INFLATION

Group Members

Aditya Bhujbal M 3005 Varsha Sadafule M 3041 Harshad Sawant M 3059 Lavanya Samala M 3043 Dhanashree Mayekar M 3029 Veena Dhuri M 3009 Hemant Sarang M 3044 Jaimala Pandey M 3034 Sandeep Singh M 3054 Sushant Gawali M 3010

Definition:

In Economics, Inflation is a rise in the

general level of prices of goods and services

in an economy over a period of time.

Meaning

Inflation means a persistent increase in the level of

consumers prices or a persistent decline in the

purchasing power of money, caused by an increase

in available currency and credit beyond the proportion

of available goods and services.

Methods to Measure Inflation.

Consumer Price Index (CPI)

Wholesale Price Index (WPI)

Current CPI/WPI – Last Calculated CPI/WPI

Last Calculated CPI/WPI

InflationRate

=

150 - 140 140

InflationRate = 100

100

= 7.12%

Varsha SadafuleM - 3041

Types Of Inflation

A) On the basis of the period of occurrence

1. War Time Inflation.

2. Post War Inflation.

3. Peace Time Inflation.

B) On the basis of the rise in prices

1. Creeping Inflation.

2. Walking Inflation.

3. Running Inflation.

4. Galloping or Hyper Inflation.

Harshad SawantM - 3059

C) Open and Repressed inflation

Open Inflation : Government takes no

steps to control price rice

Repressed Inflation : Price level check by Government

D) Comprehensive and Sporadic Inflation

Comprehensive : All commodities available in the economy witness price

rise

Sporadic Inflation : Only a few commodities

register a rise in price

E) Partial and Full Inflation

Partial : Before the stage of full employment

Full : After the stage of full employment is

reached

F) Demand pull and cost push inflation

Demand Pull : Increase in the aggregate demand for goods and

services

Cost Push : a. an increase in wages

b. an increase in the profit margin

Lavanya SamalaM 3043

Causes of inflation

Inflation is a persistent and appreciable rise

in general level or average of price

-Acc to ACKLEY

Types of causes

1. DEMAND side factors:

Aggregate demand is greater than aggregate supply

2. SUPPLY side factors:

Aggregate supply fall short of aggregate demand

Demand side factors

1. Rise in Public expenditure

- expenditure incurred by govt.

- Aggregate demand is greater

than aggregate supply

-INDIA’S 48%

CAUSES

2. Deficit financing

- Expenditure is more than Income

- Fiscal deficit in 2002-03 is Rs145072cr.

2007-08 Rs150948cr.

Increase in Money supply

Irving fisher’s quantity of money

explains-

“Increase in money supply with

proportionate increase in output

lead to rise in PRICE and fall in

money VALUE”

BLACK MARKET & CURRUPTION

It is unearned income by

public servants

Excess demand lead to inflation Acc. To Transparency

International for corruption

India ranks 74

OTHER FACTORS

Growth in population Growth in private expenditure Increase in Export Money reduction in direct taxes

DHANASHREE MAYEKARM - 3029

SUPPLY SIDE FACTORS CAUSING INFLATION

Industrial disputes

Natural calamities

Artificial scarcity

Increase in export

Global factors [impact high oil price]

Fluctuating agricultural growth

Neglecting the production of consumer goods

Veena DhuriM - 3009

Effects Of Inflation

Inflation Rate

Hyper inflation Accelerating inflation Anticipated inflation Unanticipated inflation

Effects of inflation

Inflationary noise Effect on economic growth Effect on consumption and economic

welfare

Hemant SarangM - 3044

Economic Effect of inflation

• Distribution of income.

• Distribution of wealth

• Different sector of society.

Economic Effect of inflation

Wage earner Producer Fixed income people Borrower & lender Government Employment

Jaimala PandeyM 3034

MEASURES TO CONTROL INFLATION

TYPES OF MEASURES TO CONTROL INFLATION

MONTARY MEASURES

FISCAL MEASURES

OTHER MEASURES

MONATARY MEASURES

A) CREDIT CONTROL

B) DEMONETIZATION

C) ISSUE OF NEW CURRENCY

FISCAL MEASURES

A) REDUCTION IN UNNECESSARY EXPENDITURE

B) INCREASE IN TAXES

C) INCREASE IN SAVING

D) SURPLUS BUDGETS

E) PUBLIC DEBT

Sandeep SinghM 3054

OTHER MEASURES

A) PRICE AND WAGE CONTROL

B) INDEXATION

C) TO INCREASE IN PRODUCTION

D) RATIONING

IS FISCAL OR MONETARY POLICY ARE MORE EFFECTIVE TO CONTROL INFLATION?

Sushant GawaliM - 3010

Simple reasons for Inflation

Inflation Rates from Jan. 05

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avrg

20090.03

%0.24

%-

0.38%-

0.74%-

1.28%-

1.43%-

1.54%NA NA NA NA NA NA

20084.28

%4.03

%3.98% 3.94% 4.18% 5.02% 5.60%

5.37%

4.94% 3.66% 1.07% 0.09% 3.85%

20072.08

%2.42

%2.78% 2.57% 2.69% 2.69% 2.36%

1.97%

2.76% 3.54% 4.31% 4.08% 2.85%

20063.99

%3.60

%3.36% 3.55% 4.17% 4.32% 4.15%

3.82%

2.06% 1.31% 1.97% 2.54% 3.24%

20052.97

%3.01

%3.15% 3.51% 2.80% 2.53% 3.17%

3.64%

4.69% 4.35% 3.46% 3.42% 3.39%

Inflation by Commodity groups

In ‘primary articles’, inflation declined to 6.0 % in the current week

In ‘primary food articles’, inflation declined to 8.3 %

In ‘non-food articles’, inflation fell to 1.7 %

In ‘minerals’, inflation remained stable at (-) 1.2 %

Cont…

In ‘fuel and power’, inflation remained stable at

(-) 4.0 % In ‘manufactured products’, inflation rate was 4.5

%.

The inflation rates of July 2009

India’s inflation rate fell marginally to minus 1.54 percent for the week ended July 18

The wholesale price index however was as high as 12.54 per cent in the corresponding week last year, according to Commerce Ministry.

Present News of Inflation

Annual inflation, measured by the wholesale price index, registered its lowest fall in the last three months, with inflationary pressures starting to build up in the economy

Planning Commission’s Deputy Chairman, Montek Singh Ahluwalia said “ The Indian government sees food prices easing by year end and aggregate inflation being contained at a comfortable level”

The states have been asked to invoke provisions of the Essential Commodities Act and the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act to check hoarding of essential items.

Cont…

As per the latest data, the widely watched consumer price index for industrial workers has clocked an annual inflation of 11.89% in the month of July.

Fuel and manufactured items also became costlier over the week, though the annual inflation for these items remained in negative territory.