Inflation is rising, which means our ability to buy things or purchasing power as it is called is getting affected. Our savings as the value of that savings is diminishing in a manner that we have not seen in a while. Why is inflation going up in the manner that it is ? What is the impact of this? How can the current inflation rate of 6.3% go down? BOOM Explains.

DK Joshi, Chief Economist, CRISIL, says that there are two sets of reasons for inflation in India. One is the international prices--the crude is already above $75 per barrel and domestic taxes on crude are quite high. The combination of both creates high fuel inflation. The second factor is that the commodity prices have firmed up very very fast, and sharply. A global recovery and strong recovery in quality intensive manufacturing sectors has given a big boost to metal and steel prices, aluminium--so all these are seeing an upturn. On top of that, on the food side, the edible oil where we import more than 60% of the requirement has seen a very sharp increase. So these are global factors that are outside our control.

He also says that if you look at the consumption side, it hits the poor more than the rich. Right now, the purchasing power of the poor people has gone down because there has been a hit to income and not so much hit to the upper income category. From that perspective also, the inflation is having an inequitable impact on the poorer.

Watch BOOM's Govindraj Ethiraj discuss the reasons and impact of inflation in the Indian economy with economist DK Joshi.