India is not the only economy in the world that is threatened by high inflation. Prices have risen across the globe. Consumer price inflation in emerging Asia has increased by 1.75 per cent since the end of 2003, according to David Burton, director of the Asia and Pacific department of the International Monetary Fund (IMF).

The average headline inflation rate in the region is now 4.5 per cent. Yet, there is a difference between inflation in India and elsewhere in Asia. The rise in the consumer price level in the rest of Asia is largely because of food prices. Shortages in China and erratic weather in many food-exporting countries have pushed up global food prices, says Burton. This has added 1 per cent to the average consumer price inflation in emerging Asia (including India).

Higher prices of oil, on the other hand, have pushed up consumer prices by a mere 0.5 per cent. This is because food still accounts for a larger share of consumer spending in Asia than energy does. In India, consumer inflation has been pushed up by the strong prices in various industrial commodities. Food prices have been under control because of last year's exemplary monsoon. And high oil prices have not hurt consumers because of price controls, tax cuts and subsidies.

The question is how long the government can use such methods to protect household budgets. The more interesting issue is food prices. That global prices are climbing does not seem to concern too many people in India. Perhaps we are living in a fool's paradise. It is very unlikely that India can be an exception to the global rule. And remember: high food prices are inevitably a source of social unrest and political trouble. Governments have been hammered because of high onion prices. One wonders what could happen if prices of all types of food started climbing.

Can you guess which country will grow the fastest in 2004? It could be Iraq. Nominal GDP fell by 35 per cent in 2003. The new government expects growth in 2004 to touch 52 per cent (from the low 2003 base) and then a further 17 per cent in 2005.

Between 1983 and 2004, says the IMF in a new country report, Iraq suffered because of both economic mismanagement as well as international sanctions. GDP per capita dropped from over $3,000 in the early 1980s to as low as $200 in the early 1990s. It recovered after that, and reached $800 by 2001. The conflict in Iraq has once again pulled it down to $500.

Iraq scores poorly on human development indicators as well. Unemployment is close to 30 per cent. There is rampant underemployment. Around 60 per cent of Iraqis are dependent on the government food distribution system for subsistence. And all this in a country that has between 100 billion and 130 billion barrels of oil under its land and accounts for 11 per cent of the world's proven petroleum reserves.

LEGENDARY investor Marc Faber has struck a note of warning in a recent piece on asset bubbles. "Sure there will be a time when, as was the case at the time of the Mississippi Scheme and the South Sea Bubble, the present 'chain letter' type of fiat money operation practiced by the US Federal Reserve Board will no longer work and lead to a sharp depreciation of the US dollar..."