Asian Giant Economies - China and India both seemed to be plagued with inflation.

Inflation in China accelerated in February as food prices jumped, adding pressure on the central bank to raise interest rates in the world’s fastest-growing major economy.

Consumer prices rose 2.7 percent from a year earlier after gaining 2.2 percent in January, the National Bureau of Statistics said Tuesday.

Where as India’s key inflation rate has surged to a 3-year high, the government said Friday, raising the possibility of the central bank raising interest rates soon despite signs of a slowing economy.

The wholesale price index-based inflation rate accelerated to 7 percent on year in the week that ended March 22 from 6.68 percent a week earlier, according to data released by the Ministry of Commerce and Industry.

Inflation has 2 aspects to it - 1) a short term increase in liquidity in the market , like frequently seem with a sustained bull run in the real estate or stock market. 2) a long term supply constraint

The key element behind both economies is a supply constraint on grains. The agricultural produce is not being able to cope up with increasing consumption, surge in demand.

This is more alarming when looked at from the following perspective.
What actually compounds the problem for India is the fact that lower harvest worldwide, specifically in Australia and Brazil, and the overall strength of demand vis-a-vis supply and low stock positions world over, global wheat prices have continued to rise.

Wheat demand is expected to rise, while world production is expected to decline further in the coming months, as a result of which global stocks, already at historically low levels, may fall further by 20 per cent. These global trends have put upward pressure on domestic prices of wheat and are expected to continue to do so during the course of this year.

No wonder, despite the government lowering the import tariffs on wheat to zero, there has been no significant quantity of wheat imports as the international prices of wheat are higher than the domestic prices.

Thus, irrespective of government taking action to suck up excess liquidity in the market, bringing wheat important taxes to absolute zero, the global produce is not able to cope up with increasing consumerism.

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