Fuel Prices raises fear of deflation

Its not the consumers who fear deflation. Deflation is when the prices of items don't rise significantly. With fuel prices being cut, deflation seems to be eminent and has some people worried. Who are these people, definitely not you and me?

The people who fear deflation are the very people who knock on your door, ambush you outside your office premises, make unsolicited calls on you mobile etc etc. They are the mutual fund, insurance, provident fund companies. Now that you know who they are, the question is why do they fear deflation?

For some years now these companies have been trying to convince you and me not to have our money lying in the savings account because it will loose its value due to high inflation. If the banks give an interest of 4% and inflation is 6%, a Rs 100 note in your bank will have the value of Rs 98 the next year. That why, they say, you should invest your money in (risky) mutual funds that give you more than 10% interest. Thats how they've made money for you and themselves have become giants in the financial world.

Now that inflation is down, they cannot tell you that your money is loosing its value and therefore do not have a valid reason to ask you to gamble your money in the stock market. I don't know what they'll tell you but I do know that they'll persuade the govt to decrease the interest rates to neutralize the growth effect deflation has on your savings. But for now, govt will not listen for now because elections are around the corner and prices must come down for the govt to prove that they've made progress and successfully defended and defeated the spiraling inflation that plagued our country (India) few months back.