INFLATION - ITS CAUSES and ITS EFFECTS ON VARIOUS SECTORS ON INDIA

WHAT IS INFLATION
Defination:
Inflation is defined as the rate at which the general level of prices for goods and services is
rising and subsequently purchasing power is falling
Measures of Inflation
Inflation is measured by calculating the percentage rate of change of a price index, which is
called the inflation rate.
Consumer price indices
Cost of living indices
Producer price indices
Commodity price Indices

Causes of Inflation in Current Scenario

Global imbalance the cause for global liquidity

The psychological dimension

Higher international farm prices impact Indian farm prices

Growth and forex flows

Steps taken to control the current inflation

A well planned, reasonable and balanced intervention by the government
people have to understand the facts and logistics of price inflation.
The public distribution system has to be geared up

INFLATION IN AIRLINE INDUSTRY

One major issue is cost of Aviation Turbine Fuel
Companies prefer to ground flights

Prefer paying parking charges of Rs 50,000 per hr rather than keeping a flight in air
which costs Rs 3,50,000.00 per hr
Job cuts in airline industries on a rise
INFLATION IN BANK
The RBI may go for further monetary tightening in the light of rising inflation
Yields are rising, compelling the banks to raise interest rates, which will hamper their
business growth
Inflation concerns remain high with finance ministry officials indicating the rate could
go up to 13 per cent in the near term

EFFECTS ON INFLATION ON AUTOMOBILE COMPANIES IN INDIA

The automobile sector is also suffering because of soaring raw material prices
The automobile sector is also suffering because of soaring raw material prices
The automobile sector is also suffering because of soaring raw material prices
The two-wheeler sector is especially suffering, as banks are not willing to lend fearing
delinquency.

EFFECT ON STEEL AND RUBBER INDUSTRIES

Steel prices have hardened almost 21 in the current calendar year during 2008,
aluminium has risen by 16 in the current calendar year.
Rubber and plastic prices have also gone up substantially by 17 in the current
calendar year and 24 in the current calendar year respectively

INFLATION IN IT COMPANIES
Patni computers has handed the pink slip to over 400 employees for non
performance.
TCS other companies warns its employees that non performance wont be tolerated.
Companies like wipro and sutherland may cut down on incentives and other perks
INFLATION IN CEMENT INDUSTRY
Higher input costs, low market valuations and scaled up capacity amidst reduced
demand is likely to take its toll on the cement industry.
The growth rate of the industry is projected to drop below 10 % for the current fiscal.
High inflation and home loan rates have slowed down the growth trajectory of the
real estate sector, which accounts for 60 % of the total cement demand.
Small shops affected
Kirana stores have started feeling the heat .
Some small shops have shut and others are considering getting into new businesses
Prices of products or rice and pulses have gone up
Inflation has hit low income group which has taken its toll on small retail stores and
businesses

EFFECT ON OIL PRICES

India is among the most expensive places for oil
Middle class have started using public transportation
Rising oil prices is a concern especially with the growth in sales of automobiles
More people have started using one mode of transportation example sharing of a car
to go to office
Demand for petroleum products has increased at 2.4% to 3.3 %
ON Fast moving consumer goods (FMCG)
FMCGs are feeling the heat of inflation as their input costs have gone up while their
sales have stagnated,
FMCG majors Godrej and Marico registered a decline of 0.88 percent and 8.28
percent in their total income on sequential quarter basis, while Hindustan Unilever and
Dabur managed to post a 15.72 percent and 16.47 percent increase respectively.
Slow Moving Consumer Goods SMGC
LG has increased the prices of their products by 3 %
Most companies like voltas videocon samsung have cut down on the offers they used
to have for their customers.
Sales have delined for smgcs over the last 3 months by 23%
Sensex
A huge 6.5 % fall in Reliance Industries & 4.5 % fall in Bharti Airtel was responsible
for the benchmark
Sensex to close at 14590.16 points, down 498 points.
For the first time in 2008, the Sensex dipped from the psychological level of 15,000
points
Investors confidence is dented by the rising inflation.