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Document Structure Analysis

The document discusses inflation in India, defining it as a sharp rise in prices caused by too much money chasing too few goods. Inflation can be classified based on its rate, degree of control, and causes. The main types of inflation are demand-pull and cost-push inflation. The document also examines consumer price index and wholesale price index as measures of inflation in India, and various monetary and fiscal policies that can be used to control inflation such as credit control, increasing taxes, and price controls. It notes some negative impacts of high inflation such as added inefficiencies and reduced investment and savings. Food inflation and oil prices are identified as major contributors to overall inflation in India.

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Atul Dwivedi
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8 views22 pages

Document Structure Analysis

The document discusses inflation in India, defining it as a sharp rise in prices caused by too much money chasing too few goods. Inflation can be classified based on its rate, degree of control, and causes. The main types of inflation are demand-pull and cost-push inflation. The document also examines consumer price index and wholesale price index as measures of inflation in India, and various monetary and fiscal policies that can be used to control inflation such as credit control, increasing taxes, and price controls. It notes some negative impacts of high inflation such as added inefficiencies and reduced investment and savings. Food inflation and oil prices are identified as major contributors to overall inflation in India.

Uploaded by

Atul Dwivedi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

Inflation in india

Ghanshyam iilm gurgaon 1/4/2012 10:31 PM

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.

Ghanshyam iilm gurgaon

1/4/2012 10:31 PM

On the basis of rate of inflation On the basis of degree of control On the basis of causes Others

Ghanshyam iilm gurgaon

1/4/2012 10:31 PM

Demand pull inflation Cost push inflation

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Ep1 Ep

Eq

Eq1

D1

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S1 S

Ep1

E1 E

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Monetary Measures Fiscal Measures Other Measures

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Credit Control Demonetization of Currency Issue of New Currency

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Reduction in Unnecessary Expenditure Increase in Taxes Increase in Savings Surplus Budgets Public Debt

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To Increase Production Rational Wage Policy Price Control

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Consumer Price Index Wholesale Price Index

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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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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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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.

Ghanshyam iilm gurgaon

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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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PI for a certain year - PI for a comparative year PI for a comparative year

X 100

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INFLATION RATES
2006-2007 Inflation Food inflation Non-food inflation 7.8 10.3 6.2 2007-2008 12.0 17.6 6.8

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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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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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Increase in the price of wheat Increase in the price of world oil Increase in the price of rice Increase in the price of CNG

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