple through the entire economy.
Hello there!
What’s hitting India right now doesn’t fit the facets of Inflation as we know it.
This is cost-push inflation: pressure originating on the supply side, from disrupted trade routes, sanctions, and fractured input chains.
Companies can’t absorb it indefinitely, so prices climb. And a rate hike won’t fix a fertiliser shortage.
India is dealing with a live, multi-track version of this right now.
The US waiver on Russian oil imports has lapsed, threatening the discounted barrels Indian refiners have been relying on.
Strait of Hormuz disruptions have squeezed fertiliser flows out of the Middle East.
The rupee is amplifying every import cost further.
Three separate supply shocks, three different parts of the economy, hitting at the same time.
That’s what makes this cycle worth understanding carefully. The risk isn’t evenly distributed, and neither is the opportunity.
Knowing which is which starts with getting the diagnosis right.
Do you think Indian companies are pricing in the full extent of this supply shock or are markets still underestimating it?
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Prices are rising, economic growth is slowing, and unemployment remains high.
That’s all in The Finology Letter
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