INFLATION IN

INDIA

INFLATION IN

INDIA

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INFLATION “Inflation is nothing more than a sharp upward rise in price

level.”

Too much money chasing, too few goods.”

Inflation is a state in which the value of money is falling i.e.

price are rising.”

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VARIATIONS ON INFLATION

Deflation is when the general level of prices is falling.

This is the opposite of inflation.

Hyper inflation is unusually rapid inflation. In extreme

cases, this can lead to the breakdown of a nation's

monetary system.

Stagflation is the combination of high unemployment

and economic stagnation with inflation..

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KINDS OF INFLATION On the basis of rate of inflation On the basis of degree of control On the basis of causes Others

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CAUSES OF INFLATION

Demand-Pull Inflation

This theory can be summarized as "too much money

chasing too few goods". This usually occurs in growing

economies. 

Cost-Push Inflation

When companies' costs go up, they need to increase

prices to maintain their profit margins.

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Demand-pull Inflation

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Cost-push Inflation

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HOW TO CONTROL INFLATION

Monetary Measures

Other Measures

Fiscal Measures

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Monetary Measures Credit Control

Demonetization of Currency

Issue of New Currency

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Fiscal Measures

Reduction in Unnecessary Expenditure

Increase in Taxes

Increase in Savings

Surplus Budgets

Public Debt

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OTHER MEASURES

To Increase Production

Rational Wage Policy

Price Control

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How is it Measured?

Consumer Price Index

Wholesale Price Index

Consumer Price Index CPI is a measure estimating the average price of consumer

goods and services purchased by households.

CPI measures a price change for a constant market basket

of goods and services from one period to the next within the

same area (city, region, or nation).

It is a price index determined by measuring the price of a

standard group of goods meant to represent the typical

market basket of a typical urban consumer. The percent

change in the CPI is a measure estimating inflation.

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Wholesale Price Index WPI was published in 1902,and was one of the economic

indicators available to policy makers until it was replaced by

most developed countries by the CPI market. index in the

1970.

WPI is the index that is used to measure the change in the

average price level of goods traded in wholesale market.

Some countries (like India and The Philippines) use WPI

changes as a central measure of inflation. However, India and

the United States now report a producer price index instead.

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Problems with WPI In present day service sector plays a key role in Indian

economy. Consumers are spending loads of money on

services like education and health. And these services are

not incorpated in calculation of WPI.

WPI measures general level of price changes either at

level of wholesaler or at the producer and does not take

into account the retail margins. Therefore we see here that

WPI does give the true picture of inflation.

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Problems with WPI

WPI is supposed to measure impact of prices on business.

“But we use it to measure the impact on consumers. Many

commodities not consumed by consumers get calculated in

the index.

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Inflation rate

PI for a certain year - PI for a comparative year X 100

PI for a comparative year

SOURCE: www.InflationData.com

CURRENT ANNUAL INFLATION RATE

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CURRENT INFLATION RATES

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

2011 1.63% 2.11% 2.68% 3.16% 3.57% 3.56% 3.63% 3.77% 3.87% 3.53% NA NA NA

2010 2.63% 2.14% 2.31% 2.24% 2.02% 1.05% 1.24% 1.15% 1.14% 1.17% 1.14% 1.50% 1.64%

2009 0.03% 0.24% -0.38% -0.74% -1.28% -1.43% -2.10% -1.48% -1.29% -0.18% 1.84% 2.72% -0.34%

2008 4.28% 4.03% 3.98% 3.94% 4.18% 5.02% 5.60% 5.37% 4.94% 3.66% 1.07% 0.09% 3.85%

2007 2.08% 2.42% 2.78% 2.57% 2.69% 2.69% 2.36% 1.97% 2.76% 3.54% 4.31% 4.08% 2.85%

2006 3.99% 3.60% 3.36% 3.55% 4.17% 4.32% 4.15% 3.82% 2.06% 1.31% 1.97% 2.54% 3.24%

2005 2.97% 3.01% 3.15% 3.51% 2.80% 2.53% 3.17% 3.64% 4.69% 4.35% 3.46% 3.42% 3.39%

2004 1.93% 1.69% 1.74% 2.29% 3.05% 3.27% 2.99% 2.65% 2.54% 3.19% 3.52% 3.26% 2.68%

2003 2.60% 2.98% 3.02% 2.22% 2.06% 2.11% 2.11% 2.16% 2.32% 2.04% 1.77% 1.88% 2.27%

2002 1.14% 1.14% 1.48% 1.64% 1.18% 1.07% 1.46% 1.80% 1.51% 2.03% 2.20% 2.38% 1.59%

2001 3.73% 3.53% 2.92% 3.27% 3.62% 3.25% 2.72% 2.72% 2.65% 2.13% 1.90% 1.55% 2.83%

2000 2.74% 3.22% 3.76% 3.07% 3.19% 3.73% 3.66% 3.41% 3.45% 3.45% 3.45% 3.39% 3.38%

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EFFECTS OF INFLATION

They add inefficiencies in the market, and make it

difficult for companies to budget or plan long-term.

Uncertainty about the future purchasing power of

money discourages investment and saving.

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EFFECTS OF INFLATION

There can also be negative impacts to trade from an increased

instability in currency exchange prices caused by unpredictable

inflation.

Higher income tax rates.

Inflation rate in the economy is higher than rates in other

countries; this will increase imports and reduce exports, leading

to a deficit in the balance of trade.

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EXAMPLE

Increase in the price of transport

Increase in the price of world oil

Increase in the price of rice

Increase in the price of housing

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PUBLIC SURVEY Rise of Price money for the basic commodities

By controlling the basic habitats and natural disasters.

Inflation about the same product price rises without any

information. E.g.. The price of a shirt today is rs.100 the

same shirt price cost tomorrow for 150. This is inflation.

To control this inflation Take out the black money Control the demand and supply Not giving the products for free Controlling the import tax. Developing the agriculture

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Increase the production via Inc the salary %.

Increase the rate of interest.

About inflation from IT a guy

Inflation caused because of out sourcing

Stopping the outsource for studies in abroad

Giving infrastructure in India

PUBLIC SURVEY

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The conclusion from all this is:

You don’t have to live cheap, just

live smart..! By

Santhosh and Narendra kumar

04/11/2023 07:59 PM 27

Thank you..

NARENDRA KUMAR SANTHOSH