Inflation in

India
Presented by:
Chetna Rathi 50
Pranali Masulkar 67
Rahul Trivedi 69
Swapnil Bhala 76
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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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KINDS OF INFLATION
On the basis of rate of inflation
On the basis of degree of control
On the basis of cause

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CAUSES OF INFLATION
Demand pull inflation
Cost push inflation

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Demand-Pull Inflation
Demand-pull inflation is an inflation that results
from an initial increase in aggregate demand.
Demand-pull inflation may begin with any factor that
increases aggregate demand.
Two factors controlled by the government are increases
in the quantity of money and increases in government
purchases.
A third possibility is an increase in exports.
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Cost-Push Inflation
Cost-push inflation is an inflation that results from an
initial increase in costs.
There are two main sources of increased costs:
 An increase in the money wage rate
 An increase in the money price of raw materials, such
as oil.
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HOW TO CONTROL INFLATION
Monetary 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

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

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

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