Inflation

- Mayur Khatri (2027)

 Contents : A glimpse of what is to come

•Meaning and Definitions

•Types of Inflation

•Theories and causes of Inflation

•Effects of Inflation

•Control Measures

•Present Scenario
 Definitions :
What is Inflation?
“Inflation is an increase in the quantity of purchasing power.”–
Gregory
Inflation is the stage of too much money chasing too few
goods.”-- Coulbourn
Meaning :
Inflation is considered a global phenomenon. It takes place
because of rapidly rising prices of goods and services, resulting
in the decline of the value of money.

The rate at which the general level of prices for goods and
services is rising, and, subsequently, purchasing power is falling.
 Types of Inflation

-Creeping Inflation
-Walking or trotting Inflation
-Running Inflation
-Galloping Inflation
-Hyper Inflation
 Theories and Causes of Inflation

The main cause of inflation is the increase in the demand of

goods and services and at the same time decrease in the
supply of goods and services.

There are two theories related to the causes of inflation:

Demand-pull (when there is excess demand), and
Cost-push (when costs rise)
 Theories and Causes of Inflation

 Demand Pull Inflation –

This occurs when there is excess aggregate demand in the

economy (overall) or in a specific market or industry.
Businesses respond to high demand by
raising prices to increase their profit margin
 Theories and Causes of Inflation

 Cost – push Inflation :

This occurs when costs of production or operation are
increasing.
 Cost Push inflation is mainly caused due to the following
factors:
· increase in wages.
· increase in cost of
raw materials
· increased cost of
imported components
(import-push inflation)
 Effects of Inflation

Effect depends on the speed of inflation and the nature of

the economy.
 Rising prices of imports
 Lowers national saving
 Redistribution of Income & Wealth
 Collapse of Monetary system
 Adverse impact socially and politically
 Discourages Investment & savings
 Higher Interest / Income tax rates
Control Measures
 Monetary Policy:
Monetary Policy
essentially implies the policy
followed by financial
institutions.
High interest rates and
slow growth of the money
supply are the traditional
ways through which central
banks fight or prevent
inflation.
 Fiscal Measures
Reduction in unnecessary
expenditure.
Increase in Taxes.
Increase in savings
Adopt Surplus
Budget(collecting more
revenue and spending less).
Stop Repayment of Public
Debt until inflationary
pressures are controlled.
Other Measures
 Present Scenario
CATEGOR
COUNTRY DATES ACTUAL HIGHEST LOWEST UNIT FREQUENCY
Y
INFLATIO 1969 –
INDIA 6.46 34.68 -11.31 PERCENT MONTHLY
N RATE 2013
The inflation rate in India was recorded
at 6.46 % in September-2013.
From 1969 until 2013,
India Inflation Rate averaged 7.7%
Highest
34.7%September -1974
Lowest
-11.3 % in May -1976
The average inflation of India in
2013: 11.04 %
Thank You