Inflation, as measured by the wholesale price index (WPI), which actually went into negative territory for a brief period in mid-2009, started rising in late 2009, and had remained around 9–10 per cent for all of 2010 and much of 2011, reflecting both supply and demand pressures. Supply pressures stemmed from elevated domestic food prices and rising global prices of oil and other commodities.
Demand pressures stemmed from rising incomes and sudden release of pent up demand as recovery began. The supply shocks and demand pressures combined to trigger a wider inflationary process. We were caught in the quintessential central banking dilemma of balancing growth and inflation. 19.