GLOBALISATION

&

INFLATION

DEFINITION

“ GLOBALISATION IS A PROCESS

OF INTEGRATION OF THE WORLD INTO A SINGLE HUGE MARKET”.

IMPACTS OF GLOBALISATION
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CONCEPT OF 5 C’s Customer Competition Currency Company Country

DEFINITION

The term "inflation" usually refers to a measured rise in a broad price index that represents the overall level of prices in goods and services in the economy.

WHAT INFLATION TELLS?
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INFLATION tells us two important things :Firstly: Do not keep your money stagnant. If you just save money by putting it your safe it will loose value over time. If you have Rs.1000 in your safe today and you keep it there for 10years or so, it will be worth a lot less after 10 years. If you can buy something for Rs.1000 today, you will probably require Rs.1500 to buy it 10 years from now. So do not keep money locked up in your safe. Always invest money. If you can’t think where to invest your money, then put it in a bank. Let it grow by gaining interest. But whatever you do, do not just lock your money up in your safe and keep it stagnant. If you do this, you will be loosing money without even knowing it. The more money you keep stagnant the more money you will be loosing. Secondly: When investing, you have to make sure that the rate of return on your investment is higher than the rate of inflation

What is the rate of inflation?
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Current rate of inflation is 0.044% The prices of everything goes up over time and this phenomenon is called inflation. The question is: By how much do the prices go up? At what rate do the prices do up? The rate at which the prices of everything go up is called the "rate of inflation". For example, if the price of something is Rs.100 this year and next year the price becomes approximately Rs.104 then the rate of inflation is 4%. If the price of something is Rs.80 then after a year with a rate of inflation of 4% the price go up to (80 x 1.04) = 83.2 So, when you make an investment, make sure that your rate of return on the investment is higher than the rate of inflation in your country.

CAUSES OF INFLATION
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The main cause of high inflation in India used to be rises in global oil prices. The chief component of the inflation was the increase in the prices of food articles - caused by increased demand as well as supply constraints. Apart from the rise in prices of food articles, fuel and cement prices too recorded high increases

MEASURES OF CONTROLLING INFLATION

MONETARY POLICY :- Today the primary tool for controlling inflation is monetary policy. High interest rates and slow growth of the money supply are the traditional ways through which central banks fight or prevent inflation. Fixed exchange rates :- Under a fixed exchange rate currency regime, a country's currency is tied in value to another single currency or to a basket of other .A fixed exchange rate is usually used to stabilize the value of a currency, vis-a-vis the currency it is pegged to. It can also be used as a means to control inflation.

Wage and price controls:-Another method attempted in the past have been wage and price controls ("incomes policies”). Gold standard:-Gold was a common form of representative money due to its rarity, durability, divisibility, fungibility, and ease of identification.Representative money and the gold standard were used to protect citizens from hyperinflation.

MEASURES BY R.B.I

These measures included:- increasing repo rates, the Cash Reserve Ratio (CRR) and reducing the rate of interest on cash deposited by banks with the RBI.

FISCAL STIMULUS PACKAGES

1st Stimulus package came out on 7th Dec 08
Its features
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Increase in govt spendings Exporters Support for medium,small&micro enterprises Textile sector Infrastructure financing

2 Stimulus package on 2 jan 09
n d n d

ITS MEASURES
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IIFCL INTEREST RATE CUTS ECB LIMITS CVDS FIIS IN DEBT MARKETS SME STATE GOVTS PUBLIC SECTOR BANKS

EFFECTS OF INFLATION ON ECONOMY

Inflation is good for economy.. because the price gets higher sales gets better... In short: INFLATION IS GOOD FOR COMPANIES AND BAD FOR CUSTOMERS.. but Inflation above 4% mark ,make ....people to reduce their spending on luxcury items.. this is what worries the branded companies, but for the poor, and those who are in the job... they suffer because they cannot save much.... some times they have to go for loan, to make their ends meet on interest which makes things worst for them. So the effect of inflation is a mixed one......... Double digit inflation over a period of six months is very bad.

POSITIVE IMPACT

A small increase in price level is considered to be beneficial for the economy. Inflation generally increases the price level gradually over time. When price starts increasing, the consumers may opt for making purchases at present time, out of the fear of further increase in price level in future. This tendency of the buyers increases the spending and borrowing activities in the short term period. It provides additional mobility to the economic performance of the economy.

NEGATIVE IMPACTS
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Bad for fixed income group people Impact on Household Sector Impact on Business Sector Impact on Debtors and Creditors Impact on Govt Affects purchasing power

IMPACT OF GLOBALISATION ON INFLATION
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Policy Incentives: Trade Integration & Price Level Declines: Inflation responses to domestic Output Fluctuations Productivity Growth, Aggregate supply &Relative Prices:

GROUP MEMBERS
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AMIT SHIRALE (32) GAURAV HIRANI(30) INDRAJEET (29) NAFISA MULLA (25) PRIYA SWAMI (52) ASHA PUJARI (23)

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