short notes on Inflation and Impact of Zero Inflation on the Economy Inflation is the measure of rise in general prices

in any economy over a given p eriod of time. Normally inflation is measured every week, but for the policy pur poses its annual measure is taken into account. Inflation is measured by the gov ernment by considering the changes in wholesale price index and those in the con sumer price index over the given period of time. Inflation is of several types and the "creeping" or "walking" inflation of upto 5 per cent per annum is called functional inflation and considered good for the health of growing economies. Running, galloping and hyper inflation is bad for the economy as it also erodes the real income level of the poorer sections of th e emerging economies, thereby making their livelihood even more difficult. Hence , in a developing economy, the government policies aim at keeping the inflation rate within the functional limits. Due to increased prices of the food items, India, along with most parts of the w orld, faced high inflation rate in double digits during the middle of 2008, whic h could be termed as `running' inflation. The government took several monetary and f iscal policy measures to control it and succeeded to bring it down. But in early 2009 a peculiar phenomenon was experienced. In March 2009, the inflation rate i n the country went down as low as 0.44 per cent, a sudden drop from 2.43 per cen t during the week prior to that. This has given rise to the speculation that the country may experience zero infl ation rate. The apprehensions are that zero rate of inflation would act as disco uragement to the new investors, who are likely to put on hold their new projects , which would affect the growth rate of the economy. Zero inflation reduces the level of profits drastically. Such a situation, thoug h may be cheered by the consumers and benefit the poorer sections spending most of their earnings on consumption, yet may actually reduce the economic activity in the economy to the minimum. This may be harmful to the economy in the medium and long run.