Read the following passage carefully and answer the questions given below it. Certain words have been printed in bold to help you locate them while answering some of the questions.
Over the past few decades, many Asian nations transformed from poverty into global competitors. From 2003 to 2007, Asian economies expanded at an average annual rate of 8.1%, triple that of advanced economies. Over the same period,Inflation in Asia, averaged only about 3.5%. But Asia could be facing turbulent economic times. In May the average inflation rate throughout the region reached nearly 7% led by spikes in oil and food prices. In India, inflation jumped to an 11.6% annual rate in June, according to the latest government figures, the highest in 13 years.
Policymakers and central bankers are forced to raise interest rates and limit credit to get inflation under control. But these same measures suppress the investment and consumption that generates growth. The combination of slowing growth and soaring inflation makes economic policy-making tricky. Inflation stirs up the middle classes
Because it can quickly erase years of hard-won personal gains. Inflation is cruel to the poor. Because families have to spend a larger share of their meagre incomes on necessities. In the Philippines. Farmers, unable to afford fuel for tractors, use water buffaloes to plough their fields.
But to avoid unrest, leaders cannot blindly adopt rigid anti-inflation measures. Voters won’t hesitate to remove from office any politician who doesn’t deliver the goods. So they cannot overreact to the inflation threat and scale down economic growth in the process. Developing nations need to grow quickly to create jobs and increase incomes for their large populations. With prices soaring, doing nothing is not an option. Most central bank in Asia have started raising interest rates. The Reserve Bank of India increased its benchmark rate twice last month to a six year high of 8.5%
The challenge is especially difficult because currently inflation is not of domestic origin. Prices are being driven higher by a global surge in oil and food prices, which individual governments can do little to control. Of course, inflation is not just a problem in Asia World Bank President Robert Zoellick called rising food and oil prices a man-made ‘catastrophe’ that could quickly reverse the gains made in overcoming poverty over the past seven years. For now, though, there is more talk than action on the international front, so Asian governments are on their own.
Even though inflation throughout the region is likely to continue to rise in coming months, no one is expecting an economic calamity. According to the Asian Development Bank Asian countries have large hard currency reserves and relatively healthy banks, and so are far better prepared to absorb external shocks than they were during the region’s last recession ten years ago. Asian policymakers have learned their lessons and are more alert.
Which of the following factors was responsible for inflation in India?