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INFLATION


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GROUP MEMBERS

Roshan Vaidya 56

Pranali Vedak 57

Aditi Verma 58 Neha Vora 59

Siddhesh Waghela 60 Rakesh Ware 61


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SYNOPSISIntroduction

DefinitionRate of inflation

Types of inflation

Forms of inflation

Causes of inflation

Measures of inflation

Consequences of inflation

Consumer price index

Wholesale price index


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INTRODUCTION

Inflation is defined as a sustained increase in theprice level or a fall in the value of money.

It is measured as a rate percentage per unittime, say a year or month.

When the level of currency of a country exceedsthe level of production, inflation occurs.

Value of money depreciates with the occurrence

of inflation.


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DEFINITION

According to C.CROWTHER, Inflation is

state in which the value of money is fallingand the prices are rising.

In economics,the word inflation refers togeneral rise in prices measured against a

standard level of purchasing power.


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RATE OF INFLATION

Rate of inflation is the rate of change of thegeneral price level. It is measured bysimple formula:-

Rate of inflation t=Pt-Pt-1 Pt-1

Where, Pt=price level in the year t

Pt-1=price level in the year t-1,the base year

If there is a decline in the rate of inflationsuch a situation is called DISINFLATION.


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INDIA INFLATION RATE

India inflation rate stands at 11.49 percent year-over-year.Inflation rate refers to a general rise in prices measuredagainst a standard level of purchasing power.

The most well known measures of Inflation are the CPI whichmeasures consumer prices, and the GDP deflator, whichmeasures inflation in the whole of the domestic economy.

. The economy has posted an average growth rate of morethan 7% in the decade since 1997, reducing poverty by about10 percentage points.


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CHART OF INFLATION RATE

YEA JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2009 1.45 9.63 8.03 8.70 8.63 9.29 11.89

11.72

11.64

11.49

2008 5.1 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45

10.45

9.70

2007 6.72 7.56 6.72 6.67 6.61 5.6 9 6.45 7.26 6.40 5.51 5.51 5.51

2006 4.39 5.31 5.31 5.26 6.14 7.89 6.90 5.98 6.84 7.63 6.72 6.72


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TYPES OF INFLATION

Open inflation

Suppressed inflation

Creeping inflation

Galloping inflation

Hyper inflation


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FORMS OF INFLATION

Demand-Pull inflation

Cost-Push inflation

Stagflation

Deflation


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CAUSES OF INFLATION

FACTORS ON DEMAND SIDE:

o

Increase in money supplyo Increase in disposable income

o Deficit financing

o Foreign exchange reserves


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Contd

FACTORS ON SUPPLY SIDE

oRise in administered pricesoErratic agriculture growth

oAgricultural price policy

o Inadequate industrial growth


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CONSEQUENCES OFINFLATIONAdverse effect on production

Adverse effect on distribution of income

Obstacle to development

Changes in relative prices

Adverse effect on the B.O.P


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MEASURES OF INFLATION

Monetary policy

Fiscal policy

Wage control

Price control

Indexation


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CONSUMER PRICE INDEX A consumer price index (CPI) is a statistical estimate of the

level of prices of goods and services bought for consumptionpurposes by households.

The change in the CPI is a measure of inflation, and can be

used for evaluation of wages, salaries, pensions, orregulated or contracted prices.

The CPI is one of the most important products of national

statistical offices.

The consumer price index numbers of Maharashtra foragricultural labourers and rural labourers registered the

highest increase of 27 points.


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WHOLESALE PRICE INDEX

The Wholesale Price Index (WPI) was first published in1902.It consists of over 2,400 commodities.

The Wholesale Price Index or WPI is the price of arepresentative basket of wholesale goods.

The Wholesale Price Index focuses on the price of goodstraded between corporations, rather than goods bought byconsumers, which is measured by the Consumer PriceIndex.
http://en.wikipedia.org/wiki/1902http://en.wikipedia.org/wiki/1902


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COMPOSITION OF WHOLESALE PRICE INDEX

The wholesale price index comprises of thefollowing indices:

Domestic Wholesale Price Index (DWPI)

Export Price Index (EPI) Import Price Index (IPI)

Overall Wholesale Price Index (OWPI)

The WPI covers five commodity groups - agriculture;manufacturing; quarrying; import and export; andmining.


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FEATURES OF WHOLE SALE PRICE INDEX

It captures the price movement extensively and thereforetaken as a indicator of inflation.

The index is published weekly with the shortest possible timegap of two weeks.

It is used to analyze the market activity and the monetaryconditions in an economy.

It focuses on the changing nature of the economy of differentkinds of services such as railways, road transportations,telecommunications,etc.

These features highlight the utility of this index inmonitoring ongoing changes in an economy in order tosuggest the need for any adjustment.


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CONCLUSION

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