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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Now in August 2012, the inflation rate is 7.55%.

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Nishant Goyal

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Wholesale Price Index (WPI) Consumer Price Index (CPI)

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Wholesale price index

Consumer Price Index

Index of price prevailing in the wholesale market Covers a fixed basket of goods comprising primary articles, minerals, fuel prices etc. Measured weakly in India.

Index of prices prevailing in the retail market. Index relating to the basket of prevailing commodities purchased by the average consumer-food, fuel, lighting, housing, clothing etc. Measured monthly in India.

Note: India, is amongst few countries of the world, which selected WPI as its official scale to measure the inflation in the economy.

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Inflation Current CPI/WPI Last Calculated CPI/WPI = Rate Last Calculated CPI/WPI Inflation 150 - 140 = Rate 140

100

100

= 7.12%

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1. 2. 3.

War Time Inflation. Post War Inflation. Peace Time Inflation.

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1.
2.

Creeping Inflation.
Walking Inflation.

3.
4.

Running Inflation.
Galloping or Hyper Inflation.

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10

Open Inflation : Government takes no steps to control price rice

Repressed Inflation : Price level check by Government

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11

Comprehensive : All commodities available in the economy witness price rise Sporadic Inflation : Only a few commodities register a rise in price

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12

Partial : Before the stage of full employment Full : After the stage of full employment is reached

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13

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

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1.

DEMAND side factors: Aggregate demand aggregate supply

is

greater

than

2.

SUPPLY side factors: Aggregate supply fall short of aggregate demand

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1.

Rise in Public expenditure - expenditure incurred by govt. - Aggregate demand is greater than aggregate supply

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2.

Deficit financing - Expenditure is more than Income - Fiscal deficit in 2002-03 is Rs1,45,072cr. 2011-12 Rs 5,09,731cr.

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Irving fishers quantity of money explainsIncrease in money supply with proportionate increase in output lead to rise in PRICE and fall in money VALUE

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It is unearned income by public servants Excess demand lead to inflation Acc. To Transparency International for corruption India ranks 95 out of 183

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

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Industrial disputes Natural calamities Artificial scarcity Increase in export

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Global factors [impact high oil price] Fluctuating agricultural growth

Neglecting the production of consumer goods

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Hyper inflation Accelerating inflation Anticipated inflation Unanticipated inflation

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Effects of inflation

Inflationary noise Effect on economic growth Effect on consumption and economic welfare

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Economic Effect of inflation

Distribution of income and wealth

Different sector of society.

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MONTARY MEASURES FISCAL MEASURES OTHER MEASURES

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A)

CREDIT CONTROL DEMONETIZATION ISSUE OF NEW CURRENCY

B)

C)

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A)

REDUCTION IN UNNECESSARY EXPENDITURE

INCREASE IN TAXES INCREASE IN SAVING SURPLUS BUDGETS PUBLIC DEBT
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B)

C)

D)

E)

Measures taken to absorb liquidity monetary policy

Raised Cash Reserve Ratio Increase in short-term borrowing & lending rates of RBI

Reduced import duties Ban on things that could be exported.

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A)

PRICE AND WAGE CONTROL INDEXATION TO INCREASE IN PRODUCTION RATIONING

B)

C)

D)

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Firstly save!!! As much of your money as possible should be saved. This will reduce the demand on the economy and hopefully reduce inflation. Do not overuse daily essentials like cooking gas, electricity etc. Cut down on inessentials when buying groceries. Look for cheaper alternatives to products that you normally buy.

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Keep roads, highways, sidewalks, etc., beautified to help attract tourism and bring additional monetary into a growing economy. Stop illegal immigration. Invest in short term deposits and funds, commodities and property. This will help you to slowly reach your financial goals while safeguarding your hard-earned money.

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We are open for Queries???

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