INFLATION


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

Inflation Current CPI/WPI ± Last Calculated CPI/WPI = Rate Last Calculated CPI/WPI Inflation 150 - 140 = Rate 140 100

100

= 7.12% 7.12

Varsha Sadafule M - 3041

Types Of Inflation

A) On the basis of the period of occurrence
1. 2. 3.

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

B) On the basis of the rise in prices
1. 2. 3. 4.

Creeping Inflation. Walking Inflation. Running Inflation. Galloping or Hyper Inflation.

Harshad Sawant M - 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 Samala M 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 SUPPLY side factors: Aggregate supply aggregate demand

2.

fall

short

of

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 explains³Increase 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 MAYEKAR M - 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 Dhuri M - 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 Sarang M - 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 Pandey M 3034

MEASURES TO CONTROL INFLATION

TYPES OF MEASURES TO CONTROL INFLATION

MONTARY MEASURES FISCAL MEASURES OTHER MEASURES

MONATARY MEASURES
A)

CREDIT CONTROL DEMONETIZATION ISSUE OF NEW CURRENCY

B)

C)

FISCAL MEASURES
A)

REDUCTION IN UNNECESSARY EXPENDITURE INCREASE IN TAXES INCREASE IN SAVING SURPLUS BUDGETS PUBLIC DEBT

B) C) D) E)

Sandeep Singh M 3054

OTHER MEASURES
A)

PRICE AND WAGE CONTROL INDEXATION TO INCREASE IN PRODUCTION RATIONING

B)

C)

D)

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

Sushant Gawali M - 3010

Simple reasons for Inflation

Inflation Rates from Jan. 05
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avrg 2009 0.03% 0.24% -0.38% -0.74% -1.28% -1.43% -1.54% NA NA NA NA NA NA

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%

Inflation by Commodity groups

In µprimary articles¶, inflation declined to 6.0 % in the current week In µprimary food articles¶, inflation declined to 8.3 % In µnon-food articles¶, inflation fell to 1.7 % In µminerals¶, inflation remained stable at (-) 1.2 %

Cont«

In µfuel and power¶, inflation remained stable at (-) 4.0 % In µmanufactured 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 ³ 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.

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