INFLATION

GROUP MEMBERS ‡ ‡ ‡ ‡ ‡ ‡ Roshan Vaidya Pranali Vedak Aditi Verma Neha Vora Siddhesh Waghela Rakesh Ware 56 57 58 59 60 61 .

SYNOPSIS  Introduction  Definition  Rate of inflation  Types of inflation  Forms of inflation  Causes of inflation  Measures of inflation  Consequences of inflation  Consumer price index  Wholesale price index .

INTRODUCTION  Inflation is defined as a sustained increase in the price level or a fall in the value of money. . say a year or month.  It is measured as a rate percentage per unit time.  When the level of currency of a country exceeds the level of production.  Value of money depreciates with the occurrence of inflation. inflation occurs.

DEFINITION  According to C.´  In economics. ³Inflation is state in which the value of money is falling and the prices are rising. .CROWTHER.the word inflation refers to general rise in prices measured against a standard level of purchasing power.

the base year ‡ If there is a decline in the rate of inflation such a situation is called DISINFLATION.RATE OF INFLATION ‡ Rate of inflation is the rate of change of the general price level. . Pt=price level in the year t Pt-1=price level in the year t-1. It is measured by simple formula:‡ Rate of inflation t=Pt-Pt-1 Pt-1 Where.

Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. and the GDP deflator.INDIA INFLATION RATE ‡ India inflation rate stands at 11. . ‡ . ‡ The most well known measures of Inflation are the CPI which measures consumer prices. which measures inflation in the whole of the domestic economy.49 percent year-over-year. The economy has posted an average growth rate of more than 7% in the decade since 1997. reducing poverty by about 10 percentage points.

31 APR 8.63 5.CHART OF INFLATION RATE YEA 2009 2008 2007 2006 JAN 1.69 5.72 9.31 MAR 8.33 6.47 7.4 9 10.72 4.6 9 7.63 10.87 6.45 6.6 4 9.77 6.26 5.26 MAY 8.14 JUN 9.51 6.72 5.40 6.03 7.72 NOV DEC .61 6.7 2 9.51 6.8 9 8.45 5.02 7.1 6.56 5.39 FEB 9.98 SEP 11.75 6.84 OCT 11.81 6.29 7.89 JUL 11.51 7.63 7.67 5.70 5.4 5 5.4 5 5.90 AUG 11.70 7.

TYPES OF INFLATION  Open inflation  Suppressed inflation  Creeping inflation  Galloping inflation  Hyper inflation .

FORMS OF INFLATION Demand-Pull inflation Cost-Push inflation Stagflation Deflation .

CAUSES OF INFLATION FACTORS ON DEMAND SIDE: o Increase in money supply o Increase in disposable income o Deficit financing o Foreign exchange reserves .

Contd«« FACTORS ON SUPPLY SIDE o Rise in administered prices o Erratic agriculture growth o Agricultural price policy o Inadequate industrial growth .

P .O.CONSEQUENCES OF INFLATION  Adverse effect on production  Adverse effect on distribution of income  Obstacle to development  Changes in relative prices  Adverse effect on the B.

MEASURES OF INFLATION  Monetary policy  Fiscal policy  Wage control  Price control  Indexation .

salaries. ‡ The change in the CPI is a measure of inflation. pensions. .CONSUMER PRICE INDEX ‡ A consumer price index (CPI) is a statistical estimate of the level of prices of goods and services bought for consumption purposes by households. ‡ The CPI is one of the most important products of national statistical offices. and can be used for evaluation of wages. ‡ The consumer price index numbers of Maharashtra for agricultural labourers and rural labourers registered the highest increase of 27 points. or regulated or contracted prices.

WHOLESALE PRICE INDEX  The Wholesale Price Index (WPI) was first published in 1902. which is measured by the Consumer Price Index. .  The Wholesale Price Index focuses on the price of goods traded between corporations. rather than goods bought by consumers.It consists of over 2.400 commodities.  The Wholesale Price Index or WPI is the price of a representative basket of wholesale goods.

COMPOSITION OF WHOLESALE PRICE INDEX ‡ The wholesale price index comprises of the following indices: ± Domestic Wholesale Price Index (DWPI) ± Export Price Index (EPI) ± Import Price Index (IPI) ± Overall Wholesale Price Index (OWPI) ‡ The WPI covers five commodity groups . import and export. . quarrying. manufacturing.agriculture. and mining.

FEATURES OF WHOLE SALE PRICE INDEX It captures the price movement extensively and therefore taken as a indicator of inflation. .etc. These features highlight the utility of this index in monitoring ongoing changes in an economy in order to suggest the need for any adjustment. It focuses on the changing nature of the economy of different kinds of services such as railways. It is used to analyze the market activity and the monetary conditions in an economy. The index is published weekly with the shortest possible time gap of two weeks. road transportations. telecommunications.

CONCLUSION .

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